The Branded Pantry

A very interesting newsletter, http://www.shelfsnap.com/newsletters/Volume15.htm examining the differences between how shelves look in the store, vs. the plan for those shelves.

Much has been written (perhaps most succinctly by CPGmatters.com http://www.cpgmatters.com/ProductTrends0310.html#anchor_140) about CPG’s move back into E-tailing.    A number of the articles focus on P&G’s initial “build their own” strategy.  Other articles focus on new platforms such as Alice.com which has attracted participation from 29 manufacturers.  

Almost all of the articles give a lengthy review of past forays into E-Tailing by CPG companies (almost always mentioning Webvan and other spectacular failures).  Many talk about the new efforts “getting it right.” 

Truth be known, CPG has been sold effectively through E-tail since 1989.  And while some efforts failed spectacularly others have quietly, done very nicely and have continued to grow significantly for years and years.   

Online CPG-retail much like many other categories, has shown year over year results that have consistently well out-paced same store physical sales.  Most of this has been on the backs of online sales channels offered by traditional grocers such as ShopRite, Harris Teeter, and Delhaize more through specialized online services such as MywebGrocer.  Other CPG sales have moved through straight E Tail services such as Netgrocer, Amazon, MyBrands, FreshDirect and Alice.com, as well as hybrid services such as Peapod. 

A great deal of innovation continues to flow from these services, so while the recent entries may well lead to some new ideas….there are other, very significant motivators for CPG firms to reengage in direct to consumer channels.  Three connected motivators spring to mind:

1.     The absolute number of outlets which could sell or at least stock the manufacturer’s items has been falling for years, but that decline has accelerated mightily during this downturn. (http://brandedpantry.com/2010/02/28/200000-1/ )

2.  .  Clean stores and SKU rationalization have eliminated sizes, flavors and entire brands from store shelves in the biggest food, drug, mass and even C-store chains.  A brand, size, or flavor eliminated in one retailer, is unlikely to be found worthy or continued space in another. The items left on shelf are being squeezed for pricing and for ad-support making them less and less profitable.

3.  .  Fewer outlets, fewer products and brands on-shelf, more of the ad budget in the hands of the remaining retailers….this all translates into control.  Most importantly this translates into the conscious shift in control of the consumer interface to those remaining large retailers. 

CPG companies know there is no hope in replacing the short term volume lost in the continuing SKU rationalization efforts and in ongoing store closures by simply offering an online shopping opportunity.  They are hoping to maintain or establish a more direct tie to their consumers.  Most I have talked to aren’t sure what they want to communicate to those consumers, since sending buyers into stores which no longer carry the advertised product is a recipe for disappointment.    

Perhaps these new efforts by the CPG companies to get online, might well sit down with the MyWebGrocers, the Peapods, the MyBrands and the FreshDirects of the world and see what has worked and what has not, as a good starting point for new efforts.  

There is little doubt a broader innovation, beyond simply connecting via a website and mobile coupons will emerge.  Little doubt at all. 

Add another retailer to the roughly 200,000 stores which have closed down since the beginning of the “downturn”. 

In January, at the FMI Midwinter Executive Conference, Tres Lund CEO of Byerly’s reported to a somber group that 200,000 stores had closed out of a market consisting of about 1.1 million “doors.”  While sobering in its own right, the number becomes a bit more meaningful when it is on your own street. 

The ShelfSnap offices are located in the bucolic suburb of Libertyville, 30 miles north of Chicago.  Our office is just north of downtown.  The downtown area has been quite vibrant traditionally, with lots of community activities, bustling traffic on Saturday mornings and Friday noon, summer concerts in the downtown park for business owners and town folk alike.  

Usually, there is one storefront or another that has gone dark at any given point, only to start up a few months later reincarnated as something else.  However over the last 18 months we have seen five shutter their businesses, the latest on this past Saturday.  Only one business has started anew in that time, in one of the empty storefronts.  Thankfully, it is a booming bakery with an impressive inventory.  Hopefully the crowds we see there are enough to keep them in cupcakes (we are certainly doing our part!) 

The store that announced its “final sale” was a women’s clothing store that I had not noticed much about.  Seemed to be high end inventory, and always had a nice display in the window.  A person was in the store the morning I saw their “final” banners so I wandered in and pretended to look at the sparse inventory.  I asked about the reasons for closure.  She teared up a bit, and then said “parties and banks.”  She said her store always had a loyal customer base due to the quality of her merchandise and the quality of the store’s service.  The downturn had affected the number of parties people were throwing which impacted her sales.  She said that has happened many times over the years, and on each occasion the owners buckled down, find new exciting clothes to entice their customers for other less formal needs and tap their credit to last out the recession.  This time their bank, of 20 years, said “no” and closed their line…..and their way of life. 

Clearly, there is much we do not know about this little store and the bank that refused to support it.  What we do know is that 4 more people are now in the job market from the store, the suppliers to that store have one less outlet to buy their goods and the customers will have less unique merchandise to select from when the parties return.  Oh, and there is one more darkened store, peering out from main street in Libertyville.  

You are the CEO.  Ten years ago a competitor emerged creating a new distribution channel.  You eventually followed that competitor into the channel, but not until they had claimed a very substantial chunk of business…a chunk that continues to nibble at your market share.

Now that competitor has opened yet one more channel.   Industry pundits discount the competitor’s self reported  

progress for the new channel, claiming that the product lines delivered through this new format are not full price product and therefore might not represent true impact.  Still, the delivery method has grown from 10% of sales in March of 2009 to 60% of sales in January 2010.  From whom do you take your advice?

Peter Drucker “the most important work fo the executive is to identify change that is already happening.  The challenge is to exploit these changes and to use them as opportunities.  Far too few businesses are willing to slough off yesterday and as a result have too few resources available for tomorrow. ”

The product line in question here are books, the statistics Amazon’s percentage of sales on books “kindle ready”.  The trend is real, rapid and irreversible.  The game is afoot, has been for some time.  Traditional book sellers have already lost with Borders reporting holiday sales off 14% from year ago.   Next year the book source brands people will be talking about for the holidays will be Apple, Google and of course Amazon.   Borders may well be a division of B&N and most probably there will be more empty retail space to add to the over 200,000 retail doors that have closed since the beginning of this downturn. 

I bought two Kindles for Christmas ‘08.  One for my very tech savvy eldest, who travels extensively and reads voriciously.  One for my tech-aphobe wife whose relaxation depends on books.  One week after my daughter left from her Christmas break and went back to work in Texas, my wife still had her head buried in the Kindle and had “improved” the design by adding a battery powered reading light.  The game was clearly well underway at that point. 

What change that has already happened am I failing to exploit?  What game is already afoot, in which I am not engaged?

The trade papers are riddled with announcements from manufacturers about their new product intentions.  Unilever, Procter and Gamble, Pepsico, Nestle, Kraft and many others have announced their intentions to introduce products into a myriad of categories over the next three months.  New product activity which largely took a hiatus in troubled 2009 is back with a vengeance.  Every manufacturer we have talked with is hoping that they won’t need to pare their line down to make way for the new items.

How will these new products fare when many key retailers have significant SKU rationalization programs underway?  Coupled with retail efforts to broaden private label brands, how new introductions will fare is anybody’s guess.   Oh, that’s right, with ShelfSnap you no longer have to guess. Here is how two recent launches are faring.   ShelfSnap and our Canadian field partner, ForeKnowledge, analyzed two 4^th quarter launches made by two top food manufacturers.

New Item Introduction 1

The first product introduced two new flavors into an existing snack category product.

•  Eighty percent assortment distribution was achieved across the top Canadian grocery banners.

• During the introductory period 20% of the shopper base was not exposed to the product at their primary store locations.

Positioning of the product (facings, shelves, proximity) were literally all over the category. 

Here is an example of placement in three stores across one chain.   New Product Placement and Facings

Same Chain - 3 Stores

• Overall, this new brand achieved a 59% assortment distribution.
• SKU Assortment achieved for the brand ranged from 47-65% across the various retailers.
• In retailers authorizing the new brand, the new items only achieved distribution in 81% of the stores.
• In authorizing stores 76-80% of items in stores that had agreed to list the items.
• Regardless of whether the chain has yet approved listing, 40% of all shoppers will have to work very hard to find this item.  It is not available in their primary stores.

So, as this crush of new products is working its way onto the store shelves, what are YOUR objectives?

·   

1. What percent of the stores should handle these items?
2. What are your assortment objectives?
3. How many facings of each item are you hoping for?
4. Do you have a specific shelf you are targeting?
5. What would you like the new item merchandising next to?
6. What items are you targeting for delisting?
7. What existing items must not be sacrificed for these new items?
8. If a new, competitive item is launching, how will your items be affected?

At this time of any year we would be starting to come out of the malaise that affects most of us from our end of year holidays and we would be starting to execute the plans we put into place during the planning-budgeting cycle from last year.  Those plans were probably based on a management perspective that included continued bad economic conditions and news.  They no doubt reflected a “hunker down”, conservative fiscal philosophy that had the impact of putting a moratorium on hiring and on investing in new products, services or change-outs of any sort.  In short, this translated into “let’s do the same with less…and keep our heads down.” 

Peter Drucker would ask us not to yield to the temptation to “just get on with it”.  He would recommend that we step back and recognize that “virtually no program or activity will perform effectively for a long time without modification and redesign.”  Business professionals “are likely to respond to the failure of a program, process or program by doubling the efforts invested in it.”    “First class resources, especially those scarce resources of human strength need to be pulled out immediately from operations that have ceased to be productive and put to work on the opportunities of tomorrow.”    

We talked recently with a company where the ShelfSnap service had uncovered assortment voids ranging from 10% to almost 30% of the plan for that manufacturer…with facing-shorts much more significant than that in a major account.  They were “hoping” that their recently purchased information program consisting of some new DSR tools and some Task Management reporting systems would take care of the problem.  Those tools had already been deployed in the account where ShelfSnap had found the significant deviations from plan.  In other words, their new information system might have yielded other benefits but it was not helping them in dealing with their compliance issues.  Dealing with those issues would yield between 8 and 20% volume increases.  

I have spent a good bit of space over the last two years writing about what I believe to be a fact, and that is that there are no silver bullet applications available to solve the front-to-back inefficiencies in the CPG and Retail compliance arena.   It doesn’t matter if we are talking about best of class “point” solutions or about the end to end solution suites.  They all promise to conquer compliance issues through some sort of exotic modeling based on POS movement combined with deliveries, or labor based self management task systems.

We have proven over this last year that the most amazing point and end-to-end solutions do generate great results in many areas in the supply chain.  They do not however result in better in-store compliance and we have proven that by looking at the significant deviations from plan in new product introductions, displays and POG resets across the largest retailers in the land.  Check any of our prior newsletters at where we document many of these studies. http://www.shelfsnap.com/news-events.php. 

ShelfSnap was developed to fill the last remaining gap in the in-store intelligence continuum. We are NOT a silver bullet.  We are a link…a link that was largely missing prior to now. Others have begun to see us in the same light. 

ARCweb’s Logistics Viewpoints is a thought provoking authority on all things supply chain.  Their premier analyst, Steve Banker, recently reached out to ShelfSnap and very quickly understood our key role in the demand chain.  Inference based estimates about store conditions have been in place for years and have changed nothing of consequence in the condition of products on-shelf, or on display. 

According to Steve,

“I see the ShelfSnap solution as providing a practical way for manufacturers and retailers to use planogram data for shelf-level collaboration, or for retailers themselves to have more effective task management at the store. I also see it as improving the alerts generated by existing DSR solutions.” 

ShelfSnap couldn’t agree more.    Please read the entire article at: 

http://logisticsviewpoints.com/2009/12/17/filling-a-void-in-shelf-level-collaboration/. Or give us a once over at ShelfSnap.com.  

The CPG Industry appears, once again, to be focused on in store execution and compliance.  Mantras like the In-Store Implementation Network’s Plan-Do-Measure can be heard by numerous groups.  Some experts opine that measuring and managing at the store level is the best way increase sales dollars.  Others seem to think actually understanding issues at the store level is too large a task to undertake and it remains on the “too hard” pile.   

We thought it appropriate time to chat with an Industry Icon who is as responsible for modern day category and space management as any other industry figure, Ted Gladson.  Ted has roamed stores for five decades and has witnessed many changes over the years, playing an important part in many of the positive changes.

Service - One Store at  Time

Armed with a glassine sheet, a grease pen, a Polaroid camera and a vivid imagination, Ted helped pioneer the process known today as Space Management.  One store at a time, Ted walked into pharmacies all across America.  First, he took a Polaroid image of the shelf to memorialize what the store had in place.  Then he sat down with a calculator and sales reports to lay out the retailer’s shelf based on what he thought the customer would view as a logical and easy-to-shop pattern.  Ted gave preference in both shelf position and facings to the brands and items most popular with those consumers.  When he was done perfecting his new shelf design, Ted would reset the section for the owner and then he took another picture to capture the desired set . . . in order to publish it to his sales force.   Ted employed his skill for perfecting product placement and created shelfsets designed to improve the customer’s purchase experience and increase the retailer’s revenue - one store at a time.After years of proving the very substantial ROI that both retailers and manufacturer could achieve from these practices, Ted left the corporate world to found Gladson Interactive.  Ted would run Gladson from 1971 until he sold the firm in late 2005.

Industry Leader and Icon

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2009 will be a hallmark year for the paucity of new items introduced by manufacturers.  However, Fabric Care is a category with numerous new products and many of these deliver substantial innovation to consumers.In late April the first of these laundry brands hit the market, clamoring for space on key retail shelves.  Soon after both introductory trade promotion and heavy consumer advertising began pulsing through magazines and television.  Both were quite substantial outweighing most new product introductions from recent years.  The product was first seen on the grocery shelf in early May at least in outlets such as SUPERVALU and Safeway.ShelfSnap looked at the launch of this product in the largest U.S. retailers.  We picked a point in time 4-5 weeks after the product launch and promotion in feature advertisements.  We ran a second wave 4 weeks later.

PerformanceWave 1 - June 2009:

• 31% of the stores did not stock the new product at all. 
• Of the stores that did handle the products, the average store stocked only 4 of the 6 SKUs in the brand. 
• In total only 48% of the possible distribution was in place 6 weeks after the launch in these critical retailers. 
• The average SKU had 1.2 facings per store.
• In two-thirds of the stores the products were scattered across multiple shelves.

Wave 2 - July 2009 - 4 Weeks Later: 

•  All of the stores in these chains handled the product.
• However, only 85% of the possible distribution was in place at this 10 week point.
• The average facings per item had increased to 1.3 with only 5 of the 6 SKUs in the brand on the store shelf.
• The brand was always stocked on a single shelf level.
• Over 40% of the stores had changed the location of the brand from the prior wave.

Tools This type of performance occurred in the largest retailers in the U.S.  All of the most sophisticated traditional tracking and detection tools are in-place and being used by the retailers, broker and manufacturer.  The amount of scrutiny placed on this launch was very significant.  Somehow the tools were not up to the task of clearly laying out to the trading partners that compliance was compromised. (more…)

The lots were full today. 

Not just Best Buy,  Walmart* , Costco and the like but Office Depot! 

Now I cannot convert that into $$ or trends, but it looked pretty positive. 

Based on four conversations in the Costco gas line, they were bargain seekers.  But of course,  ALL of the ads focus on the deals so the consumers WOULD be looking for the deal. 

It also looked like Trader Joe’s was doing quite a business and they had an ad or two focused on Black Friday. 

I did NOT see Jewel or Dominick’s participating nor did I see a lot of CPG led ad efforts.  One might have thought….but.

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