THE BUZZ
August 28, 2008
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Dear Rhonda: You need to get answers to two questions:
PROTECT THOSE DISPLAY FUNDS
Dear Reefer:*
Help! Some suppliers are threatening to pull their trade promotion funds for display programs because of low store compliance. It’s not entirely my fault! — Rhonda Retailer
By Kevin Janiga
Dear Rhonda: You need to get answers to two questions: What is a “reasonable” level of store compliance? And how can you structure display programs that are easier to execute and forecast? Many display compliance issues are rooted in supply chain service problems. Accordingly to a recent GMA study, manufacturer-to-retailer DC and retailer DC-to-backroom fulfillment rates are in the 98% -99% range. The problem lies in the last 50 feet from the backroom to shelf, with only a 91-94% fulfillment rate. In addition, many promotions don’t meet forecasts for these reasons (% of stores cited): Display space not available – 16%; short of skilled labor – 42%; signage not deployed – 22%; displays put up late – 33%. Overall, display compliance averages 59.4% across all grocery categories, with the highest display compliance rates in dry grocery at 77%. Typically, display compliance peaks at 61.1% on Wednesdays, and declines to 56.3% on Saturdays. With most manufacturers factoring in 80%-plus display compliance rates into the trade promotion financial models, there is clearly a gap between expectations and reality. Here are some steps you can take to protect your trade promotion funding. 1. Agree on the promotional goals, merchandising expectations, and sales/profit objectives up front, in the promotion contract. In addition to the ad & display planner, a letter should go out to all stores specifying these execution elements and expectations. 2. Make sure the vendor has enough production capacity to supply the promotional product being merchandised. Many vendors are eager to feature and display (F&D) new products right after they’ve hit the shelf, but then are plagued with start-up problems. Make sure these bugs have been worked out. 3. Check the promoted product’s volume history. To forecast properly, you need good baseline and promotional sales history on a product under consideration for a display program. Consider requiring a threshold level of promotion sales for a product to be given primary feature and display space. Niche products and new items are notoriously hard to forecast. Be sure they fit your promotional theme, as well as drive traffic or related-item sales. 4. Are the gross margins and total margin dollars attractive enough? Make sure that the promotional item has strong baseline volume as well as promotional gross margins before considering it for display. Also, consider the promotional sales lifts for the line. For example, let’s assume that grocery chain Z is considering two different lines for an upcoming back-to-school F&D promotion. Line A has $200,000 per week baseline volume, 20% promotional gross margin, and typically has a promotional sales lift of 150%. Line B does only $75,000 per week in baseline volume, but has a 30% gross margin, and a 500% promotional sales lift. While Line A ($200,000 X 20% X 2.5 = $100,000 margin) is a larger turn volume item, Line B ($75,000 X 30% X 6 = $135,000 margin) is more impulse-oriented and delivers better total promotional margin dollars. Therefore, Line B may be a better choice, particularly if you have exclusive distribution in the market. So if your vendors are balking at future F&D programs, implement these simple steps. If you can get your in-store display execution above 80% compliance, you will be outpacing the industry and providing your vendors with a better trade promotion ROI to justify future display programs. Kevin Janiga is president of Winsights Marketing, LLC, a marketing & sales consultancy in Tampa, Fla. He can be reached at kevin@winsightsmktg.com or 813-635-6013.
*”Reefer” is a pet name by which many readers know this magazine. We assume it’s a reference to refrigerated trucks.
A NEW ROOKERY OF GOLDEN PENGUINS!
NFRA names 35 winners in annual competition for outstanding merchandising during March Frozen Food Month.Recognizing the industry’s top merchandising and promotional efforts to increase frozen food sales during March National Frozen Food Month, the National Frozen & Refrigerated Foods Association has named 35 winners in its annual Golden Penguin Awards Competition. Some 51 Silver Penguins out of hundreds of entries from across the country were also awarded. Four winners were honored this year with a special amber penguin commemorating three consecutive Gold awards in the same category: Harmons, Retail Corporate Chain or Division (10-50 Stores); Winn-Dixie, Retail Corporate Chain or Division (Over 50 Stores); Deep Creek High School/Chesapeake Public Schools, School Foodservice Operation (1-10 Schools); and Merchants Distributors, Inc., Wholesaler. Three-time winners must retire from the competition for one year before entering again in the same category. Golden Penguins will be presented at the National Frozen & Refrigerated Foods Convention on October 14 in San Diego. Silver Penguins are typically presented at local level frozen food association meetings. Here are the Golden Penguin winners: Retail - Best Endcap Display: Fry’s #135, Phoenix, assisted by Co-Sales, Phoenix; Fry’s #23, Mesa, Ariz., assisted by Co-Sales, Phoenix; Fry’s #61, Surprise, Ariz.; Wegmans #3, Webster, N.Y.; Retail - Best Department Display: Fry’s #104, Flagstaff, Ariz., assisted by Dreyers Grand Ice Cream of Arizona, Flagstaff, Ariz.; Ingles Store #39, Anderson, S.C., assisted by: Frozen & Refrigerated Foods of North Carolina, Charlotte, N.C. Retail - Overall Store Promotion: Harris Teeter #257, Cary, N.C., assisted by Acosta Sales & Marketing, Charlotte, N.C.; Jewel/Osco #3185, Naperville, Ill., assisted by Advantage Sales & Marketing - Schaumburg, Ill.; Wegmans, State College, State College, Pa. Retail Corporate Chain or Division (10 - 50 Stores): Harmons, West Valley City, Utah. Retail Corporate Chain or Division (Over 50 Stores): ACME Markets, Malvern, Pa.; Jewel/Osco, Melrose Park, Ill.; Publix, Lakeland, Fla.; Safeway, Pleasanton, Calif.; Winn-Dixie, Jacksonville, Fla. Manufacturers: Birds Eye Foods, Rochester, N.Y.; Kraft Foods, Glenview, Ill.; Retail Sales Agent, Acosta Sales & Marketing, Jacksonville, Fla.; Co-Sales (Phoenix Division), Phoenix; Wholesaler: Merchants Distributors, Hickory, N.C. Local Frozen Food Assn. Over 50 Members: N. Fla. Frozen & Refrigerated Food Assoc., Orange Park, Fla.; School Foodservice Operation (1 - 10 Schools in District): Deep Creek High School/Chesapeake Public Schools, Chesapeake, Va.; Military Commissary - Best Endcap Display: Ft. Belvoir Commissary, Ft. Belvoir, Va., assisted by Webco, Manassas, Va.; Military Commissary - Best Dept. Display: DeCA - Eglin AFB, Eglin AFB, Fla., assisted by C. Lloyd Johnson Co., Mary Esther, Fla.; Military Commissary - Overall Store Promotion: Eglin Commissary, Eglin AFB, Fla., assisted by WEBCO, Mary Esther, Fla.; Military Sales Agent: C. Lloyd Johnson Co., Norfolk, Va. To see a listing of Silver Penguin winners, go to www.nfraweb.org or to www.rffretailer.com, and scroll down in the “In the News” section. Winners were chosen by marketing professionals from accredited colleges and universities during a two-day judging process at NFRA headquarters in Harrisburg, Pa. Judges looked for the best creative effort which included use of the Frozen Foods – Fresh Ideas. Great Taste. logo/theme during a full 30-day program. Winning entries demonstrated the effective use of elements such as in-store consumer programs, advertising, community service and education, creative use of merchandising materials and special displays.
WHAT'S THE DEAL WITH WHOLEFOODS?
With the economy cooling and competition heating up, it is touting low prices. How come, and will it work?
Whole Foods, known to some as “Whole Paycheck,” has launched “The Real Deal,” offering its shoppers discounts, coupons and money-saving shopping tips. Recently, our pals at RetailWire.com asked their BrainTrust panel of experts two questions: Does this signal concern at Whole Foods about increased competition and the lousy economy? And, will any sort of effort be able to reverse the long-held “Whole Paycheck” perception? Here are some edited answers…
What it says is that its executives are worried about the impact of an economic downturn. As to whether or not it will work, let’s just say price impressions take a long, long, long time to turn around.
— Ryan Mathews, Founder, CEO, Black Monk Consulting
I think that their new programs will draw price sensitive customers into the store and help to reduce the “Whole Paycheck” image. A new Whole Foods just opened in Reno, Nev., where I live. Within a couple weeks, many of my neighbors are raving about the quality and shopping experience which never happened with the previous Wild Oats store that was replaced by the new store. It is very clear when you shop the store that they are making a big effort to present a case that they aren’t an expensive alternative to the traditional supermarkets. They do this by showing competitive stores’ receipt tapes by the front door and by having displays of popular products in Reno and showing the competitors prices.
—’dalecbyrne’
If you are struggling financially, as many Americans are, then Whole Foods is not the answer. Walmart wins every time.
—Tony Orlando, Owner, Tony O’s Supermarket & Catering
“Whole Paycheck” is being defensive with its new low price real deal promotion. Their stock is tanking, big time. They are being bombarded on all sides by Trader Joe’s, Fresh & Easy, A&P/Waldbaum’s/SuperFresh, Harris Teeter, Bloom, Safeway Lifestyle, Fresh Market and others. So they are taking defensive measures. They better pray that their affluent customers hang on.
—’weo’
The list of alternatives are certainly increasing not only from other retailers like Henry’s and Sprouts, but also from established chains that are increasing the number of their “organic” products.
— Camille Schuster, President, Global Collaborations, Inc.
I can save money on natural grocery products by shopping at Whole Foods Market, and I live in a city (Denver) with plenty of other choices, including Natural Grocers by Vitamin Cottage, Sunflower Farmers Markets (“Serious Food, Silly Prices”) and (soon) Sprouts Farmers Markets… I don’t think Whole Foods Market needs to worry too much about erosion from its base, and if my local store’s business level last Sunday is any indication, things are just fine. What it needs to do is educate the people who have just recently transitioned over from conventional, or who shop both conventional and Whole Foods.
—’historymystery’
WF wants to steer you toward house brands and/or unique SKUs, for which they can either earn high margins or charge monopoly prices (accordingly)... but not EVERYTHING is expensive.
—’csundstrom’
The big and busy Whole Foods in Chicago’s affluent Lincoln Park neighborhood recently failed not one but two health inspections and was closed for a couple days. Not only was this shocking on several levels to customers who expect only excellence from Whole Foods, but it raises questions about whether corners are being cut elsewhere behind the scenes, and why.
—’Liatt’
sidebar: RETAILWIRE INSTANT POLL RESULTS
Will ‘The Real Deal’ alter consumers’ perceptions that Whole Foods is an expensive place to shop?
Yes - 30%
No - 61%
No opinion - 9%
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