2014 CategoryLeadershipBenChmarking study

Custom insights

Table of Contents

INTRODUCTION 3

n Research Objectives and Methodology 4

n Participants 6

EXECUTIVE SUMMARY 9

KEY FINDINGS 14

n Manufacturer/Retailer Power Balance 15

n Top Industry Issues 17

n Category Leadership Results Drivers 22

n Opportunities for Differentiation 24 via Category Leadership

n Company Customizations 25

n Leading Manufacturers & Retailers 28

RECOMMENDATIONS 30

© 2014 KanTar reTail. all righTs reserved.

no parT of This worK may be reproduCed or TransmiTTed in any form or by any means, eleCTroniC or meChaniCal, inCluding phoToCopying, reCording, or by any informaTion sTorage and/or reTrieval sysTem, wiThouT permission in wriTing from The publisher.

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WhO IS KANTAR RETAIl?Kantar Retail is the world’s leading shopper and retail insights and consulting business and is part of the Kantar group of WPP. The company works with leading branded Manufacturers and Retailers to help them transform the purchase behavior of consumers, shoppers and retailers through the use of retail insights, consulting, analytics and organizational development services. Kantar Retail tracks and forecasts over 1000 Retailers globally, has purchase data on over 200 million shoppers, and among its market-leading reports are the annual poweranking survey (USA and China) and industry shopper study across retailers. Kantar Retail works with over 400 clients and has 20 offices in 15 markets around the globe.

ThE BENEFITS TO OUR ClIENTSOur mission at Kantar Retail is to drive tangible transformation in our clients’ businesses — significant, positive achievements that can be seen and measured. As one firm, we can integrate and align multiple marketing objectives, extend global practices and drive business growth. At this challenging time, these insights and actions are needed more than ever. At Kantar Retail:

n Our insights transform perspectives.

n Our strategies transform propositions and organizations.

n Our execution transforms experiences and results.

n Initiatives range from creating the high level growth vision and strategy for a company down to testing a shelf redesign or training a single person.

KANTAR RETAIl CONDUCTS BENChMARKING STUDIES ON ThE FOllOWING SUBjECTS

n PoweRanking® of Manufacturers and Retailers

n Category Leadership

n Trade Promotion Spending and Merchandising

n FoodservicElite® Ranking of Manufacturers and Operators

n Industry Shopper Study Across Retailers

n Digital Power Study

Kantar Retail Overview

RESEARC

h O

BjECTIv

ES A

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METh

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Research Objectives and Methodology

RESEARCh OBjECTIVESFor nearly 20 years, Kantar Retail has sponsored an industry study to provide insight into Category Management and Leadership practices. The original benchmark study sought to establish a definitive position regarding the strategic role and importance of Category Management from both a Retailer and Manufacturer perspective. Over the past eleven years, we have highlighted the evolution of Category Management to the results-oriented practice of Category Leadership, with a focus on Shopper Insights and Retail Execution.

ThE SpECIFIC GOAlS OF ThE CURRENT RESEARCh ARE TO:

n Understand the evolving relationship between Manufacturers and Retailers through a Category Leadership lens.

n Assess Manufacturer and Retailer current practices, successes, and opportunity areas of Category Leadership.

n Outline organizational, technical, strategic and executional success factors.

n Enable Manufacturers and Retailers to assess their overall Category Leadership performance relative to competition.

METhODOlOGY

Customized questionnaires were developed for both the Retailer and Manufacturer communities. These questionnaires were distributed in early 2014, with the assurance of total confidentiality to respondents. Target groups included a broad representation of Food, health and Beauty Care and general Merchandise Manufacturers, as well as grocery, Drug, Mass, Club and Convenience Stores, and Retailers from many other channels.

The quantitative ratings are based on a five-point scale, and top two box scores (e.g., percent rating very/extremely important or very good/superior performance) are reported. The rankings of the Insights/ Category Management leaders are incorporated from our PoweRanking® survey and are reported as two-year rolling numbers that reflect the percentage of respondents ranking their Trading Partners among the top three. Point gaps may not appear exact due to rounding.

ISSUE RESEARCH &

IDENTIFICATION ANALYSIS CATEGORYlEADERShIp

PERFORM

ANCE EXECUTION

TRACKING

STORYLINE/

TOO

L

DEVELOP

MEN

T

PARTIC

IPAn

TS

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Participants

Over 450 Manufacturer and Retailer participants provided input. Respondents work across all levels of management within Retailers/Wholesalers and Manufacturers. The list below depicts an alphabetical sample of these leading companies.

MANUFACTURERS

n Abbott

n Anheuser-Bush

n Bayer

n Bemis

n Bic

n Burt’s Bees

n Cadbury

n Campbell’s Soup Company

n Caterpillar

n Clorox

n Coca-Cola

n Coleman

n Colgate Palmolive

n Continental Mills

n COTy

n Crayola

n Dannon

n Delmonte Foods

n Dentek

n Diageo

n Dr. Pepper Snapple group

n Dreyers

n E.j. gallo Wine gallery

n Elmers

n Energizer

n Frito Lay

n general Electric

n georgia Pacific

n gSK

n hasbro

n heineken

n h.j. heinz Company

n hershey’s

n j.M. Smucker

n jasco Products

n johnson & johnson

n KAO Brands

n Kellogg’s

n Kimberly Clark Company

n Kraft Foods

n Land O’ Lakes

n LEgO group

n MARS

n Mattel

n Maybelline

n McCormick

n McKee Foods

n MWv Packaging

n Mediacom

n Merck

n Mission Foods

n Mondelez

n nestle

n nestle Purina

n newell Rubbermaid

n Proctor & gamble

n Pepperidge Farms

n PepsiCo

n Perdue

n Pernod Ricard USA

n Perrigo

n Pfizer

n Phillips

n Pinnacle Foods

n Post Foods

n RB

n Revlon

n Rich Products

n S.C. johnson

n Sargento

n Seneca Foods

n Sony

n Unilever

n United Sugars

n WhiteWave

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Participants

RETAIlERS

n Ahold

n Albertsons

n Big y Foods

n Bi-Lo, Inc.

n Bj’s

n Bozzuto’s, Inc.

n Brookshire grocery Company

n C&S

n Circle K

n DeCA Military

n Delhaize

n Food-4-Less

n giant Eagle

n h.E. Butt grocery Company

n harris Teeter

n Kroger

n Meijer

n PETCO

n Price Chopper/golub Corporation

n Rite Aid

n Safeway

n Sears holding Co.

n Toys R’ Us

n United grocers

n Wakefern Food Corporation

n Walgreen Company

n Walmart

9

ExEC

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Executive Summary

Over the past 5 years, we have seen the shift in focus for Trading Partners from Category Management to Category Leadership. In our 2009 Category Leadership study, Retailers reported an average of 9 employees within the Shopper Insights function, both at and outside headquarters. As a rapidly developing branch at Retail, over half now have 20+ employees in Shopper Insights at hQ and a third have similar representation outside of hQ. This increase in focus on growing the Shopper Insights and Shopper Marketing functions has occurred across both Retailers and Manufacturers, but with significantly greater increases for Retailers.

Today, this increased internal dedication to and connectivity across insights and management for Retailers has led to a greater breadth of Retailer insights and game-changing expectations for Manufacturers. now, Manufacturers are expected to bring knowledge and insights to Retailer headquarters, where the insights are managed on an ongoing basis.

In addition to growing the Shopper Insights function, Best in Class organizations have also developed Centers of Excellence (COE) and insights-dedicated groups to ensure the linkage from Category Management to Shopper Insights and Shopper Marketing. These Shopper Insights teams holistically address consumer, shopper, and retailer insights. The number of Retailers with Shopper Insights and Shopper Marketing roles reporting directly into a COE or insights group has increased significantly overtime. In the past 3 years, the percent of Retailers with Shopper Insights reporting to a COE has increased from 6 to 12%, while the percent reporting to an insights-dedicated group has increased from 25 to 41%. Percent of Shopper Insights teams reporting to Marketing and Sales have remained more consistent to declining.

% of Companies with 21+ Employees in the Following Divisions

Shopper Insights at HQ

Shopper Insights Outside HQ

Shopper Marketing at HQ

Shopper Marketing Outside HQ

Retailers (2014) 53% 36% 53% 39%

Retailers (2009) 24% 21% 27% 27%

% Growth vs. 5 YA 121% 71% 96% 44%

Shopper Insights at HQ

Shopper Insights Outside HQ

Shopper Marketing at HQ

Shopper Marketing Outside HQ

Manufacturers (2014) 16% 15% 16% 19%

Manufacturers (2009) 7% 9% 6% 4%

% Growth vs. 5 YA 128% 67% 167% 375%

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Executive Summary

Manufacturers have similarly trended toward employees reporting to a COE, but not as drastically as Retailers. Insights and Marketing hubs also reported an increase since 2011, whereas Shopper Marketing and Sales saw slight declines in number of employee reports.

With an increased Retailer focus on discovering and leveraging insights, the balance of power has shifted in the Retailer’s favor for marketing expertise, shopper insight ownership, and thought Leadership. As Retailer internal capabilities have grown in translating analytics and Shopper Insights into action, the bar has been raised even higher for Manufacturers to provide meaningful leadership. Today, Retailers are no longer looking for Manufacturers to bring them generic fully-vetted products and solutions, but to come to the table with ideas grounded in Shopper Insights, and the readiness to co-create programs and innovations customized to meet the Retailer’s shoppers’ unique needs.

today’s principles for successful Category Leadership, as defined by trading partners, include:

n Understanding consumer wants, discovering Shopper Insights and pursuing opportunities to drive category growth based on deep shopper and category knowledge

n Thinking long-term about driving future growth, by setting a vision for the category, as well as a plan to activate against the vision in the near and long-term

n guiding the way to a better shopper experience, supported by actionable Shopper Insights

n Sharing new information, ideas and processes to deliver results, supported by world class innovation and data-based collaborative execution

As successful Category Leadership relies on applying Consumer/Shopper Insights directly to strategy and action, Manufacturers and Retailers agree that identifying Category opportunities and having a good Consumer Foundational understanding are the most important business drivers. All shopper and consumer business issues have risen in importance across Trading Partners, and are only expected to continue to rise as differentiators of success.

‘‘[Category leadership is]

the linkage from insights to

activation, which ultimately will

shape the category differently,

based on deeper knowledge

of the shopper. Today, the

advantages oF Better

inFormation are not

impacting the shelf/assortment

as much as they should.’’ — manufacturer

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Executive Summary

And yet Manufacturers are lagging in providing the right Shopper Insights, as well as tying them to the right action plans that work for each Retailer and its shoppers.

Why is this? — Because discovery and sharing of insights on the “Average Shopper” are no longer novel and meaningful for Retailers, and therefore no longer sufficient for driving Category Leadership. Retailers are now looking for not only insights on their shopper that leverage their shopper data, but also across key shopper and demographic targets (including hispanics, Millennials, Boomers, and Low Income).

Further, Category Leadership can no longer be supported by one cohesive strategy and “one size fits all” approach, or even a Channel-level approach, but instead by customized and localized Retailer, and even store-specific, strategies and solutions. These types of strategies can evolve through growth of manufacturer data management capabilities to successfully manage and report on Retailer-specific shopper data, POS data, and segmentation schemes. Successful use of these data sources allows for customization and localization of insights and recommendations for retail partners.

To bring targeted, customized solutions, manufacturers can also leverage their expertise outside of the retailer’s four-walls, where Retailers have limited visibility and knowledge. Manufacturers can creatively apply best practice learning and trends from other Retailers and Channels, as well as leverage Macro Trends to think beyond the categories in which they play and redefine total store and its growth strategy.

Category Leadership must continue to evolve. It needs to link highest level consumer need states and Shopper Insight ‘whys’ and ‘why nots’ to long term category and store growth visions, and in turn, to customized activations of the vision at Retail. For strategies and activation plans to be successful, it is crucial to begin with a broader strategy in mind, and then connect down to the tactical category-level opportunities.

‘‘we should focus on consumer

demographics and needs.’’ — retailer

‘‘as retailers continue to refine

their strategies for establishing

a point of differentiation, they

will be inCreasingLy FoCused

on utiLizing manuFaCturer

shopper insights to develop

their own Category management

processes.’’ — retailer

‘‘we need to discover shopper

insights and activate category

growth drivers based on deep

shopper and category knowledge.’’ — manufacturer

‘‘[we must] provide specific

recommendations that are laser

focused on individual shoppers:

be it through pricing, promotions,

or pos.’’ — manufacturer

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Executive Summary

While today many organizations are focused against winning with their top Trading Partners, category growth can no longer be achieved through a limited, efficient focus. We know that through to 2020 and beyond, growth will emanate from many smaller and differing sources. There will be no single winning Retailer or format. This challenges Manufacturers and Retailers alike to rethink their strategies on working together and effectively deploying resources to win.

Our recommendation to win in this ever-changing landscape is to focus on both breadth and depth. Start with the high level Consumer/Shopper Insights, best practices, and overall total store growth strategies. Once these are established, focus on activating drivers of success distinctively at a more geographically localized, category-specific level.

Leverage Broader insights and high Level strategies:

n Focus on integrating broader insights and best practices outside of a Retailer’s four walls to drive traffic and jointly grow total store together, by delivering cross-channel best practices in jBP sessions. Cross-Channel understanding has gained most significantly in importance as a business results driver, as an area where Manufacturers can truly differentiate in helping their Retail partners to grow and drive store traffic.

n Partner on developing a long-term, differentiated 3-5 year Category and total store vision. Redefine traditional categories through a shopper lens to drive tactical multi-channel activation principles and organizational focus.

Customized activation of drivers of success:

n Ensure that high level strategies link to customized aisle and store activations to drive differentiation at Retail and maintain shopper loyalty.

n Integrate customized digital programs to attract and retain shopper base.

n Employ key store and shopper segmentation schemes (hispanic Shopper Marketing, Rural vs. Urban, Trip Types, Shopper Demographics) to guide targeted programs at a local level.

‘‘Category management is

focused on one category and

related productivity in delivering

against shopper needs. Category

Leadership takes that to

the next LeveL with innovation,

external marketing, as well as

relating that category to the

overall business objectives

and goals.’’ — retailer

KEy

FInD

Ing

S

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Manufacturer/Retailer Power Balance

pOWER ShIFTS TOWARDS RETAIlERS — IN AREAS OF INSIGhT & ThOUGhT lEADERShIpConsistent with 2011, Trading Partners agree that the balance of power continues to shift overall towards Retailers. In 2011, the greatest predicted shifts were in marketing expertise, with more power moving to Retailers by 2016. Retailers and Manufacturers predict further shifts in marketing expertise, though Manufacturers uniquely believe the balance of power will remain slightly in their favor. Additional areas that identified, as well as further predicted, shifts in balance of power towards the Retailer include shopper insight ownership and thought Leadership.

manuFaCturer / retailer balance

BaLanCe oF power overaLL

BaLanCe oF marketing expertise

BaLanCe oF shopper insight ownership

BaLanCe oF thought Leadership

manufacturer / retaiLer balance

Mfr. Ret.

5.5 6.4 6.5

Mfr. Ret.

3.0 4.2 4.8

Mfr. Ret.

3.8 4.6 5.4

Mfr. Ret.

3.7 4.6 5.2

BaLanCe oF power overaLL

BaLanCe oF marketing expertise

BaLanCe oF shopper insight ownership

BaLanCe oF thought Leadership

Mfr. Ret.

5.2 6.2 7.0

5 years ago present 5 years Future

Mfr. Ret.

4.5 5.5 6.6

Mfr. Ret.

4.4 5.8 7.0

Mfr. Ret.

5.3 6.1 6.8

Manufacturers reporting balance of power between Manufacturers/Retailers

Retailers reporting balance of power between Manufacturers/Retailers

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Manufacturer/Retailer Power Balance

Conversely, Trading Partners predict very slight power shifts in the area of execution responsibility from 2009 to 2019. Both Manufacturers and Retailers consistently view Execution as already more Retailer-driven, particularly for driving store traffic and developing total store vision. Overall, the shift of new strategic responsibilities and maintenance of executional responsibilities for the Retailer mean a greater range of Retailer responsibilities across the board.

manuFaCturer / retailer balance

BaLanCe oF exeCution responsiBiLity

BaLanCe oF responsiBiLity to drive

totaL store traFFiC

BaLanCe oF perFeCt aisLe aCtivation pLan

responsiBiLity

BaLanCe oF totaL store vision

manufacturer / retaiLer balance

Mfr. Ret.

5.75.8

Mfr. Ret.

6.2 6.6 7.1

Mfr. Ret.

6.16.46.7

Mfr. Ret.

7.07.47.9

Mfr. Ret.

7.07.17.3

Mfr. Ret.

6.36.66.7

BaLanCe oF responsiBiLity to drive

totaL store traFFiC

BaLanCe oF perFeCt aisLe aCtivation pLan

responsiBiLity

BaLanCe oF totaL store vision

5.7

BaLanCe oF exeCution responsiBiLity

Mfr. Ret.

6.46.56.4

Mfr. Ret.

7.37.57.5

Ret.

5 years ago present 5 years Future

Manufacturers reporting balance of power between Manufacturers/Retailers

Retailers reporting balance of power between Manufacturers/Retailers

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EXECUTION & NEW pRODUCT INNOVATION STIll TOp ThE lIST OF KEY INDUSTRY ISSUESThe most important Retailer issues have remained fairly consistent from 2011. new product innovation, execution at retail and supporting private Label growth (the top 3 issues in 2011) remain at the forefront. The importance levels for execution at retail and private Label growth have remained flat from 2011-2014 and, according to Retailers, Manufacturer performance has improved across both metrics.

new product innovation has gained even greater importance in the past 3 years, rising as a top issue from 84% to 93% of Retailers. yet, Manufacturer performance rating has declined 3% points against new product innovation (decreasing from 32-27% since 2011), Retailer performance has improved by 15% points (increasing from 27-42% since 2011), widening the performance gap on this important issue.Retailers indicate that “there hasn’t been any great groundbreaking innovation recently,” as the majority of Manufacturers are focused on renovation versus true innovation.

Top Industry Issues

Top 5 packaged goods industry issues(% of retaiLers rating very/extremely important and very good/superior manufacturer performance)

Additional issues not included in the top five:

Consumer marketing at retail /category management

Digital activation

In-store digital activation

Shopper marketing

Shopper segmentation

Supply chain management

Supporting loyalty marketing (store loyalty programs)

Trade promotion efficiency

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‘‘There needs to be a quick way to manage

data down to the store/item level.’’ — retailer

Top Industry Issues

DATA MANAGEMENT & ShOppER INSIGhTS RISE AS TOp ISSUES

Additionally, manufacturer data management (a new metric for 2014) and shopper insights have emerged as the third and fourth highest rated issues in Retailer importance, above support of private Label growth.

Though important to Retailers, manufacturer data management has the second greatest gap in performance, following new product innovation. Only 28% Retailers report high Manufacturer performance in Data Management capabilities. This is largely tied to the need for Manufacturers to better manage, incorporate, and report on Retailer-specific Shopper Data, POS data, and Segmentation Schemes, in order to customize results and recommendations.

Interestingly, while the variations in importance and performance ratings remained consistent among Manufacturers and Retailers, regardless of their size, a few key differences did emerge. Small Retailers reported equal importance levels to Large Retailers, yet even lower Manufacturer performance ratings, against new product innovation (22% versus 33%) and data management (17% versus 29%). This reflects the opportunity for Manufacturers to prioritize focusing energy on Smaller Retailers in these areas, versus shopper insights and execution where they are already performing comparably across differently sized Retailers.

‘‘data mining will be critical for time-starved

category managers. They need simplified

solutions. Turn-key analysis that provides the

needed metrics will have to be established.’’— retailer

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Top Industry Issues

MANUFACTURERS MAINTAIN FOCUS ON TRADE pROMOTION In addition to new product innovation and execution at retail, trade promotion efficiency remains in the top three industry issues for Manufacturers, with shopper insights and data availability and management following closely behind to round out the top five. The top three industry issues, at 97%–94% importance, also have significant gaps in Retailer performance.

As the almost unanimously agreed upon #1 and #2 rated industry issue, for Retailers and Manufacturers respectively, new product innovation has seen varying shifts in performance. As Manufacturer performance has lagged in supporting new product innovation, Retailer performance has improved by 15% point, widening the performance gap on this important issue.

Top 5 packaged goods industry issues(% of manuFaCturer rating very/extremely important and very good/superior retailer performance)

Consumer marketing at retail/category management

Digital activation

In-store Digital Integration

Shopper marketing

Shopper segmentation

Supply chain management

Loyalty marketing (store loyalty programs)

Private label (store brand) growth

Additional issues not included in the top five:

Top Industry Issues

IMpROVEMENTS IN ShOppER OVERAllIn addition to increased importance levels, shopper marketing, shopper segmentation, and shopper insights have also all increased significantly in performance across Trading Partners in the past three years.

As Manufacturer importance ratings have increased across Loyalty marketing and shopper and Consumer marketing, Retailer performance changes have outpaced the increases in performance across the board. Loyalty marketing is among Retail performance top ratings, with only a 5 percentage point gap in performance ratings according to Manufacturers.

Overall, Retailers have acknowledged improvements in Manufacturer performance across shopper and Consumer marketing capabilities as well. For shopper marketing specifically, Manufacturer Performance rating has outpaced increases in importance level for Retailers. however, as shopper insights emerges as a top industry issue and business driver, Manufacturer performance lags in successfully providing Retailers these types of insights. This ties back to the need for not only generalized insights, but Retailer-specific insights, tied to action plans to win with the core consumer/shopper in a unique way.

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CPG Industry Issues

Manufacturer Importance

Change vs. 2011

Retailer Performance

Change vs. 2011

Retailer Importance

Change vs. 2011

Manufacturer Performance

Change vs. 2011

Shopper Marketing 12% 13% 7% 13%

Shopper Segmentation 14% 15% 17% 12%

Loyalty Marketing 3% 13% 15% 8%

Consumer Marketing 6% 13% 3% 2%

Shopper Insights n/a n/a 11% -1%

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Top Industry Issues

EMERGENCE OF DIGITAldigital activation and specifically digital in-store activation surface as newer packaged goods industry issues versus 2011. Retailers rate these issues as the least important among the issues addressed (65% and 50% importance ratings, respectively). Manufacturer performance against these issues, similarly, received the lowest scores (18% and 10%).

Digital metrics are relatively low on the importance scale for Manufacturers as well, with digital activation at 69% importance and in-store activation at 48% importance. Retailer performance gaps against these Digital opportunities are moderate. As expertise in digital activation grows, and Trading Partners best learn how to leverage digital to drive store traffic and product engagement, digital in-store activation will grow in importance in upcoming years.

‘‘There will be a need to

incorporate more digital

insights, even for brick and

mortar retailers.’’— Manufacturer

‘‘increased competition in the marketplace, particularly digital, will

force retailers to engage and partner at a deeper level with manufacturer/

brand Category management and insights department.’’ — Manufacturer

digital importance(% of manuFaCturers rating very/extremely important and very good/superior manufacturer performance)

digital importance(% of retaiLers rating very/extremely important and very good/superior manufacturer performance)

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Category Leadership Results Drivers

CONSUMER FOUNDATION & OppORTUNITY IDENTIFICATION RISE ABOVE EXECUTIONAl DRIVERS

Category issue/opportunity identification and Consumer Foundation/understanding have risen in importance to #1 and #2, as business results drivers, for both Manufacturers and Retailers. performance monitoring has also increased significantly in importance, into the top 5 drivers for both Retailers and Manufacturers, reversing a downward trend from ‘06 –‘10. This reflects performance monitoring as a key final step of the Category Leadership cycle, after issue identification, research and analysis, storyline development, and execution.

manufacturers view section assortment management and promotion merchandising as top business results drivers; this reflects a consistent trend in views on assortment management, with a significant increase in the importance of promotion, reversing a downward trend from ’06–’10.

Cmar/Category management business results drivers (Top 8)(% of manuFaCturers rating very/extremely important and very good/superior performance)

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Category Leadership Results Drivers

Cmar/Category management business results drivers (Top 8)(% of retaiLers rating very/extremely important and very good/superior manufacturer performance)

retailers have reported an increased importance across nearly all business results drivers, with the exception of aisle/section management and execution of shopper marketing programs. Cross Channel understanding has increased most significantly as a business results driver to Retailers, ranging from the lowest ranked driver at 59% in ’10, to #5 at 85% this year. Retailers also report Manufacturer improvement in this area. pricing remains a top business driver for Retailers as well.

There are a few driver areas where Retailers report Manufacturer performance as declining. Consumer Foundation/understanding, increasing in importance by 19 percentage points versus 2011, is the #1 business results driver for Retailers — top 2 box for 93% of Retailers — and Manufacturer performance is declining slightly. We also see declines in performance for shelf/assortment management across both Manufacturers and Retailers. Manufacturers report increased Retail performance across all other business results drivers.

24

Opportunities for Differentiation via Category Leadership

CONSUMER/ShOppER INSIGhTS & lONG-TERM VISION WIll OVERpOWER CURRENT OppORTUNITIES FOR DIFFERENTIATIONability to Listen remains the top differentiating activity today for Manufacturers, increasing from 59% to 66% of Manufacturers prioritizing this capability as a means to differentiate over the past three years. Collaborative approach and understanding retail partners needs follow closely behind.

For Retailers, willingness to test in-store is agreed to be the top differentiating factor, across 65% of Retailers, with Collaborative approach and ability to Listen following, similarly to Manufacturers.

however, both Manufacturers and Retailers predict that these current top differentiators will be overshadowed by a number of other activities in the future. Both Manufacturers and Retailers agree that Consumer/shopper insights will emerge as the top, vital differentiator versus today. Retailers also predict the increased importance of providing a Long-term 3-5 year Category vision.

Category management activities that CurrentLy differentiate your Company

Category management activities that will differentiate your Company in the Future

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Company Customizations

IMpORTANCE OF CUSTOMIzATION CONTINUES TO GROW

Customization expectations and priorities continue to grow, and are slightly different for Manufacturers versus Retailers.

Over 90% Manufacturers expect to have Customized Joint Business planning (JBp) initiatives annually with top strategic Retailers in the next 5 years. Manufacturers expect the greatest increases, from both 5 years ago as well as now, in bringing Customized digital programs to Retailers, as well as Customizing aisle and store recommendations for key Retailers.

‘‘retailers should start with their

shopper and tailor a plan to unlock

the insights that will drive growth

based on findings. Testing real time

will become increasingly critical.

we must learn to fail faster.’’— Manufacturer

Company Customizations (manuFaCturers rating somewhat/Completely agree)

26

Company Customizations

Retailer top 2 priorities in customization now remain consistent through 2019, prioritizing Segmentation Schemes. Expectation of employing multiple store segmentation schemes (hispanic Shopper Marketing, Rural vs. Urban), and expectation of employing multiple shopper segmentation schemes (trips, shoppers) are reported to be key for over 80% Retailers in five years.

While Manufacturers expect an increase in digital Customization similar to overall changes in customization, Retailers place a heavier weight on the expectation that strategic manufacturing partners will support the development of customized digital programs for Retail shoppers — climbing from 3% 5 years ago, to 79% in 2019 — as the number three area for Customization.

Company Customizations (retaiLers rating somewhat/Completely agree)

27

Company Customizations

ShOppER INSIGhTS & ShOppER MARKETING ORGANIzATIONS

While large Retailers have slightly more employees in Shopper Insights and Shopper Marketing than small Retailers, the differences are not overwhelming. however, the number of employees dedicated to the Insights and Shopper Marketing functions have increased more significantly for Retailers than for Manufacturers over the past 3 years.

Manufacturers average 8 employees per function/location at small companies and 13–14 at large companies, divided fairly evenly between marketing and insights, as well as inside and outside headquarters This reflects a fairly sizable increase in focus on Shopper Insights and Marketing for small companies over the past 3 years.

Small Retailers are more likely to have more shopper-focused employees than small Manufacturers, also with more Shopper Marketing employees at hQ than for larger Retailers, who are more likely to house them outside of hQ.

average number of employees — manuFaCturers (by size of Company)

average number of employees — retaiLers (by size of Company)

28

Leading Manufacturers & Retailers

Manufacturers who were reported as excelling in Category Leadership in the 2013 PoweRanking® provide unbiased Consumer insights, as well as leverage external best practices, to grow their respective categories at Retail.

n Procter & gamble’s innovation lab sets it apart as a leader in Consumer insights.

n general Mills’ use of consumer data to advance assortment helped move the company into the third position.

n nestle rose to the sixth rank by providing Retailers with accurate insights from both internal and external studies.

n Campbell’s moved up two ranks after successfully working with Retailers to stabilize the Soup category.

MOST hElpFUl CONSUMER INSIGhTS/CATEGORY lEADERShIp (Manufacturer)

‘‘we did two pilots with generaL miLLs in 2012 to

leverage shopper insight data to make better assortment

decisions. both pilots exceeded expectations, and drove

tangible results for the supplier and the category as a whole.’’

‘‘nestLe brings accurate and

actionable Consumer insights

from a number of internal and

external studies that they

participate in.’’

Source: 2013 PoweRanking®

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Leading Manufacturers & Retailers

Walmart, Kroger, and Target continue to dominate in Retail Category Leadership. Walmart proves to be best in class by heavily involving the buying teams, while Target’s strength comes from knowing its core shopper.

Publix and Meijer both improved two ordinal ranks from 2012. Ahold’s open-minded and forward-focused approach to Category Leadership pushed it into the Top 10 this year.

MOST hElpFUl CONSUMER INSIGhTS/CATEGORY lEADERShIp (retailer)

‘‘kroger knows how to cross merchandise product.

They understand category affinities and how to make

areas in store — like seasonal — draw shoppers and

sell product. That strength only comes from a solid

Category leadership understanding.’’

‘‘waLmart created Category

leadership, refusing to accept just

‘Category management.’ They also

do not allow suppliers to claim

‘category captaincy’ and place

that responsibility on the buying

department, with suppliers serving

as advisors.’’

Source: 2013 PoweRanking®

Retailer Comments on Most helpful Consumer Insights/Category Leadership

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1. Don’t Strive to Be a Category Manager, Be a Category leaderTrading Partners consistently define Category Management as “tactical” and “reactive,” versus Category Leadership, which is “strategic” and “objective.” This means that to drive successful partnership, both Manufacturers and Retailers need to think and act as growth leaders. As one Manufacturer stated,

“ anyone Can manage a Category; onLy one Can Be the Leader and drive the Category to its FuLL potentiaL.”

2. Turn Insights into Customized ActionsDon’t stop at developing Consumer/shopper insights. Focus on the co-creation of Retailer-specific Shopper Insights, and work together to convert those to action plans. Work together to drive true, differentiated, game-changing category and total store growth.

3. Focus on jBp OpportunitiesRegular Joint Business planning is crucial to developing strong ongoing relationships between Retailers and Manufacturers. Trading Partners must continue to focus on developing strong relationships across all associated roles, supported by regular open conversations. JBp can support the alignment of both short and long-term objectives going into a business cycle, as well as allow for joint development and co-creation of strategies and activations.

Recommendations

‘‘Category leaders do what is good for the category and the retailer, even before the retailer asks for the information.’’ — Retailer

‘‘management may get you into the room and perhaps a seat at the table, leadership gets you the chair at the end of the table and control of the presentation.’’ — Manufacturer

‘‘The best teams don’t live out of their laptops, but spend time with everyone involved in the process for a true Jbp plan.’’

— Manufacturer

‘‘we have just started working with [retailer] in their Jbp process and it is the most collaborative one i have seen in my 20 years. no matter the size of the partner, if you have capability and insights, you have a voice.’’ — Manufacturer

‘‘we need to share both data and our end goals, so a customized solution can be realized that best benefits the category and retailer.’’— Manufacturer

‘‘provide analytics and insights on shoppers and consumers that allow co-creation of unique, exclusive products and services to help both businesses grow.’’ — Retailer

‘‘understand the needs of our customers, not just the general market. work with us to grow categories and drive consumers into the store. Come with best practices and programs that will differentiate us.’’ — Retailer