CONSUMER MARKETS

ADVISORY

Efficient local assortment differentiationSelex – Barilla case study

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Who we are…

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Selex

2004 Turnover € 6,300 million

Marketshare 7.6%

2,646 stores in the Hypermarket, Superstore, Supermarket and convenience channels

5th largest retailer in Italy

22 associated groups with around 25 storebrands

Associated firm leading the project of this case study is Megamark (142 stores) with storebrand:

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Barilla

2004 Turnover € 2.5 billion

Leader in pasta and crispbread

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Pasta: the essence of Italy

Ranked among the top 10 in the Italian grocery business

Champion of Italian gastronomy:26 Kg per capita, 4.000 SKU’s, 140 manufacturers

Highly localised People needs…Pack sizeUnusual shapesLocal players

Need to manage the Category meeting local expectations while remaining efficient

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Our joint project on the Pasta Category

Category Management project in South Italy

Scope: 130 storesSmall super format (400-1000 m2)Puglia region – concentrated on 5 regional cities

Objectives:Improve performanceImprove efficiencyLeave room for local flexibility

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The situation at the start of our joint project…

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We soon realised that the overall performance of the category was outstanding …

…our sales were largely in line with the regional market

2,2%

2,8% 3,0%

Pasta share of store sales

Italy Region Selex

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The problem was the level of service to the shopper and low in-store efficiency

More space to the category than others… but many OOS’s and high ordering & replenishment costs

lots of products with only a single

facing

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Our assortment was similar to that of a hypermarket …

…but we are a chain of convenience stores and small supers!

273 278

RegionalHyper+SuperBenchmark

Selex

Average number of items on shelf

3890

RegionalHyper+SuperBenchmark

Selex

Average number of specialty items on shelf

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We had more space and many more items than our competitors…

…and little correlation between cluster size and assortment

Cluster Large

Cluster Medium

Cluster Small

Number of items per cluster and zone

competitors

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WHY?

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Pasta is a priority category for all retailers in the Puglia region

People are more demanding then in other areas in Italy – brand loyalty and variety of choice

People change stores if they do not find their brand

People are highly “vocal” – especially in small store formats they tend to ask for their brand…

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The decentralised management of the pasta category has some negative side effects

Assortment open/available to all stores

Assortment decisions, ordering and merchandising left to store managers

High level of resistance to imposing restrictions as in other categories!

Offering not based on market knowledge

Little continuity of the offering

No retail network efficiencies

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Our approach…

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Our approach was based on three criteria …

1. Improve service to the Shopper– Product availability in pasta– Continuity of the pasta offering– Completeness of the overall store offering

3. Improve the efficiency and effectiveness of assortment and display

5. Leave some freedom to store managers to customise their assortments

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The first two objectives needed category management expertise

FROM TO BASED ON

14.5 mt. shelf

290 items in assortment

92% market coverage

13.5 mt. shelf

250 items in assortment

92% market coverage

Fixed number of shelves

Fixed number of items by brand

Store clustering and system of 3 zones

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Change management proved a key part of the project!

The objective to provide store managers with some freedom to decide, was more difficult…

no mono

facings

Clear brand profile

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We devised a tool to set guidelines for managing the assortment at store level

Fixed Flexible Fixed Flexible Fixed Flexible

Fixed Flexible Fixed Flexible Fixed Flexible

Fixed Flexible Fixed Flexible Fixed Flexible

• Granoro• Divella• Barilla• Garofalo

• Barilla• Divella• Granoro• Riscossa

• Divella• Granoro• Riscossa• Garofalo

• Granoro• Divella• Barilla• Riscossa• Garofalo

• Divella• Granoro• Barilla• De Cecco• Garofalo

• Barilla• Divella• Granoro• Riscossa• Garofalo

• Granoro• Divella• Barilla• Riscossa• Garofalo

• Granoro• Divella• Barilla• Riscossa• Garofalo

• Granoro• Ambra• Divella• Barilla• Garofalo

• De Cecco• Voiello

• Voiello• De Cecco

• Barilla• De Cecco

• De Cecco• Voiello

• Riscossa• Voiello

• Voiello• De Cecco

• Ambra• De Cecco• Voiello…

• Ambra• De Cecco• Voiello…

• Riscossa• De Cecco• Voiello…

Cluster Small

Cluster Medium

Cluster Large

Zone A Zone B Zone C

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The tool mixes flexibility and strict rules to reduce the risk of mistakes

A fixed and flexible assortment component

Guidelines for the flexible component differentiated per cluster

SKU’s rankings to support brand choice for the flexible component

Guidelines for managing promotions

Guidelines for implementation

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Results…

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The results show an over-performing shelf with improved standardisation

ASSORTMENT

SPACE

SALES

- 14 %

- 7 %

+ 6 %

max

min

max

min

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In the freed space we could merchandise complementary products …

Pasta and pasta sauce on the same shelf to favour joint purchasing

Pasta sauces

Oven sauces

Pasta

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Let the store managers talk …

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Grazie!