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©UW-EC Great Northwoods Sales Warm-Up 2017

Hormel Foods Consumer Products Sales Case Study Information

Hormel Foods Consumer Products Sales Overview

Consumer Products Sales (CPS) is the organization within Hormel Foods that sells shelf stable

and perishable food products to retail customers, i.e. grocery (Kroger, Hy-Vee, Wegmans,

Publix), super centers (Walmart and Super Target), drug (Walgreens and CVS), mass (Target and

Shopko), warehouse (Costco and Sam’s Club) and dollar (Family Dollar and Dollar General)

outlets. A CPS sales representative is responsible for achieving volume goals specific to their

customer through new item placement or increased sales of existing items.

In order to get a new item placed, most customers demand an introductory set-up allowance

(slotting fee) to cover the administrative costs of product set-up within their system as well as

the cost of occupying the space within their warehouse and labor to get the new item onto the

shelf. While introductory set-up allowances are an industry norm, they should be avoided if

possible. They are viewed as another source of revenue for the customer, and an expense to

CPS as the funds are not directly invested to drive the sales of the new item placed. To assist in

this process, Hormel often times provides the sales team with funds to cover those costs.

Though it varies by account, the average allowance covered by the company per new item

slotted is $45/store.

The CPS sales representative is also given a trade budget to help drive increased sales to the

end-consumer once the product is in distribution. The amount of trade provided by the

organization is tied to the volume of product you sell at your account. Trade dollars can be

defined as monies given in an effort to defer retailer advertising costs and subsidize the retail

price during a promotional period to support HORMEL® branded products. ‘Promotion’ means a

feature, display, temporary price reduction or combination of tactics used to drive incremental

sales. The trade offered, as well as advertising support, is sought by grocery stores everywhere

and is provided by CPS sales representatives to their retail customers as ways to influence

promotional activity and support retailer specific marketing programs. The CPS sales

representatives also have marketing materials in the form of displays, coupons, print and online

advertising at their disposal. This on-going support assists the CPS sales representative by

creating a “pull mechanism” for HORMEL® products. By aggressively pursuing sales goals


through creative strategies and fresh thinking, Hormel Foods’ CPS sales representatives have

ample opportunities to grow sales and achieve their goals.

A CPS sales representative has a portfolio of the most renowned grocery products in America to

sell, from on-trend ethnic flavors such as CHI-CHI’S® salsa, HOUSE OF TSANG® sauces and

marinades and traditional staples such as SPAM® luncheon meat, SKIPPY® peanut butter,

HORMEL® chili, COMPLEATS® microwaveable meals, NATURAL CHOICE® lunchmeat, BLACK LABEL®

bacon and HORMEL® pepperoni.

In addition, the products within the Hormel Foods CPS portfolio offer a competitive advantage

over similar products produced by other food manufacturers due to the strong trade and

advertising support as well as Hormel Foods’ solid reputation of quality and food safety within

the industry.

How Hormel Foods CPS Sells to Grocery Customers Consumer Products Sales Reps have two different types of grocery customers: chain grocery

stores and grocery stores supplied by a wholesaler.

A chain grocery store is a group of stores with one central decision maker. A chain grocery store

buys directly from Hormel Foods and self distributes product from their own distribution centers

(warehouses). Chain accounts are typically higher volume stores. Hy-Vee and Kroger are both

examples of chain accounts since they buy directly from Hormel Foods and supply their own

stores with product.

A wholesaler is a customer that buys directly from Hormel Foods and further distributes the

products to smaller grocery stores. This is optimal for smaller independent stores since they do

not want to tie up their capital in warehousing and trucks to service their stores. Independent

stores can have more than one location and still find it beneficial to be serviced by a wholesaler.

A CPS sales representative that calls on a wholesaler makes two sales calls, one to sell the

wholesaler and the other to the smaller grocery store accounts that are supplied by the

wholesaler. An example of a wholesaler account would be SUPERVALU. An example of a

grocery store being serviced by SUPERVALU is Festival Foods or Hometown IGA. The CPS sales

representative first must sell the product to SUPERVALU and gain their acceptance to supply the

item and then resell the product to Festival Foods or Hometown IGA. The volume totals of the

smaller accounts will be comparable to a chain account once they are added together. Every

sale counts!

All CPS sales representatives assist their customers with promotional tactics to help drive sales.

CPS sales representatives usually have appointments once per month with chain and wholesale


accounts, to sell new products, promotions, offer items for future ad consideration, review

Hormel Foods marketing support, and discuss item performance. Hormel Foods provides the

CPS sales representatives the autonomy to work with their customers and create promotional

ads, develop co-promotional opportunities with other brands, and plan marketing events in the

stores. Given the amount of freedom and creative liberties that Hormel Foods allows its sales

representatives, it is very similar to running their own business.

SUPERVALU Company Overview

SUPERVALU Inc. is one of the largest grocery wholesalers and retailers in the United States with

annual sales of approximately $19 billion. SUPERVALU serves customers across the country

through a network of approximately 2,000 owned, franchised and independently owned stores.

Over 1800 of these are operated by wholesale customers serviced primarily by the Company’s

food distribution business and 197 traditional retail stores operated under five retail banners. It

ranks in the top 100 of the Fortune 500 list. Headquartered in Minnesota, SUPERVALU has

approximately 30,000 employees. Additional information about SUPERVALU can be found at

www.supervalu.com

SUPERVALU Wholesale Distribution Business Overview

SUPERVALU is a wholesaler that supplies company-owned stores and stores owned by

independent retail operators with products ranging from produce, fresh meats, and canned

goods to household cleaning supplies and health and beauty products. The company buys these

products directly from manufacturers and growers. SUPERVALU resells and generally delivers

product to smaller retail grocery stores and chains that do not have the resources to move

product directly from manufacturers.

While SUPERVALU delivers the best products available at competitive prices, their

merchandising teams work closely with manufacturers to develop and deliver comprehensive

merchandising programs to independent retail operators. The purpose of their programs is to

drive sales and profitability for the independent retail operators, SUPERVALU and the

manufacturer.

SUPERVALU’s wholesale distribution business is comprised of three distribution regions, one of

which is the Northern Region. The Northern Region includes 950 stores located in Alaska,

California, Idaho, Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Montana, North

Dakota, Ohio, Oregon, South Dakota, Washington, West Virginia, Western Wisconsin, Wyoming,

and Guam.


Sales Scenario I – SUPERVALU Warehouse Northern Region (Day 1)

As a Territory Manager for Hormel Consumer Product Sales (CPS), one of your

responsibilities is calling on the SUPERVALU Northern Region. SUPERVALU Northern

Region, located in Minneapolis, MN, is a grocery wholesaler supplying their own corporate

retail stores as well as independent grocers. While independent retailers like to maintain

their autonomy, they generally follow the merchandising recommendations made by

SUPERVALU. Upon approval of new products, promotions and events at SUPERVALU,

Territory Managers sell and implement the programs to each group of independent stores,

i.e., Festival Foods, Hometown IGA or Deluxe Foods, supplied by SUPERVALU.

In recent years, research and trends show that consumers are becoming more health

conscious and are looking for more nutritional solutions at their retail food stores.

Research also has shown that while the focus on healthy eating practices is growing,

convenience continues to play an important role in the purchase decisions made by

consumers. In response, Hormel has launched a new product called Natural Choice®

Snacks which it will be supporting with a variety of marketing collaterals and activities.

Through your training and research you know this to be a competitive, but growing

market.

SUPERVALU will be launching a January promotion focusing around healthier, on-the-go

meal options, catering to New Year’s resolutions. The promotion will be held within their

in-store flyers as well as digital app support. The promotion will focus on nutritious meal

options that are convenient for on-the-go opportunities.

From past experience you know SUPERVALU requires a minimum warehouse slotting

allowance of $7,500. You are authorized to approve up to $5,000 per item warehouse

slotting allowance. Any request for additional fees must be approved by your manager. In

addition, you are aware SUPERVALU expects in-store samples of new, advertised products.

You’ve heard through CPS peers that SUPERVALU independent customers are eliminating

additional product displays in an effort to enhance customer shopping experiences and

reduce inventory as well as adding focus to natural and organic product assortments.


In preparation for planning the New Year’s Resolution promotion and an upcoming product

review, Casey Dahl, SUPERVALU Grocery Category Merchandiser, has agreed to meet with

you. Casey a seasoned category merchandiser who relies on relationship selling, has been

tasked to apply analytics to all buying decisions. Casey is an active runner and enjoys

cooking for company. Casey is a passionate chef who is always on the go.

You’ve been calling on Casey for the past year and you two have a good working

relationship. Getting Casey to focus on the opportunity is always a challenge. Throughout

your meetings you’ve decided that Casey is somewhat of a “late adopter.” Nevertheless

Casey is considered a top buyer at SUPERVALU due to keen attention to detail and

budgetary focus. You’ve felt that this methodical approach has at times made him/her

hesitant to change.

Your goal is to present and gain distribution on the four new Natural Choice snacking

items, provide slotting for the warehouse, and include them as part of SUPERVALU’s

upcoming New Year’s Resolution promotion. In advance of this meeting you sent

samples of each of the new Natural Choice® Snacks products.

As a CPS representative you will have marketing support in the form of coupons (often

referred to as FSI’s – Free Standing Inserts) in newspapers, magazines and on-line

activities. The FSI will focus on New Year’s resolutions and the need for better-for-you

snacking options. The coupons have a drop date to the markets of December 31, 2017.

Please use the SUPERVALU New Item Form as your contract to close this sale. (To be posted

on website.)


Sales Scenario 2 – Deluxe Foods (Day 2)

You are a Hormel CPS territory manager with headquarter sales call responsibilities on a

287 store traditional up-scale grocer called Deluxe Foods. Deluxe Foods is an independent

retail chain supplied by SUPERVALU. These stores are currently located throughout the

Midwestern United States with the largest presence in Minnesota, Iowa & western

Wisconsin. Deluxe Foods is an upscale grocery chain with a focus on natural assortments.

The previous buyer, Alex, had discontinued a large number of Hormel REV varieties. You

felt that Alex had a negative impression of Hormel and had refused acceptance of our items

no matter the situation or data presented. Alex is no longer on the desk and has been

replaced by a young, ambitious buyer named Riley who is rumored to have a negative

impression of Hormel from a previous role.

In your last meeting with Riley, you learned that he/she is all about the business and

appreciates a fact-based sales approach to support decisions rather than being persuaded

by a sales pitch. During your conversation, Riley spoke about how busy his/her kids are and

how difficult it is to stay healthy with little time to for him/herself. Riley informed you that

Deluxe Foods is interested in offering “better for you” items, at a competitive price. Riley also

voiced concerns on evolving natural trends and the migration of people sitting down for

meals. You mentioned that our new innovative product, Natural Choice® Snacks, was a

possibility that would fit that need, and the brand has been performing admirably since its

recent launch. After showing a little initial interest, he/she asked for this follow-up meeting

to review the products more in-depth. In advance of this meeting you sent samples of each

of the new Natural Choice® Snacks products. With intense competition in the category, it

will be a challenge to sell Riley on the items. Riley reminded you about Deluxe’s standard

introductory set-up allowance of $50 per item per store.

Your task is to create a sales story showing how Natural Choice® Snacks aligns with

Deluxe Foods upscale natural model and how they can capture additional consumer

purchases with adoption of this product. Natural Choice® Snacks have been

approved at SUPERVALU. During your upcoming meeting you must negotiate slotting

for the 287 store chain, agree on first ship dates, item locations, potential item

deletions and suggest a merchandising plan to effectively promote the item(s).

Please use the Deluxe Foods New Item Form as your contract to close this sale. (To be

posted on website.)

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