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Several of the food companies that are poised to be tomorrow's category captains are in a category all their own: They're retailers.
As supermarkets increasingly scramble to rejuvenate the stagnant categories in their center store aisles, a few are staking more of a claim to the management process, instead of relying solely on their suppliers as they may have done in the past.
It's not that manufacturers have gotten it wrong -- in many cases some of the brightest merchandising ideas, not to mention innovative products, are coming from their category management expertise. Yet more retailers are realizing that they need to step up their involvement to ensure they're accounting for every possible sales dollar.
"When sales are decreasing and shifting, it's a problem for retailers because they aren't able to sustain same-store sales growth," notes Bill Bishop, president of Barrington, Ill.-based Willard Bishop Consulting. "Over time, a store that's losing volume and at the same time increasing costs will become unprofitable. This is a huge challenge to retailers experiencing it, and they're making it job No. 1 to stop the loss."
Some retailers are tackling the task of rejuvenating the center store one category at a time by re-evaluating assortment and pricing, says Bishop. Retailerwholesaler Supervalu has been in the spotlight lately for such an approach.
However, a few retailers have begun taking the process a step further by reinventing what the categories look like -- and passing up short-term gains, such as slotting fees, in the process.
"There are retailers who are saying, 'I believe the way to create a new strategy for this category is to stop carrying as many items that aren't selling, even though I'm behooved by manufacturers to carry them,'" observes Bishop. "They're choosing to make significant reductions in SKUs and walk away from manufacturer payments, realizing they'll have to make a short-term sacrifice by losing money that had been given to them as an incentive to sell."
By reducing underperforming SKUs, retailers are opening up more shelf space for authentic new items, which often include ethnic and specialty products, or their own private label brands, explains Bishop. Some supermarkets, such Marsh and Albertsons' Jewel, have begun highlighting their specialty items with bump-out merchandising -- a feature they couldn't otherwise commit to without the appropriate space.
In the ideal situation, retailers' and manufacturers' interests in center store converge, says Bishop. "When the retailer articulates his strategy, and then shares it with the supplier or finds a supplier to help implement the strategy, the process starts to resemble real retailer-driven category management. That looks very different from the category management of the last 10 years."
Ted Taft, a partner with Euro RSCG Meridian, a consultancy based in Westport, Conn., agrees that retailers are steadily becoming more proactive in the category management process. And they aren't just looking at categories currently in their stores, he observes. "Retailers are looking at new categories. They're also looking to bring certain sections of the center store to life."
For Stop & Shop, for instance, the section in the spotlight is entertainment. The chain is featuring in some of its stores an aisle focused on movies and books, says Taft. The signage at the front of the aisle even resembles a movie theatre marquee.
Likewise some of Albertsons' stores in Las Vegas include a "Beverage Boulevard" with similar flair, he notes.
Not all retailers are at a place where they can entertain such ideas, however, observes Taft, because they're focused solely on ECR (efficient consumer response) and top-line growth. "Today ECR has become somewhat of a distraction. So much of the industry is still in the efficiency mindset --focusing on filling out templates and assortment -- that they don't think of creative ways to do something different in the stores."