CATEGORY MANAGEMENT

Supermarkets, wholesalers and manufacturers have long had input in category management, but now some brokers' data-gathering and analysis capabilities are making them valuable contributors to the process.Retailers such as Super S, San Antonio; Kroger Co., Cincinnati; and Giant Food, Landover, Md., have begun formulating category management strategies in concert with brokers, many of whom are responsible

Supermarkets, wholesalers and manufacturers have long had input in category management, but now some brokers' data-gathering and analysis capabilities are making them valuable contributors to the process.

Retailers such as Super S, San Antonio; Kroger Co., Cincinnati; and Giant Food, Landover, Md., have begun formulating category management strategies in concert with brokers, many of whom are responsible for stocking store shelves based on plans developed with the retailer.

By involving brokers in category management, some of the data- analysis load is being lightened at the supermarket level, freeing executives to do more strategic planning and less number crunching.

The brokers are acting as data repositories, often developing a strategy for various categories based on the supermarket's view of each area, then analyzing the effectiveness of plans by measuring point-of-sale data and data from outside sources such as ACNielsen, Schaumburg, Ill., or IRI, Chicago.

"The brokers are becoming more and more vital to the supply chain," said Joey Ely, director of category marketing resources at Fleming Cos., Oklahoma City. "The goal is to have the same systems in place so that wholesalers like us and brokers, who are actually implementing the plans, can speak a common language."

Mark Meyer, chief executive officer of CMI, a broker in Columbus, Ohio, said, "As category management becomes more and more critical to the success of a supermarket, they are looking for partners to help them digest and analyze an increasing amount of information to develop a plan for how the shelves should look. That is where brokers have started to step up their role.

"At the retail level, a lot of time is spent just collecting the data, and we are willing to take on that role."

Bringing brokers into the category management process has already had a significant effect for some early partners.

For example, in the first half of 1997, the 45-store Super S chain began implementing a multipartner category management plan with Christal Co., a broker in San Antonio, and Fleming.

The results, which will be published in a detailed case study early next year by the Association of Sales and Marketing Cos., Reston, Va., showed an 11% increase in dollar volume and a 3% jump in unit sales over a 12-week period in stores implementing the category management plan, compared with the stores that were not yet part of the program.

The categories that were examined included biscuits and dough, juice, margarine, milk and yogurt. Details about how many stores were involved in the program and future expansion plans have not yet been made available, and officials from Super S were unavailable for comment.

Brokers are becoming more involved in category management initiatives because supermarkets need partners to assist them in evaluating the increasing amount of data available, said Tom Christal, president and owner of Christal Co.

"There is more store-level information available, which drives the complexity of category management," Christal said. "In addition, we're beginning to see a lot of regionality to decision making," he added. "Companies like Kroger are a good example. They allow for some regional flexibility in merchandising.

"The challenge becomes how do you take a centrally designed, corporately blessed category management process and implement it on a region-by-region or even store-by-store basis. Things are being driven further and further out to the store level. That's where brokers come in," Christal noted.

Mark Baum, senior vice president of the ASMC, said multipartner category management has the potential to be extremely effective because it allows each party to concentrate on its strengths. The association represents grocery brokers.

"We're just learning how each party can contribute to the process," he said. "Right now we're putting together a template, a sort of standard for how brokers fit into the category management scheme in relation to the manufacturers and the retailers," Baum said.

One of the reasons brokers are just now getting involved in category management efforts is the huge investment involved, both in computer systems and staff trained to analyze data.

"Right now, out of a thousand brokers, there are only about 50 equipped to handle this in terms of technology and manpower," said Chris Hoyt, president of Hoyt & Co., a consulting firm in Stamford, Conn. "It requires a slew of software and the ability to crunch all forms of data plus a properly trained staff to do category management effectively,

"And the data is only a part of it. You need people who can take that data and go do something with it." What makes some brokers uniquely positioned in category management is their ability to assimilate information from the retailer and the manufacturer when formulating planograms, said Baum and others.

"What we add is that we can develop planograms based on information from all the parties and based on how the retailer views each category in relation to their business strategy," said CMI's Meyer.

"At Fleming, we're beginning to share the templates and other information to help the brokers design and implement their planograms," said Fleming's Ely.

"In the case of Super S, what we did is put together a team that consisted of corporate and local, a broker, five manufacturers and a representative from a syndicated data company. We put all those people in place to understand how category management works and who is best suited to what role. Hopefully, this will be a model for how wholesalers, brokers and retailers should work together," he added.

The next step will be to do a lot of this work over the Internet. "We've got some of our retailers doing this, but having access to the most current information is critical to good category management, so we're encouraging on-line exchange of data whenever possible," CMI's Meyer said.