MAKING SAUCES PERFORM

Managing and merchandising the pasta sauce category has become something of a three-ring circus for buyers and category managers.Recent brand, variety and flavor introductions have turned retailers into jugglers as they decide which products to carry, and how and where to promote them.One thing most retailers agree on is that premium sauces are the segment that's driving the category.Gary Rygg, director

Managing and merchandising the pasta sauce category has become something of a three-ring circus for buyers and category managers.

Recent brand, variety and flavor introductions have turned retailers into jugglers as they decide which products to carry, and how and where to promote them.

One thing most retailers agree on is that premium sauces are the segment that's driving the category.

Gary Rygg, director of nonperishables at Thrifty Foods, Burlington, Wash., said the space devoted to pasta sauces has "increased mainly because of the premium sauces that have come out." Craig Hoff, director of grocery category marketing at Fleming Cos., Oklahoma City, agreed. "In just looking around the stores, I haven't seen it change a whole lot; I've seen [space] being reallocated. Most everybody's pushing to get the premium in a position on the shelf to really push it."

A Boston-area broker said pasta sauce as a whole is up 11%. While the category has three segments -- premium, mainstream and price-sensitive -- the premium sauce segment is up 57% and continues to entertain retailers with dynamic profit margins, he said.

While the premiums satisfy consumers' hunger for quality, ready-to-eat sauce, the mainstream and price-sensitive labels also grab their share of attention. A buyer at a small Washington-based chain said the mainstream and price-sensitive items actually offer better margins than the premium brands. As a result, he does more to promote those items.

Fleming's Hoff said that scenario is the exception rather than the rule.

"The premium sauce usually carries a little higher gross profit percentage for the retailer," he said. "Take the canned spaghetti sauces, which is the low end. A lot of times those are featured at cost or at a very marginal gross profit. The glass jars [the mainstreams] -- you normally run those with a little bit of profit in them. But then when you run the premium sauces, you run those with at least a 15% to 20% gross profit. But you have about 27% to 28% gross profit on a weekly and then daily basis. So there is a better margin in it."

Within the last six months, several new products have become part of the pasta sauce show. On the day SN spoke with Ralph Kluchar, a grocery manager at Riser Foods, Bedford Heights, Ohio, he had just received four new-product introductions from one manufacturer.

In addition to vendors introducing new lines, new varieties are rearing up like circus ponies. White sauces, according to retailers, are harnessing a share of the market. Kluchar added he's also seeing more garlic and cheese introductions.

Kluchar said he manages the inundated category by looking at his average set, 12 to 16 feet, and maximizing variety "to that set to a minimal amount of facings or minimal amount of pack-out and facings." He is carrying 48-ounce sizes and phasing out 14-ounce jars "because all [the consumers] want in the 14-ounce is the base sauce," said Kluchar.

Private label accounts for about 10.4% of the market, according to figures from A.C. Nielsen, Schaumburg, Ill. An industry observer in New England said the pasta sauce category is "not highly sensitive to the private-label inroads; it's limited. You'll find in spaghetti sauce, it's very, very minor. Consumers tend to sway away from private label because there's too many value brands out there that meet the need of the consumer."

Rygg of Thrifty Foods, however, said aggressive promotion has helped bring private label's share of the category in his stores to 15%.

With so many choices, it's difficult for category managers and buyers to maintain their balance on the category tightrope. The most obvious tool is simply reviewing the category's movement.

Ruth Kinzey, spokeswoman for Harris Teeter, Charlotte, N.C., said her chain "routinely reviews all product within the category and discontinues the slowest moving items."

Following a similar line, David DiGeronimo, grocery buyer at Victory Super Markets, Leominster, Mass., said he makes room for new stockkeeping units by weeding out those that aren't selling well. "To make room for a new line, I'll take the worst two selling or the slowest selling [mainstream sauces]. I kind of hit every company and take one out to make room for the new ones."

Some retailers already have an established category management system. Some, like Mark Polsky, senior vice president of Magruder Inc., Rockville, Md., haven't.

"But we're constantly evaluating both [Magruder's] movement, and IRI, Nielsen numbers," Polsky said. "We look at all that. As the new items come out, we try to give them a chance, unless we really think they're not going to work. We remove the slowest-moving items. There's not much else we can do."

Rygg of Thrifty Foods said, "Obviously, you can only handle so many. We look at movement on the items that we currently have, what we assess to be the potential of the item being presented, certainly promotional monies, penny profit, introductory allowances, all those kinds of things."

The contact at the Washington-based retailer admitted the company was carrying too many SKUs. "There again in the process of category management, we're overSKU'd as a company right now, and we know that because we're giving everybody that fair chance," he said. Currently the retailers stocks about 76 SKUs in an 8-foot space. John Gennari, vice president of sales at Borden Italian Foods Co., Columbus, Ohio, said his company has come up with four basic principles that deliver the best sales per foot: · Brand segments must be merchandised consistently, vertically and horizontally. · Premium should be placed between mainstream anchors in the center of the section.

· Mainstream brands should be anchored vertically, and the remaining brands should be merchandised in mixed blocks in the center of the section.

· A strong player should be placed in the center of the premium block, making it the premium segment's anchor.

The local Boston observer suggested a similar arrangement. He said that retailers in the Boston market and parts of Connecticut have "flanked the entire category from a merchandising standpoint with [mainstreams on either end]. They've put the premium segment in the center of the section. It simplifies things for the consumer and it boosts the category volume and profits at the same time."