MINNEAPOLIS -- Supervalu here will aggressively roll out category management pricing and allowance promotion programs this fall.
The category management allowance program, CMAP, which allows retailers who meet manufacturers' performance requirements to earn immediate billback of funds directly off their invoices, will be made available in Supervalu's Midwest Region this fall. Each of Supervalu's seven regions are made up of various divisions.
Supervalu is also starting to work with a small group of retailers in most of its seven regions, with pricing software to help them maximize gross profit potential without hurting their price image.
Internal training on these category management tools, as well as new software that gives demographic insights into consumers on a store-by-store basis, began last month for Supervalu's regional staffs. These regional staffers typically communicate about category management with the retailers serviced by Supervalu.
Supervalu's Midwest Region services about 500 retailers, and the wholesaler's objective is to have as many stores as possible use the CMAP program. However, CMAP is not a mandatory program, only an option for retailers.
"If retailers feel there is a benefit to them by participating in this program, it will be made available," said Leland Dake, vice president of category management at Supervalu. "If they feel they want to take a different approach in negotiating merchandising promotion funds then they don't have to participate."
If interest in CMAP in the Denver area is any indication, the program is off to a positive start. Supervalu rolled out CMAP in Denver Aug. 5, and all but a few of the 120 stores Supervalu services out of the division there are on the program, according to Dake.
While Dake said it was "too early" to reveal results from CMAP usage in Denver, he noted Supervalu is "very pleased with the amount of promotions that are going through the program, the number of vendors participating in it and the number of stores that are receiving the benefit of it."
Dake said one of the key advantages of CMAP to the retailer is immediate billback of funds for performance.
"If a manufacturer has a suggested retail price requirement to earn billback performance funds, then the CMAP program will be able to look into the retailer's suggested retail price field. If the retailer has that price point or less, they will be able to get that manufacturer's billback off their invoice," Dake explained. He added that the same system works for display quantities. If a manufacturer has a 10-case minimum display to earn billback dollars, the CMAP program can look into that order field. If the order is for 10 or more cases, then Supervalu will take the billback off the retailer's invoice, Dake said.
CMAP also helps retailers' cash flow, he noted. "If retailers are selling product at a lower price, but waiting for money, then obviously if we can get their money to them quicker that's going to enhance their cash flow.
"It also allows retailers' gross reports to be much more accurate," Dake added. These reports track retailer purchases, multiplied by suggested retail prices, to provide a gross profit figure.
"In a report like this, a retailer might gross 24% in the grocery department. But then after the retailer figures in expenses, he nets out 16%," he explained. "If we can take those allowances off invoice, it lowers retailers' cost of goods and makes those reports more accurate."
Dake said Supervalu is also working with retailers on pricing, using Price Man software from ACNielsen, Stamford, Conn.
"In the past, retail pricing has been a very tactical type of job," he said. "A retailer looked down the street, saw the competition at 79 cents on an item and said to himself 'I better be at 79 or 78 cents."'
Dake said the more strategic approach is to look at each category as a business unit and set gross profit goals and objectives.
"If I have 100 stockkeeping units in the condiment category, a consumer is not price-conscious on all 100 items in that category," Dake said.
The questions then become "Can I still make my price impression through my private label and my key category leaders, which I know have to be competitively priced? How do I work the rest of the category to maximize my gross price potential without hurting my price image? This software tool will enable us and our retailers to practice those price modeling exercises," he added.
Dake said Supervalu is "pleased by the early results that show increased profitability for the retailers who are using this system."
He noted category management is an evolutionary process and Supervalu continues to spend a considerable amount of effort in the area of training. He said retailers can learn more about category management through the services provided by Supervalu University.
Enlighten, a demographic software package from Spectra/Market Metrics, Chicago, is one of the new software systems Supervalu is building into its training program for category management. Dake said this system is already used in many of its regions now, and will be made available to all its regions in the future.