BURBANK, Calif. -- The old saying goes, "A rising tide lifts all boats."
In the early '90s, the Walt Disney Co. turned its attention to building a video sell-through business in supermarkets. The result was a period of heavy video sales and creative promotions for all major studios that lasted until DVD came on the scene in a big way.
This week, at the Food Marketing Institute Show in Chicago, Disney's video division, Buena Vista Home Entertainment, is launching a comprehensive initiative for supermarkets aimed at taking advantage of the stunning sales success DVD has enjoyed. With about 2% of the DVD market, supermarkets are a bit player, although they enjoy double-digit sales growth. Buena Vista wants to keep that growth up and increase it.
"The DVD marketplace has experienced exponential growth in the last several years. Unfortunately, most supermarkets have not seized this opportunity," said Robert Chapek, president. "Buena Vista Home Entertainment is committed to working with the grocery channel to take advantage of this exploding marketplace."
The initiative is modeled in part on a huge promotion run with Kroger Co., Cincinnati, last fall. The event supported the release of "The Lion King Special Edition" and was carried by all divisions and banners of the chain. It involved nine tie-in partners, heavy advertising, and a very significant buy-in, according to sources.
Industry insiders described it as the biggest video promotion ever. Buena Vista wants to do more than duplicate it. The studio wants to establish a permanent presence in supermarkets and run cross promotions on an ongoing basis, rather than just title-by-title, said Liz Crystal, vice president, trade marketing. Catalog, classics and event titles will be included. A special display is in the works designed for Kroger by Buena Vista and a major soft drink company that did not want to be named, she said.
A program similar to Kroger's "Lion King" promotion is planned for "Aladdin Special Edition" this fall, and may be extended to other chains. Buena Vista also is working closely with Albertsons, Boise, Idaho, Disney executives said, and the studio is at the FMI Show with the expressed intention of attracting other supermarket companies. "Generally, we are making the most ground right now with Albertsons and Kroger," said Scott Guthrie, vice president, sales and channel development. Kroger and Albertsons did not respond to requests for comment.
While many components of the initiative are in the field already, the studio expects to pull it all together in the early fall in time for the "Aladdin" release and then for the fourth quarter, Guthrie said.
In another Kroger division, Fry's in Arizona, Buena Vista titles have been cross promoted effectively with rotisserie chicken. With Fry's Magical Movie Night, consumers who purchase a specified DVD got a free 2-liter Coca-Cola and rotisserie chicken, Crystal said. This program will expand to all Kroger divisions and banners with the May 18 release of "Miracle," headlined, "All-American Meal Deal!" she said. In most cases, such promotions will be linked to the retailer's loyalty card, she added.
Such offers give supermarket customers a value comparable to the loss-leader pricing of the mass merchants, but without compromising video margins and while building traffic to other parts of the store, she said.
As with "Miracle" and "Aladdin," Buena Vista will have title-specific promotions, Crystal said. "The bigger slam dunk and the long-term opportunity is for us to have an ongoing effort in partnership with the grocery retailer," she said.
"The time is right. Supermarkets have shown growth in this category. They have embraced DVD. We have seen results when we do promotions well," Crystal said.
"We've got a category that is experiencing double-digit growth and we really believe that grocery needs to grab its fair share," Guthrie said. "We think we can do that with the inline sections, the outposting solutions, and some of the CRM [customer relationship management] in-store marketing approaches."
DVD theft has become a major concern for many supermarkets. "DVD doesn't suffer from any more shrink than other high profile categories like batteries or shaving blades," Guthrie said. Studies have repeatedly shown that about half of shrink goes out the back door, he added.
"We know that theft is an issue out there, particularly on the new releases. We've been telling retailers, 'We'll work with you,"' Guthrie said.
Pricing is another obstacle to supermarket DVD sales, as mass merchants consistently sell hit titles below cost. Guthrie formerly worked for a soft drink company, so he knows that supermarkets are not strangers to loss-leader pricing. "I'm not suggesting that is where they want to go, but I know grocers can be competitive when they see a product as a key component of diving consumer loyalty and driving sales for a given week," he said.
Views From the Field
The new Disney supermarket initiative has yet to be fully presented to many retailers. Some significant players contacted by SN said they did not know enough about it yet to comment. Kroger and Albertsons, which are already involved, did not respond to requests for comment.
"The 2004 supermarket initiative will afford supermarkets the opportunity to improve home video sales and margins," said Bill Bryant, vice president, sales, for distributor Ingram Entertainment, La Vergne, Tenn. "The initiative will be driven by marketing programs and cross promotions with key tie-in partners."
Others remain concerned about pricing and shrink. "Taking feature DVD and putting it out in high traffic areas is going to cause huge shrink," said an executive with a Midwest retailer who asked to not be identified. "Without a sharing of that shrink, it more than likely would never happen in this company," he said.
On the other hand, "if they address the pricing, if they address the shrink and if they do all the promotions they are talking about, it sounds doable," the executive said.
"Disney is not going to cause anybody to go nuts over this program unless they do something to address the shrink," said a distribution executive with long-term experience specializing in the supermarket industry.
Retail real estate and the number of display units from the various studios is another issue. "It's a very competitive environment and supermarkets are going to be more selective about what they put in." Disney's family-oriented product should help secure floor space, he noted.
Disney is on the right track with its cross-promotional efforts, the distribution executive said. "Supermarkets really love the idea of using the advantages they have that the Best Buys of this world can't counter, and they love the idea of selling it at a good price with their loyalty card. If Disney is taking that a step farther, then that is a very smart way to go," he said.
Focusing on Supply Chain
BURBANK, Calif. -- One of the ways Buena Vista Home Entertainment's new supermarket initiative will differ from past approaches will be in its attention to supply chain issues, said Scott Guthrie, vice president, sales and channel development.
"The execution is absolutely the most critical aspect of all this," he said.
In addition to traditional video distributors like Ingram Entertainment, La Vergne, Tenn., Buena Vista will use a third-party merchandiser, Mosaic Sales Solutions, Irving, Texas, to get product on the shelves on a timely basis, he said. "With Mosaic, I have a completely dedicated staff that is fully ingrained and wrapped into our business. While they might be a third party, they are absolutely part of our total business solution," Guthrie said.
Using Mosaic will ensure that the product moves from the back room to the sales floor on street date, and, he added, the less time it spends in the back, the less opportunity there will be for back-door theft.
Working with retailers, Buena Vista has put other efficiencies into its supply system. For example, making pre-packs and standees simpler to assemble can save significant time on a national basis. "It allows us to call on another 2,000 stores on that same day without adding any incremental costs. We believe that drives sales and relevancy," he said.