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Supermarkets are finding that category management can put a nice head on sales in the beer department. Retailers, major brewers and industry consultants interviewed by SN said category management is helping grocers better manage their beer departments. According to one brewer's estimates, implementing category management can help a supermarket boost its beer sales anywhere from 5% to 30%, partly through

Supermarkets are finding that category management can put a nice head on sales in the beer department. Retailers, major brewers and industry consultants interviewed by SN said category management is helping grocers better manage their beer departments. According to one brewer's estimates, implementing category management can help a supermarket boost its beer sales anywhere from 5% to 30%, partly through reducing out-of-stocks.

Category management uses scanner data and other store information to determine how much space should be allocated for specific beer brands and sizes based on sales and profit performance. It can also help retailers decide how much space they should allocate to cold and warm sales as well as to six-packs, cases, single-serves, microbrews and imports.

"Category management has been working well for us," explained Tom Roesner, direct-store-delivery buyer-merchandiser at Seaway Food Town, Maumee, Ohio. Roesner developed his own category management program using scan data and industry trends.

"Industrywide, beer sales over the last couple of years have been flat to down, and our sales have been trending on the plus side. It may be slight, 2% or 3%, but it is a plus," he said.

Brian Cain, buyer-merchandiser at D&W Food Centers, Grand Rapids, Mich., said his chain is using scanning data as its category management program.

"We take our existing schematic and put the numbers down next to it from our scanning files. We see what each package sold and then look at the items that have sold very little and those that sold a lot. We evaluate whether we need more space for the good-selling ones and less space for the slow ones. Then we look at the new items that we would like to get in and try and estimate where we think those would shake out and determine how much space we give them," he said.

While some retailers have elected to develop their own beer category management programs, many are using programs developed by the nation's leading brewers, including Anheuser-Busch, St. Louis; Miller Brewing Co., Milwaukee; Coors Brewing Co., Golden, Colo.; and Stroh Brewing Co., Detroit.

"Category management has been very helpful to us. [Manufacturers] have good information, and the information that they give you is based on what you are actually doing in that store," said Terry Fowler, director of liquor and deli at Top Valu Markets, a division of K.V. Mart, Long Beach, Calif.

"Category management has helped to eliminate out-of-stocks and it has helped create a better mix overall for having what you need," said Dick Salmon, senior vice president at Melmarkets Inc., Garden City, N.Y.

Melmarkets has used a category management system developed by Anheuser-Busch for the last two years, and "this year we have been doing it more than ever before and much more accurately," Salmon said. He credits category management for the statistical information that is tied into scanner use and planograms the chain is now using.

"We now have color planograms that have an actual life-size color picture of the product, which is posted on the back of the shelving. If anybody comes in and they see that their space is not properly allocated, they are able to immediately rectify the situation and put it in the right space. It sort of keeps everybody on the shelf allocated properly. And it gives you a reporting picture of what you do weekly, monthly and by store," he said.

"We are in the process of putting category management in place now," said Oscar Sicola, liquor-beer buyer-merchandiser at Fiesta Mart, Houston.

"We have our own in-house person who is helping me with it. Right now we're just in the process of getting all of our computers and everything set up to handle the information. But I'm sure before all is said and done we will be working with one of the two major manufacturers on it," he said.

Pat Brooks, director of frozen, dairy, deli and liquor at Save Mart Supermarkets, Modesto, Calif., said his chain is also in the process of implementing a category management program and hopes to have it up and running within six months.

"We are in communication with the three major manufacturers, and we are listening to each one's presentation. We want to listen to all three and then incorporate the points that will be best for Save Mart. We want to look at what is available and how we can best manage it for our company," he said.

Brooks said the implementation of beer category management will allow the chain "to have the products that consumers want, rather than what we think they want." He added that Save Mart plans to roll category management out through the entire store.

John Bissell, managing partner of the General Management Consulting Division at Gundersen Partners, Bloomfield Hills, Mich., said today's retailers have a lot more power than in years past and are learning about maximizing profitability through category management.

"Category management is particularly applicable in beer because there are so many new brands out there, and the category in total is not growing. Retailers are not about to allocate more shelf space to beer. As a result, retailers are being more rigorous about deciding what goes on the shelf and what doesn't," he said.

John Hanichak, vice president of national retail sales at Anheuser-Busch, explained that "category management is important for beer because shoppers have so many places where they can go and buy beer." He added that supermarket chains are very important for brewers because they represent about 30% of all beer volume.

"Beer is a destination category. Shoppers go to the supermarket to buy beer, and once there they will pick up other items that are part of the transaction," he said.

Hanichak said when it comes to beer, many consumers are extremely brand-loyal.

"As a result of their brand loyalty, retailers who have out-of-stock situations will actually lose sales and profits. Category management will help supermarkets look at their space-to-sales [ratio] and make sure that the higher selling items are properly spaced in the cooler," he said.

Scott Wigner, category management manager at Miller, said that when executed as an approach to doing business, category management can almost redefine the sales relationship.

"We are trying to add value to that sales relationship. People have been talking about consultative and fact-based selling for a long time. This is taking it to new levels," he said.

"Category management is the marketing of product to consumers and not the sales call between a beer salesman and a retailer. It is becoming more focused on how we are going to sell product to the people who are drinking it and shopping the stores," Wigner said.

According to Wigner and Jose Milan, director of national accounts at Miller, the brewer's category management program can improve supermarket beer sales by creating a fact-based dialogue between the retailer and manufacturer, creating a better exchange of ideas and system improvements, and by better using consumer information.

"The actual increase realized from category management will vary by chain or customer. It depends on a lot of issues in terms of what role does the category play within that market for that chain. There are a lot of variables that will determine what growth they will have," Milan explained.

Among the chains using Miller's system of category management are Winn-Dixie Stores, Jacksonville, Fla., and Kroger Co., Cincinnati, Milan said. Officials at both chains declined to comment.

Bob Monroe, director of key accounts at Coors, said category management can be used by retailers to determine if the role of beer in their stores should be as a traffic builder or a turf defender.

"If the role of category management is determined for the category, then the supermarket can begin to target consumers and their shopping patterns to meet the objectives that are set up for the category," he said, adding that Coors has had a category management program for about two and a half years.

"We have a functional supermarket group that specializes in category management, not just in the shelf management piece of it but across the entire marketing mix to include promotion, pricing, merchandising, efficient assortment and then assortment on the shelf," he said.

Jeff Nowicki, Coors' senior account executive for supermarkets, said beer department category management can be used to increase sales of related products.

"We can bring the consumer into other categories by using beer as a destination. We can also use snacks as a destination and put each of those together on a display. To measure what the category plan does, each one is going to be a little bit different, and there are some cases where we may not be able to measure what beer has done for pretzel sales, pizzas, etc.," he said.

Hanichak said Anheuser-Busch often uses cross-merchandising in its programs.

"If cross-merchandising becomes an important objective for the customer, then we try to give them some suggestions and even programs where we'll talk to other manufacturers of those cross-merchandising items and try to work out programs that will reach the retailers' objectives in that area. We had tremendous success with a program last year with barbecue items like mustards and ketchup that might lend themselves to a beer display," he said.

Another benefit of beer category management is that retailers can take what they learn from the beer category and implement it in other areas of the store.

"We see them moving from beer into dry pet food, and one retailer has even used it for air fresheners. As retailers begin to get expertise in the category, especially if they plan around malt beverages, it really becomes a lot easier just from an analytical standpoint," Monroe said.

He explained that category management can help to determine the best way to measure the category's activity.

"We're seeing that retailers are moving toward a measurement called Gross Margin Return on Investment. What that does is not only take gross margin implications as a measurement but aligns that with movement of inventory. You can have a category that returns to you $14 in margin, but if it only returns once a year, it won't do much for your cash flow," he said.

Because its business is divided into four geographic business units, Stroh uses localized category management programs, according to Richard Libonate, director of national accounts.

"The whole idea of category management is giving the retailer information about their specific stores and their specific market. We've talked to chains with many stores and broken them down into groups of four or five and talked about each individual store in terms of demographics," he said.

"Category management is something that is long overdue. We are finding that it deals with the ways accounts are structuring their buying staffs. They want that buyer to be the category expert, and that is the right approach," Libonate said.

The brewers said although an investment by the retailer in scanning and computer software helps in the development of a category management program, it is not a necessity.

"We're finding a lot of times that customers think they can't do category management if they don't have scanners, and that is not true," said Milan of Miller.

"There is a lot of confusion out there about what is category management and what has to be in place to do it. There is a perception that if you are not scanning, then you cannot do category management. You can use information from us and some of the other brewers to actually start a category management process. You don't have to be this high-tech chain with scanning in order to initiate this program," he said.

Although one might get the impression that under manufacturer-driven category management the brewer running the category management program for the chain would give preference to its own brands at the expense of the competition, retailers and brewers said that was not the case.

"There always is a fear of the supplier showing that he is very self-serving. It is up to the retailer to watch that and make sure that they are fair to everyone, and most of the time they are very good. You just have to watch it," said Bob Jennings, buyer-merchandising manager of the beverage department at Raley's, West Sacramento, Calif.

Jennings added that Raley's instituted a program in February sponsored by Anheuser-Busch and is currently evaluating the results.

On the East Coast, Melmarkets is also using a program sponsored by Anheuser-Busch.

"Anheuser-Busch doesn't make the decisions. We do. They are going to do the work, and the work is based on what we tell them," he said.

Top Valu's Fowler said he uses both Miller and Anheuser-Busch in his stores, depending on which brand sells best in a particular location.

"I don't go with one manufacturer doing them all because they can get a little bit greedy. If you have two people doing it, it helps to keep them honest," he said.

And the brewers say their only goal is to help the retailer boost the category.

"When you grow the category, we will grow as well," said Miller's Milan.

Category management is also an effective tool in building cold beer sales, according to the brewers.

Monroe of Coors said determination of a cold-warm ratio really depends on how the retailer and his customers view the beer category for the chain.

"The real power in category management is knowing who the consumer is and what he is going to buy," he said.

"Category management not only helps by identifying a new consumer, but it also gives us an idea of what consumers are wanting, because they are a big piece of this. It helps to identify real areas [of growth]," he said.

One area of growth in the industry has been in the microbrew and specialty beer markets. However, while these products target a smaller audience and have fewer turns than Budweiser or Miller, there is still a place for them in the category management lineup, according to retailers and brewers.

"You can't discount the fact of the margins being generated by the microbrews, imports and specialty beers," said Coors' Nowicki. "They play a very integral part in stores we have identified through clustering, using our micromarketing piece. Those stores will then both display and encourage the sales of those brands."

In an effort to build the microbrew business, Jennings of Raley's is conducting an experiment that flies in the face of current category management thinking. In one store he is devoting 15% of shelf space to microbrews, even though they account for only 7% of category sales.

"True category management is not going to have the selection that you would normally offer to a consumer. That's a big deal. To get your turns up, you have to cut down on all of the marginal items, but we want to offer a complete variety to our customers," he said.

George Thompson, a securities analyst with Prudential Securities, New York, said smaller regional brands and microbrews are integral to the ultimate success of the supermarket beer department.

"The supermarket may be told to stop carrying Brand X with a very small share, but if a shopper comes in and wants that product and the store doesn't have it, then the store's service is penalized in the consumer's eye," he said.