SAN FRANCISCO -- Del Monte Foods is reducing case sizes of most of its canned vegetable and fruit products from 24-count to 12-count to help its retail customers maximize category efficiency.
"This is a spinoff of category management," said Chuck Aldredge, director of category management for Del Monte.
The changeover will take a full year and represents a "multi-million dollar commitment" by the company, he said. Del Monte will downsize case sizes on all items except "major" vegetables, the fastest turning items in the line.
"We think this is right for our customers who have had too much inventory," Aldredge told Brand Marketing. With reduced case size, he added, "Return on inventory investment goes up. Inventory carrying costs go down. Total inventory held in stores goes down."
The change is currently being introduced and explained to the trade by Del Monte's account teams. Related issues, such as a proportional change in trade allowances per case and product replenishment strategies, need to be addressed at the same time, he said.
The company expects to take a one-time cash-flow hit as inventory burdens are shifted over from retailers to Del Monte's warehouse. Because fruits and vegetables are canned during harvest seasons and stored in warehouses for sale year-round, canners like Del Monte cannot produce goods on a just-in-time basis, Aldredge explained.
The seasonal nature of the business also means it will take a full year to implement the change from 24-count to 12-count cases, said Aldredge.
Although the risks of such a switch are "nominal" to retailers, he observed, Del Monte could potentially lose market share to competitors if its products fall out of stock at store level. Aldredge said current order-replenishing systems at Del Monte and the slow turn of many canned items make this possibility a remote one.
Aldredge said he would not be surprised if some of Del Monte's competitors followed suit. "The same issues apply to our competition's movement," he said. "They have got the same dilemmas."