Pivot Points - Kantar Retail

Pivot Points
Unlocking Growth in Uncertain Times
2015 US
1
2015 US
The Retail and Shopper Specialists
Contents
Introduction....................................03
Executive Summary........................09
Key Findings
Manufacturer Rankings..........................18
Retailer Rankings...................................34
2
2015 US
The Retail and Shopper Specialists
Introduction
Kantar Retail sponsored the first annual PoweRanking® study in 1997.
The survey originated from our industry benchmarking studies on category management and trade promotion
management, which for the past 21 years have provided insight into industry best practices in these areas. The
objective of the PoweRanking® study is to research and benchmark how retailers and manufacturers view each
other in the most important areas of the manufacturer-retailer relationship.
The PowerRanking® study identifies those retailers and manufacturers who set the standard of performance as
ranked by their trading partners. This provides benchmarks for retailers and manufacturers across
trade channels.
The specific goals of the research were to:
—— Identify the best manufacturers and retailers, as evaluated by their trading partners
—— Provide insight into what makes them “the best”
—— Define the importance of key metrics between trading partners
—— Highlight areas for improvement
3
2015 US
The Retail and Shopper Specialists
Introduction
Customized questionnaires were developed for retailer and wholesaler respondents in food, drug, mass merchandiser, dollar,
convenience and club channels and for manufacturers in food, household products, general merchandise and health & beauty care
categories. These questionnaires were distributed each spring from 1997 to 2015 to personnel at all levels of management, with the
assurance of total confidentiality of respondents.
Over 600 manufacturer and retailer respondents participated in this year’s study. The results of the 2015 survey were compared with
the results of 2013 and 2014 to determine the causes behind shifts in the rankings.
Retailers were asked to rank manufacturers on criteria that fall into two broad areas:
STRATEGIC METRICS
BUSINESS FUNDAMENTALS
—— Clearest company strategy
—— Best customer/sales teams
—— Most important consumer brands to retailers
—— Most innovative marketing approach
—— Best combination of growth and profitability
—— Most helpful consumer/shopper insights; category leadership
—— Best supply chain management
—— Best shopper marketing programs
Manufacturers were asked to rank retailers on similar criteria:
STRATEGIC METRICS
BUSINESS FUNDAMENTALS
—— Clearest company strategy
—— Best retailer with which to do business
—— Best job branding their stores
—— Best category management/buying teams
—— Projected to be Power Retailers in the next 15 years
—— Most innovative merchandising approach
—— Best supply chain management
—— Best practice category leadership
4
2015 US
The Retail and Shopper Specialists
Introduction
Results were tabulated on a two-year rolling basis, reflecting the percentage of respondents ranking each company among the top
three. Additionally, follow-up qualitative interviews were conducted among a diverse group of manufacturers and retailers to provide
further insight into the data.
The PoweRanking® methodology reflects mergers and acquisitions that have occurred in the past. We have consciously rolled up
operations into the parent company where appropriate for this year and versus a year ago. At the same time, where retailers and
manufacturers are operating largely as independent companies, they are treated as such in the data. As a dynamic monitor, the
PoweRanking® will continue to consolidate or separate companies as retailers perceive them.
PoweRanking® Composites
Business Fundamentals Composite
The 2015 PoweRanking® results include the overall
PoweRanking® Composite, created by weighting the three
strategic rankings equally with the five business fundamental
rankings (see previous page) — thus placing greater
importance on the strategic rankings. This reflects the
importance of sound strategy as an overall driving force in
business performance.
The Business Fundamentals Composite combines the five
fundamental areas of business (see previous page) into a
composite, which reflects the retailers’ and manufacturers’
opinions of those trading partners that have the strongest
organizations and personnel and provide the best tools for
solid business development.
Strategic Composite
Digital Marketing
The Strategic Composite combines the three strategic
measures (see previous page) into an overall composite
to provide better insight into which manufacturers and
retailers are most strategically important to their trading
partners.
Beginning in 2011, Kantar Retail added a measure for
Digital Marketing. Given its increasing influence on retailers,
manufacturers and consumers, digital is now a measure to
be monitored. It is not included as part of the PoweRanking®
Composite.
5
2015 US
The Retail and Shopper Specialists
Respondent Sample
Over 600 manufacturer and retailer participants provided input. Respondents included all levels of retailer/wholesaler and
manufacturer management.
Retailers
Ahold USA Inc.
Fred’s Inc.
Save-A-Lot, Ltd.
Albertsons LLC
Giant Eagle
Sears Holdings
Aldi Nord (Trader Joe’s)
Giant Food
SpartanNash
Amazon
Golub Corporation
Staples
Associated Wholesale Grocers, Inc.
HEB Grocery Company
SuperValu, Inc.
Bi-Lo Holdings
Hy-Vee
Target Corporation
BJ’s Wholesale Club
Kroger Company
True Value
Bozzuto’s, Inc.
Lowe’s Foods
Unified Grocers
Brookshire Grocery Company
Macy’s
United Grocers
C&S Wholesale Grocers
Martin’s Super Markets
Wakefern Food Corporation
Central Grocers Cooperative, Inc.
Meijer
Walgreen Co.
Circle K
Petco
Walmart Stores, Inc.
Corner Store
PetSmart
Wawa
Costco
Pilot Oil
Wegmans Food Markets, Inc.
CVS Health
QuikTrip Corporation
Winco Foods
DeMoulas Super Markets
Publix
Delhaize
Rite Aid
Dollar General
Safeway, Inc.
ExxonMobil
Sam’s Club
Family Dollar
Save Mart
6
2015 US
The Retail and Shopper Specialists
Respondent Sample
Manufacturers
3M
Continental Mills
Hamilton Beach Brands
AB InBev
Coty Inc.
Hasbro
Abbott Laboratories
Crayola
Heineken USA
ACH Food Companies
Dawn Foods
Helen of Troy
Bayer Corporation
Dean Foods
Henkel AG & Company
Beiersdorf
Del Monte Foods, Inc.
The Hershey Company
Bemis Manufacturing Company
DeMet’s Candy Company
Hewlett-Packard Co.
BIC Corporation
Diageo
Hillshire Brands
Big Heart Pet Brands
Dr Pepper Snapple Group
HMS Mfg. Co.
Bush Brothers & Company
E. & J. Gallo Winery
Hormel Foods
Cadbury Adams USA LLC
Elmer’s Products Inc.
J.M. Smucker Co.
Campbell Soup Company
Energizer Holding Inc.
Jarden Corporation
Caterpillar Inc.
Farmer John
Johnson & Johnson
Chobani
Frito-Lay
Johnsonville Sausage
Church & Dwight
General Electric
KAO Brands
The Clorox Company
General Mills
Kellogg Company
The Coca-Cola Company
Georgia-Pacific
Keurig Green Mountain
Colgate-Palmolive
GlaxoSmithKline
Kimberly-Clark Corporation
Combe Inc.
H.J. Heinz Company
Kraft
ConAgra
Hallmark
Land O’Lakes
7
2015 US
The Retail and Shopper Specialists
Respondent Sample
Manufacturers (Continued)
LEGO
The Perrigo Company
United Sugars Corporation
L’Oreal
Pfizer
VF Corporation
Mars
Philips
VitaCeutical Labs
Maybelline
The Procter & Gamble Company
Warner Brothers
McCormick & Company
Reckitt Benckiser
WD-40 Company
McKee Foods
Red Bull
Welch’s Foods
McNeil Consumer Healthcare
Reynolds Consumer Products
World Kitchen
Merck
Rich Products Corporation
Meyer Manufacturing Company
Ricos Products Co. Inc.
MillerCoors
Samsung
Mission Foods
S.C. Johnson & Son
Mondelēz
Seneca Foods Corporation
Nestlé USA
Skyy Spirits
Nippon Suisan Kaisha Ltd.
Southern Wine & Spirits
Novartis
Sun-Maid
Ocean Spray Cranberries
Sun Products Corporation
Pactiv
Tom’s of Maine
PepsiCo
Tree Top Inc.
Perdue
Tyson Foods
Perfetti Van Melle
Unilever
8
2015 US
The Retail and Shopper Specialists
2015 US
Executive Summary
9
2015 US
The Retail and Shopper Specialists
Pivot Points
Unlocking Growth in Uncertain Times
We all know that change is inevitable, but the events of the last year have reinforced that we are in an era of
“permanent transition” — uncertainty and shifting sands are not temporary, but the new normal. For many
companies, these shifts have been painful; one senior-level executive said of 2015, “never before has so
much change produced so little value for the industry.” Another indicated that “they have never worked so
hard for so little gain to the bottom line.”
The keys to this uncertainty are rooted across the consumer/shopper ecosystem:
—— A soft economic recovery and the resulting change in consumer habits
—— The rise of the 'craft' or 'small batch' entrepreneurs whose value creation model is different than
big, established companies
—— The continued shift to online shopping
—— The change in leadership and strategy from the world's largest retailers
—— The impact of activist investors on management, planning, and workloads
One impact of this is a relentless focus on near-in cost management. Many described 2015 as “too
short-term focused” as the industry is achieving profitability by “cutting our way to the bottom line,” but
“not delivering the top-line growth required to sustain a healthy industry.” Even companies that have
not directly been impacted by the “purported activist investors” are dramatically cutting their talent and
investments to improve operating metrics.
However, it was not all doom and gloom. Although 2015 may have been “growth challenged” for some,
others were able to unlock growth by focusing on the unmet needs of the consumer, increasing investment
and returns from shopper and digital marketing, and focusing their commercial efforts on winning with
diverse groups of shoppers. Successful marketers in both manufacturers and retailers have increased
resources (financial and human) for more targeted shopper insights and shopper marketing, allowing them
to get closer to the points of consideration and purchase. These targeted levers also enable them to focus
their investments where it really matters resulting in greater and more profitable conversion. In particular,
unlocking growth seems rooted in leveraging some of the major seismic shifts in the trading environment:
—— The rise and rise of multichannel
—— The importance of the value shopper
—— The growth of niche
—— Winning in an outlet rationalized world
10
2015 US
The Retail and Shopper Specialists
The Rise and Rise of Multichannel
The Importance of Winning with the
Value Shopper
Whether you call it eCommerce, omni-channel
or multichannel, 2015 may have been the tipping
point for this 'channel.' As one senior level
merchant articulated it, “this is the year that
multichannel has become mainstream for all
categories — even for food and beverage.”
The income divergence of the so called 'have'
and 'have nots' continues to be front and center
for the US economy. The 'have nots,' or those
households who have an annual household
income of less than $62,000 per year, have seen
a continued fall in their share of all income
sources. This group of Americans has only about
25% of all income, but represents approximately
60% of all households (U.S. Department of
Commerce, Congressional Budget Office, and
Kantar Retail analysis). Some believe that this
trend is going to continue. “It looks like income
inequality is here to stay and those retailers that
are serving the ‘have nots’ are seeing significant
growth,” said an industry leader.
Our interviews concluded future confidence in the
growth of online shopping will continue and those
retailers and manufacturers that are placing bets
in this space are not only capturing volume as the
shift occurs, but are driving share growth.
As a result, manufacturers are developing
more customized products for these shoppers
and placing greater emphasis on this group
in prioritizing their sales strategies and joint
business plans.
11
2015 US
The Retail and Shopper Specialists
The Growth of Niche
As consumer preferences are evolving, the 'craft' or 'small batch'
manufacturers that are less dependent on traditional power brands
are starting to have an expanded voice and presence. In a low growth
environment, what in the past may have been seen as niche offerings are
today viewed as positive contributors to growth in many categories.
Although these entrepreneurs are finding success in driving category growth
by delivering products that address an unmet consumer need, many of these
smaller companies do not have the same tools and resources as the larger
companies. An industry leader communicated, “while I love the products,
branding, and shopper excitement these smaller companies are creating, I
guess I didn’t realize that many of them don’t have much of an infrastructure.
I am finding myself in a tough position because some of these smaller
companies are finding growth, but I still need the sophistication of the
established vendors.”
12
2015 US
The Retail and Shopper Specialists
Outlet Rationalization
Despite a massive expansion in available outlets due to retailer expansion and
eCommerce’s growth, the shopper is not expanding her choice set. In fact,
over the last six years the average American head of household is shopping in
almost 30% fewer different outlets per month (Kantar Retail ShopperScape).
This outlet rationalization puts enormous pressure on retailers that are not
'front and center' to the shopper’s planning process — as many specialized
trips are being captured by Amazon or by brick-and-mortar retailers
broadening their assortment. Indeed, an SVP at a leading manufacturer said,
“retailers are trying harder than they ever have, and the big guys are focused
on reversing these trends.”
Against this backdrop, retail leaders are working harder to differentiate their
offer and ensure a more consistent execution of their strategy. For example:
—— Walmart has brought in talent from outside the US to bring in
international best practices in marketing and supply chain design.
—— Amazon is innovating on immediacy with Prime Now, and
increasingly becoming the 'everything store for members only'
—— Kroger has moved from 'Digitally Curious' to 'Digitally Committed'
and is expected to be a serious eCommerce grocer
—— CVS is pivoting, evolving from a 'retailer' to a 'healthcare and
solutions provider.'
Manufacturers, too, are consistent in the desire to 'up their game' while
keeping a tight control on costs. 2016 will be about making smarter bets,
with a particular emphasis on more targeted growth opportunities, clearer
communication to shoppers, better collaboration with customers, and a laser
focus on ROI to ensure small successes become big ones and losses are cut
quickly when the returns are not there.
13
2015 US
The Retail and Shopper Specialists
Pivot Points
Where is the Industry Focusing for the Future?
As we look to 2016 and beyond, the common belief among trading partners
is that the change not only will continue into next year, but will change at
an even faster pace. One industry leader believes that we are just at the
beginning of a 10-year window of dramatic change. While 2015 may have
been “flat and frustrating,” growth opportunities are out there. The key will
be finding the right “pivot points” to place your bets.
For those of you that know basketball, the pivot is an invaluable tool for
realigning your direction while your core remains stationary. Throughout this
document we define a 'Pivot Point' as a central factor determining future
direction. As we look to 2016, the overall goal of the industry is to pivot away
from pure cost management to top line growth. We believe that at least five
'Pivot Points' will be required to help achieve this objective.
14
2015 US
The Retail and Shopper Specialists
Shareholder First to Shopper First
Brand Builders to Business Builders
One to Many to One to One
'Shopper First' sounds like a truism, but very
few companies today put shoppers at the heart
of their planning process. Commercially, most
suppliers are organized around brands and
customers — most retailers around categories.
Those 'commercial teams' have been responsible
for achieving linear financial objectives that drive
shareholder returns, mostly by anniversarying
previous year’s performance with incremental
improvement. A 'Shopper First' strategy
understands the needs of the shopper and the
opportunities to meet them, and then works the
commercial success plan back from those needs.
Shopper vs. consumer is a purposeful word choice
as well — as media continues to flock to digital
and mobile, more of our consumer messaging
is being 'consumed' in a shopping environment
(computer or smartphone). Activating demand
becomes the critical differentiating skill set in a
shopper-centered world.
Brands are a critical touchstone for consumers.
Building and sustaining those brands will always
be core work for the industry. A brand without a
growth plan, however, is a brand under siege —
much of marketing science today is rooted in the
simple idea that great brands have to continue to
drive penetration to survive and thrive.
The business model of fast moving consumer
goods and the retail value chain is built on
economies of scale to drive low unit costs — and
CFOs and manufacturing/supply chain heads are
incented to relentlessly improve these economies.
Today, however, shoppers want and retailers need
more personalized and customized solutions —
both are demanding one-to-one relationships
given the current landscape. Delivering against
this promise turns inflexible scale into a burden
as much as an asset. The 'Uber'-fication of
everything means also that asset-heavy retailers
and suppliers are competing for investor attention
with 'asset-free' marketplace models that
create value without owning capital. The trading
partners that work collaboratively on optimizing
this asset base to leverage both cost and flexibility
will change the future.
Too much focus on sustaining brands today
without the right focus on growth tomorrow is bad
business for everyone, and the role of marketing
at both suppliers and retailers will need to 'pivot'
to focus more on ideas that drive the business
forward.
15
2015 US
The Retail and Shopper Specialists
Data Hoarders to Data Sharers
Talent Reduction to Talent Development
Data is everywhere. As one top retailer put it, “The issue isn’t about the lack
of data, it is about who we share it with, how they analyze it for us, and how
we apply it to unlock growth and profitability.” In order to truly unlock the
full potential of the available data, the industry must move away from being
hoarders of their data to sharing their data, particularly in the 'on-line' world,
which continues to lag brick-and-mortar in transparency.
Over the past 24 months, the industry has seen a significant reduction in the
tenured work force. As one executive leader at a manufacturer put it, “No
one would argue with the importance of operating an efficient organization,
but I am concerned that the cuts we have made have been too deep.” A lot of
institutional knowledge has walked out the door, and the feedback we have
received from people who remain in place is that “they are simply spread
too thin to truly have the impact we desire.” Others have indicated that “the
industry is changing so fast, I am not sure I even have the skills to perform at
my best.”
As the industry looks to the future, an intense focus will need to be placed
on talent development. Leaders will be working to simultaneously increase
the organizational performance of their existing talent base, while working
to identify the skills needed in the future. Winners will develop training
programs, attract the talent, and prepare to groom the next generation of
leaders. Said differently, the industry has some work to do to create a value
proposition for future talent where it is competing for people against other
industries that offer exciting environments, compensation, and work.
16
2015 US
The Retail and Shopper Specialists
Closing Statement
While it is clear that 2015 was a “challenging year,” we are likely at the beginning of a long period of accelerating change. Winning trading partners in this fast
changing environment will be those who anticipate the shifts and are prepared to pivot. Best-in-class partners will focus on the Pivot Points and align on the
Pivot Actions.
Leading organizations in the industry will be successful in unlocking growth by:
—— Focusing research, strategies, plans, and actions on the shopper
—— Aligning on business ideas and strategies
—— Developing personalized retailer and shopper solutions
—— Transparently sharing granular data and insights
—— Building and retaining a knowledge network with talented future leaders
An examination of best-in-class organizations illuminates the Pivot Actions to unlock growth in a retail landscape where the pace of change is gathering speed.
17
2015 US
The Retail and Shopper Specialists
Introduction
Composite
Composite
Under $10B
Executive Summary
Strategic
Composite
Clearest
Strategy
Consumer
Brands
Growth &
Profitability
Manufacturer Rankings
Business
Composite
Sales Force
Innovative
Marketing
Retailer Rankings
Insights/Category Supply Chain
Leadership
Shopper
Marketing
Digital
Marketing
Pivot Back to Growth
Reach out to Kantar Retail to obtain a full report
of the 2015 manufacturer and retailer Rankings.
Learn how YOU can get deeper insights
into how to return to growth in 2016 and beyond.
2015 US
For a copy of the full 2015 PoweRanking® report,
contact [email protected]
Study Price: US $2,000
18
2015 US
The Retail and Shopper Specialists
The Kantar Retail Narrative
Our Core Capabilities
Go to Market
We help you to
improve your
performance with
retailers through
better business
planning and
alignment of brand
with retailer and
shopper objectives
and by choosing
which channels to
compete in, how
best to access them
and how to win
within them.
We are
The Retail and Shopper Specialists
Our Purpose
We help our clients sell more — effectively and profitably
Our Belief and Philosophy
We connect a world-class set of retail and shopper assets
with pragmatic, solution-oriented people to grow client
businesses
Our Brand story
Every business challenge requires a unique solution.
We bring together a collection of retail and shopper assets
— insights, tools, analytics, and experienced consultants
who think pragmatically while building and delivering
integrated solutions. Our passion is using the right
combination of these assets to grow your business.
Our teams create real-world solutions to deliver faster
growth and we plug in seamlessly as part of your extended
team. We connect these solutions to your core work,
embedding them so your organization benefits systemically
and continuously.
These solutions are aimed at your critical business
decisions — how to best drive future growth, where to
play, how to win, and how to optimally allocate resources.
In turn, our solutions help you win the critical decisions
made by shoppers and buyers along their purchase journey.
Our specialized knowledge and expertise can be targeted
toward specific business issues, while our integrated
solutions transform businesses and generate breakthrough
performance improvement.
Organizational
Performance
We help you to develop the
commercial capability of
your organisation and the
commercial competency
of your people. Through
organisation design,
commercial process
mapping, competency
modelling and the
assessment, design
and delivery of training
academies
Shopper
Insights
We help you
turn shoppers
into buyers by
understanding
shopper
needs,
motivations,
behaviours,
barriers
and triggers
across the
path to
purchase
Retailer & Channel
Insights
We help you shape
your go to market
strategy, assess
new channel
opportunities
and strengthen
your customer
relationships by
understanding
how the overall
retail landscape is
evolving
19
Category & Shopper
Solutions
We help you unlock
future sources of
real growth through
the development of
fact based ‘Category
Drivers’ and Activation
Platforms. These
are tailor-made for
specific channels
and retailers and
are purpose built to
influence purchase
behaviour
Retail & Purchase
Data Analytics
We help you to apply
best in class analytical
tools and consulting
services to create
winning strategies
in-store and on-line
across assortment,
merchandising,
promotions and price
Retail Virtual
Reality
We help you to
create virtual retail
environments
and product
content for virtual
merchandising,
store design,
category
management,
retail execution
and shopper
research so you
can make better,
faster
retail decisions
Sales Process
Automation
We help you to optimize
and automate sales
force, KAM activities and
investments through our
Sales Master 1 application,
increasing your ROI
The Retail and Shopper Specialists
Connect with us:
www.kantarretail.com
Twitter: @kantarretail
2015 US
LinkedIn: www.linkedin.com/company/kantar-retail
Email: [email protected]
Study Price: US $2,000
Kantar Retail Consulting, Americas
401 Merrit 7, 4th Floor
Norwalk, CT 06851
USA
+1.203.834.2800
Asia Headquarters
The Center, 25th Floor
989 Changle Road
Shanghai 200031 China
+86.212.405.0132
Acknowledgements
Headquarters
The Kirkgate,
19-31 Church Street
Epsom, Surrey
KT17 4PF
United Kingdom
+44.(0)1372.825300
Brazil Headquarters
Rua Olimpiadas 205
13o andar
Vila Olimpia - Sao Paulo
SP - 04551 - 000
Brasil
+55.3006.64.54
Advisers
Author
Daniel Jerome Raynak
Executive Vice President of Strategy and Development
Jonathan Phillips — Chief Executive Officer
Bryan Gildenberg — Chief Knowledge Officer
Ginny Valkenburgh — Senior Vice President
Taylor Wray — Director of Research
Copy Editing
Geoff Wissman — Vice President, Consulting
Design
Copyright © Kantar Retail 2015
Hayden Parker — Graphic Designer
This publication is a sole property of Kantar Retail
or warranty given in respect of the accuracy of this
and must not be copied, reproduced, or transmitted
information. We would like to be informed of any
in any form or by any means, either in whole or in
inaccuracies so that we may correct them. Kantar
part, without the prior written consent of Kantar
Retail does not accept any liability in negligence of
Retail. The information contained in this publication
otherwise for any loss or damage suffered by any party
has been obtained from sources generally regarded
resulting from reliance on this publication.
Charlene Hawkins — Creative Director
to be reliable. However, no representation is made,
20
The Retail and Shopper Specialists
21
2015 US
The Retail and Shopper Specialists