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The brewer of the "King of Beers" is also the king of category management. A whopping 98.8 percent of retailers voted St. Louis-based Anheuser-Busch Inc. the best in the business in the category of beer/wine/spirits. That makes Anheuser-Busch the top vote getter across all category channels, and gives the company a commanding lead over second-place Miller Brewing Co., at 56.2 percent.
"We deliver results by making sure we understand our customer's business, taking the time to uncover insights, explore opportunities, and then deliver solutions that align with our customers' objectives and strategies," said Joe Patti, vice president, retail planning and category management at Anheuser-Busch. "This, coupled with our practical common-sense approach helps to ensure the plans and recommendations we develop are executable down to the individual store level."
In 2002, the company focused on proper space management, pricing, promotions, and distribution. Said Patti: "Our strategy has been to deliver the right products, assortment, pricing and promotions at store level to ensure the alignment with local shopper needs. To accomplish this, it becomes critical that we understand the market dynamics that are likely to impact our customers' business."
As for Miller's 16.6-percent drop in the study, Cannondale Associates partner Ken Harris noted, "It's clear that the last few years have not been positive for Miller, but I think the next two will be decidedly different. We haven't yet seen the impact of Miller's acquisition [by South African Brewers]."
As Miller has slipped, Coors has made a nice jump, being named one of the top operators in the category by just under 25 percent of retailer respondents. And, Harris pointed out, watch out for another player: "Heineken has come back strong over the past two years, thanks to its aggressive new product activity and promotional level."
Non-Carbonated Beverages: Pepsi-Cola
There's a new Pepsi Generation out there, and they're not drinking cola. The soft drink company's aggressive moves into the non-carbonated sector over the past few years has paid off big time, and retailers have once again chosen Pepsi as the leader in the category. Just over half of retailers surveyed picked the manufacturer of such non-carbs as Aquafina water, Tropicana juices, Lipton iced teas and Sobe fruit drinks as the best in the field.
And there's more good news for Pepsico — its Gatorade division ranks second in the category, with a strong 42.3 percent. Gatorade operates under a separate distribution system than other Pepsi products, which is a big plus as far as retailers are concerned. "We try to take a beverage-based approach," said Greg McIntee, vice president of strategy and customer development.
Rather than focusing on a brand or a particular subcategory, Pepsi's category management approach centers on the total vault, even if it means defaulting on one of its SKUs. "It's about understanding what the consumer is thirsty for," McIntee said. "We spend a lot of time and, candidly, a lot of money to get inside the consumer's head.
"We then create the solutions in a very objective way. Oftentimes, you can twist the numbers in a certain way to benefit your particular brand. Objectivity is going to drive the whole category, not just your own portfolio. In my experience, those who concerned themselves only with their own brand did not look at the long-term interests of the customer.
"It would be shortsighted for a supplier to push one brand instead of the category," he said.
So where does all this positive Pepsi news leave its staunchest competitor, Coca-Cola? "Coke continues to be underrepresented in the non-carb category," said Cannondale's Harris, pointing to the company's 32.2-percent result in the study. "But the company has recognized its deficiencies in the category, and is working to build up its presence." Coke's biggest success in the non-carb category thus far has been its Dasani bottled water and Minute Maid juice line.
Carbonated Beverages: Pepsi-Cola
Pepsi-Cola may be bubbling over with excitement over the news that it's overtaken Coca-Cola in the carbonated beverage category — albeit, by a very thin margin. Pepsi was chosen the best business operator in the carbonated beverage category by 85.7 percent of respondents, narrowly surpassing Coke's 83.6 percent.
Pepsi is aggressively launching an array of new beverages and extensions. Buoyed by the success of Pepsi Blue, the company will introduce Pepsi Vanilla late this summer, representing another volley in its rivalry with Coca-Cola. Pepsi is also unveiling Mountain Dew LiveWire, an orange-flavored Dew, and new packaging that mimics Coca-Cola's "Fridge Pack."
While the company focuses on a total beverage solution that incorporates its entire family of soft drinks and non-carbonated refreshments, Greg McIntee, Pepsi's vice president of strategy and customer development, said it's Pepsi's thirst for palate-pleasing pop that gives the company an edge.
"It's all about giving consumers the right choice and providing them the greatest tasting cola we can offer and the most delicious Mountain Dew and an innovative line like Code Red, Pepsi Blue and Sierra Mist."
With that lineup and an aggressive promotional campaign, Cannondale's Harris says, "I would expect Pepsi's numbers to continue increasing in this study in the future."
"The other thing is we're not into pushing products more than they need be," McIntee added, underscoring the importance to work with retailers, appreciating that not all Pepsi products are fast movers in all locations and may deserve no more than a facing or two.
Salty Snacks: Frito-Lay
Frito-Lay continues its traditional domination of this category, with a commanding 77.2 percent of respondents naming the company best business operator. In focusing on the consumer, Frito-Lay works to influence three behaviors: conversion to the category, frequency of purchase and the amount of the purchase. The tactics put against that challenge stem from four drivers known as Right Assortment, Right Presence, Right Promotion and Right Service. To implement those tactics, the Right Set proprietary software program maximizes the assortment and merchandising drivers at store level.
Another tool Frito-Lay helped bring to convenience retailers is C/SCAPE, the activity-based costing application the company co-sponsored.
According to the company, Frito-Lay strives to provide the best support available to its trading partners by constant involvement in many EDI standards committees, industry roundtables and work groups, seminars, publications and ongoing training sessions.
Interestingly, General Mills has entered the rankings for the first time, with a respectable 8-percent share. The company, which manufactures Chex, Bugles and Gardetto's products, has been "showing some focus on the category," said Cannondale's Harris, "and has come up with a coordinated channel strategy." Up until recently, General Mills targeted most of its business in the supermarket channel.
Sweet Snacks: Kraft/Nabisco
With 75.8 percent of retailers choosing Kraft/Nabisco as their top business partner in the sweet snacks category, the company holds a strong edge over Kellogg/Keebler (at 42.2 percent). What's more interesting in this category is that both of these companies suffered pretty significant declines in the year-to-year rankings — Nabisco dropped 12.7 percent, and Keebler by 24.1 percent.
Meanwhile, three companies new to the rankings are making strides. Interstate Bakeries, makers of Hostess products, has launched into third place with 15.3 percent; General Mills, continuing its move into the c-store segment, garnered 13.4 percent; and McKee Foods, manufacturers of Little Debby's snacks, making its debut with 4.2 percent.
According to Ken Harris at Cannondale, these companies are all making a big push into c-stores. "Interstate has done a revamp of its snack line," he said. All of the traditional favorites are still there — Twinkies, Ding Dongs, etc. — but now they're being marketed to the convenience channel. "Up till now, Interstate has focused on grocery. Now there's a real push into all other channels."
As for McKee Foods, Harris notes that the company is "something of an anomaly. They've got a great business model and provide great service to their customers in non-mainstream markets and in multiple markets."
Cigarettes: Philip Morris
Perhaps the leading reason Philip Morris USA garnered Category Captain honors for the second straight year over R.J. Reynolds (with 74.3 percent) was its revamped promotional programs and demonstrated willingness to work with retailers to develop responsible marketing programs.
Philip Morris has always relied on feedback from retailers when developing in-store promotions for its four key brands — Marlboro, Virginia Slims, Parliament and Basic. In 2001, the tobacco company was recognized for its Retail Leaders program. In 2002, the company endeared itself to convenience store owners by announcing it would begin offering all retailers an upfront discount on cigarettes, shifting away from its previous promotional strategy that gave after-sale rebates to only 80 to 85 percent of retailers. The change is a direct response to retailers' demands for simpler promotions and complaints over waiting for rebate payments, the company said.
Philip Morris, which has increased promotional spending in recent months to try to win back market share from lower-priced and generic competition, will cut $6.50 per carton off the invoice price for retailers, spokesman Brendan McCormick said.
Other Tobacco Products: U.S. Smokeless Tobacco Co.
"As c-stores are forced to rely less and less on cigarettes, they may find themselves turning more and more to alternative tobacco suppliers," observed Cannondale's Harris. That might explain why U.S. Smokeless Tobacco was recognized by 89.6 percent of retailers surveyed as best in category management in the other tobacco category.
USSTC's competitors also made respectable showings, with Conwood garnering 30.7 percent; Swisher, 27.8 percent; and Swedish Match, 19.6 percent.
The company's leading brands, Copenhagen and Skoal, each represent more than $1 billion at retail, the majority of that business in c-stores. Other brands include Rooster and Red Seal. The company is currently test marketing its newest product, Revel, a blend of premium tobaccos and fresh mint flavor in discreet, easy-to-use packs for adult cigarette smokers to use at times when they can't smoke. The company sells more than 1.7 million cans of moist smokeless tobacco per day, or approximately 650 million cans annually.
According to USSTC, the company's fact-based approach is solely focused on growing category volume and profitability for its retail partners. USSTC concentrates on building category awareness by partnering with customers, increasing the social acceptability of moist smokeless tobacco and improving ease of use for adult consumers.
USSTC places high value on the opinion of its retail partners, according to the company. Twice a year, USSTC meets with c-store operators at Retail Advisory Group meetings to validate its programs and STEPS initiatives.
Confectionery: Hershey Foods Corp.
With products in more than 2 million retail outlets in North America, Hershey Foods Corp., founded in 1894, credits four factors for its confectionery sales growth: superior consumer value, strong marketing programs, category management and new products. The company's execution of those factors has led to its retaking the top slot for category management in the confectionery category over Masterfoods, by a margin of 80.9 percent to 67.7 percent.
Despite an industry-wide increase in the price of chocolate bars late last year, Hershey products continue to offer a good price-value proposition — one reason private-label products are only 2 percent of the company's market, the company noted.
Hershey spends an amount equal to 15 percent to 17 percent of sales on its marketing programs. Increased advertising and focused trade promotions are aimed at motivating retailers to aggressively sell products, rather than stock the back room with inventory on deal. Highly visible and thematic selling events with appropriate displays help drive the business, noted Dave Onorato, vice president of national convenience store sales. This candy company's approach to category management looks to maximize turnover and profitability in the entire confectionery section.
"We take a category-first approach to category management," said Terry Gallagher, national manager of category development for Hershey's c-store division. "If we do what is right for the category, for the retailer, we stand to win, because we represent a large percentage of the candy business.
"We don't want this to be a one-appointment, one-project relationship. We want to build trust with retailers."
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Background and Methodology