IGA Coca-Cola Institute Perspective

Category Management at 20! Going Strong and Continuing to Evolve

A message to IGA Retailers from...
Dr. Brian Harris
Chairman, The Partnering Group

The IGA Coca-Cola Institute and Nielsen will host an International Category Management workshop in Chicago on July 15 and16. In the coming weeks the workshop speakers will use this column to share their insights on the topics they will cover at the workshop.

My first presentation on the principles of category management was made 20 years ago to Schnuck's Markets in St. Louis. At that time, Schnuck's and several other retailers were beginning to try to understand how a supermarket operator could also become an effective marketer to his customers. In 1988 the growing use of scanning information and new tools, such as computerized space management, was providing new insights into how consumers shopped and what they bought. During this period, a major shift was also taking place in how retailers were managing their product procurement - from a "buying by vendor" approach to a "buying by category" approach. The combination of these developments paved the way for category management - a way of "managing categories as strategic businesses."

By 2000 the success of category management methods was evident - surveys indicated that over 80 percent of US retailers, wholesalers and suppliers were using category management methods. Why did category management achieve such levels of acceptance? The primary reason for this success is that it consistently delivered superior sales and profit results for retailers and suppliers alike.

Building on the global success of category management, a number of other related best practices have emerged, including efficient assortment, efficient promotion and more consumer-shoppable new store designs along with loyalty marketing.

Over the past two decades, category management continues to evolve to meet the challenge of new opportunities. The next wave of retail marketing is now upon us - it is Shopper Marketing - understanding and meeting the needs of the shopper at the point of purchase (or at the "moment of truth" as Procter & Gamble so rightly terms it). A next generation of category management best practices is emerging and will be published in fall 2008 by FMI. We are calling it "Shopper & Category Development" to reflect the need for a heightened focus on the shopper. This new best practice leverages the growing insights we have on the shopper and develops category plans and initiatives based on influencing shopper behavior at the point of purchase. The next generation of these practices represents the continuing evolution of these proven methods.

Thanks,

Brian Harris

Manufacturer News

Private label products are making gains against branded competitors, although major CPG companies claim their market share is holding up well, reported The Wall Street Journal. Major brands may be benefiting from cash-strapped consumers doing more cooking at home and could offset losses to private label as a result, according to some analysts. Full Story (WSJ Subscription Required)

Unified Grocers introduced Natural Directions, a new line of natural and organic food products that will be sold in independent grocery stores throughout the western U.S. The initial launch will include 120 dry grocery, refrigerated and frozen items. Full Story

Kayem Foods reached an agreement to acquire several brands from Tyson Foods, including: Jordan's, Deutschmacher, Kirschner, Essem, Tasty Bite and Willams of Vermont. Full Story

Imperial Sugar Company entered into a sales agency agreement with Gulf Rice Arkansas LLC, a domestic rice processing and marketing firm. Imperial will leverage its customer relationships to initiate new sales opportunities for Gulf Rice Arkansas in the foodservice sector, and will receive a portion of the net revenue Gulf Rice Arkansas receives stemming from the collaborative sales effort. Full Story

UK-based Double D Food Engineering signed a distribution agreement with Nu-Meat Technology, a supplier of meat processing machinery. The British company claims partnering with the New Jersey-based supplier will increase its leverage in the U.S., where it currently has a number of installations with processors of meat and poultry, reported Food Production Daily. Full Story

Customized candy was the newest trend showcased at the National Confectioners Association show. Hershey's presented its customized Kisses with special messages that can be printed on the paper plume, reported Chicago Sun-Times. Full Story

Wm. Wrigley Jr. Company's Eclipse gum and mints will now include magnolia bark extract, a natural ingredient it claims is proven to help kill the germs that cause bad breath. Full Story

Pierre's Ice Cream Company added four new products to its Hola Fruta! line. Full Story

Foodservice News

U.S. foodservice industry nominal growth in 2008 is now forecast at 2.2%, down from previous predictions of 3.6%, according to a revised forecast from Technomic, as current economic indicators worsened since its last forecast in January. Some chain restaurant operators are still turning in solid growth, but on the whole, limited-service restaurant growth has slowed substantially, and full-service restaurants are facing even greater challenges, indicated Technomic. Full Story

Due to price pressures on its franchisees, McDonald's Corp. outlets in Augusta, GA are testing selling double cheeseburgers at $1.09, instead of a dollar on the company's popular dollar menu. The results of the single-market test are being followed closely by headquarters and among the franchisees who operate most of the fast-food giant's 13,000 domestic outlets, according to The Wall Street Journal. McDonald's also increased its estimate of food and paper costs for its restaurants to $32,000-$35,000 per unit from an earlier projection of $22,000-$26,000. Full Story (WSJ Subscription Required)

As costs for foodservice operators rise, Sysco Corp. is analyzing its clients' menus and suggesting cheaper alternatives and other changes in an effort to keep prices down, reported The Wall Street Journal. Such suggestions include shifts to lower priced cuts of meat, as well as to more of its own private label products such as cooking oils, which reportedly last longer and provide higher margins for operators. Full Story (WSJ Subscription Required)

Dunkin' Donuts is actively seeking new franchisees to open more than 142 new restaurants in Alabama over the next several years. Full Story

Meanwhile, Dunkin' Donuts is seeking franchisees to open 70 new restaurants in Michigan over the next several years. Full Story

Brinker International, Inc. reached an agreement with Top Down Enterprises, Inc. to develop five new Chili's Grill & Bar restaurants in the Southwest Greater Toronto Area including Brampton, Hamilton, Kitchener, Mississauga, Richmond Hill and Oakville. Full Story

California technology company Wellsphere launched Wellternatives, a service that recommends healthy alternatives for menu items at chain restaurants. A consumer may use their cell phone to receive suggestions from Wellternatives along with calorie and nutrition information. Full Story

Salad Creations launched its Sensible Sizing menu, featuring a full line of smaller-portioned Junior Creation salads that include all 11 of Salad Creations' featured salads. Junior Creations are also available as a "Create Your Own." Full Story

Wendy's is introducing a new line of hand-spun Frosty Shakes in three flavors: Vanilla Bean, Chocolate Fudge, and Strawberry. Full Story

Health News

A chemical compound found in celery and green pepper, Luteolin, may help ease the symptoms of people suffering from brain diseases such as Alzheimer's, according to a study published in the Proceedings of the National Academy of Sciences, reported Fox News. Full Story, Study Abstract

Popcorn consumers have about a 250% higher intake of whole grains and a 22% higher intake of fiber than people who do not eat popcorn, according to a study funded by ConAgra Foods and led by The Center for Human Nutrition. Full Story

Washington News

USDA will begin working on a proposed rule to ban the slaughter of all "downer cattle," seeking an end to exceptions, according to U.S. Agriculture Secretary Ed Schafer. In 2007, of the nearly 34 million cattle that were slaughtered, under 1,000 cattle that were re-inspected were actually approved by the veterinarian for slaughter. Full Story

Thirty-four of the USA's 800 livestock slaughter plants were temporarily shut down this year because government inspectors detected inhumane handling of animals - three times the number suspended for the same reason in all of 2007, reported USA Today. All the plants resumed operation after making fixes, according to Alfred Almanza, administrator of USDA's Food Safety Inspection Service. Full Story

A major new program in the recently enacted Farm Bill could increase taxpayer-financed payments to farmers by billions of dollars if high commodity prices decline to more typical levels, administration and congressional budget officials said. The voluntary program guarantees farmers a subsidy if they suffer losses because of low prices or poor crops. Since the amount of the subsidy for 2009 is tied to recent record prices, farmers could reap a windfall if prices drop suddenly, reported The Washington Post. Full Story (Free Registration Required)

The Farm Bill also includes provisions aimed at helping sugar growers. The legislation calls for a gradual 5.2% increase in the loan rate for sugar beet growers, or guaranteed minimum price, through 2011, and a 4.2% increase for cane, reported The Associated Press. Full Story

The U.S. State Department will provide 500,000 tons of food to North Korea. North Korea welcomed the aid, a first since 2005, noting it will help alleviate shortages and improve relations between the two countries, reported The Associated Press. Full Story

A bill that addresses the nationwide agriculture worker shortage crisis, The Emergency Agriculture Relief Act, was approved by the Senate Appropriations Committee. The bill streamlines the current H-2A agricultural guest worker program and provides "temporary" immigration status for experienced farm workers over a five-year-period, reported AG Weekly. Full Story

The House and the Senate both passed the Credit and Debit Receipt Clarification Act (H.R. 4008), which makes a technical correction to the Fair and Accurate Credit Transaction Act, according to the Association for Convenience and Petroleum Retailing, which aggressively supported this legislation. Full Story

FDA is looking for comments on a survey of food industry supervisory employees about their awareness and perceptions of FDA's Food Defense Awareness Initiative ALERT. The ALERT initiative is intended to raise the awareness of State and local government agencies and the food industry regarding food defense issues. ALERT identifies five key points that industry and businesses can use to decrease the risk of intentional food contamination at their facility. Full Notice For more information on the ALERT web-based training module, click here.

Global News

Canada's consumer food prices rose 1.2% in April, according to Statistics Canada. Prices for bakery products surged 10.4% between April 2007 and April 2008, the steepest rise since November 1981. In spite of this increase, prices for food purchased from stores went up by 0.9% in April, a slower pace than the all-items index. Prices for fresh vegetables continued to fall in April. Fresh vegetable prices were relatively higher at this period last year when supplies were hit by a frost in California. The appreciation of the Canadian dollar may have also helped lower prices of imported vegetables. Full Story

The European Commission wants to revitalize Europe's farm sector due to soaring food prices, reported AFP. After years of trying to control overproduction, the Commission is now encouraging farmers to produce more and may remove restrictions, noted EU Agriculture Commissioner Mariann Fischer Boel. Full Story

Japan will send 200,000 tons of rice from its stockpile reserve of imported rice as emergency exports to the Philippines. The Japanese agriculture ministry is unsure of the details of the rice shipments, including whether it should be given as aid or provided at current prices, reported The Associated Press. Full Story

Uno Chicago Grill entered into an agreement with Sofra LLC to open 20 new locations in nine Middle Eastern countries, including Qatar, the United Arab Emirates, Saudi Arabia, Lebanon, Egypt, Kuwait, Jordan, Oman, and Bahrain. The restaurant openings will take place over the next 10 years. Full Story

Market News

USDA is predicting that the total amount of red meat and poultry production will be down slightly next year. Deteriorating pasture and range conditions over much of the Plains and increasing livestock production costs are adversely affecting all cattle and beef sectors. USDA expects commercial pork production to be 22.9 billion-lbs. next year, 2.4% below the 2008 production forecast. Full Report

The Argentine fresh deciduous fruit crop for Calendar Year (CY) 2008 is expected to drop to 1.84 million metric tons (MT). Total exports are forecast to decrease to 765,000 MT as lower fruit production is expected for CY 2008 due to the unusually cold winter. The apple crop is forecast to decrease 9%, fresh pear production by 30,000 metric tons. Table grapes production is estimated to be up 10,000 tons however. Concentrated Apple Juice production in CY 2008 is expected to fall to 60,000 MT as less fruit will be available for processors. Full Report

The European Union will appeal a World Trade Organization (WTO) ruling that European import tariffs for bananas unfairly discriminate against many Latin American countries, reported The Associated Press. A WTO panel said that the EU was breaching global trade agreements by favoring imports from Africa, Caribbean and Pacific states - many former French and British colonies. Full Story

Calavo Growers, Inc. acquired Hawaiian Sweet Inc. and Hawaii Pride LLC, papaya and tropical-product packing and processing operations. Full Story

Sales of vegetable seeds, tomato transplants and fruit trees are increasing as more planters grow their own food in response to the current economic downturn. The nation's largest seed company, W. Atlee Burpee & Co., for example, sold twice as many seeds this year as it did last year, with half the increase from new customers, reported MSNBC. Full Story

A genetic quirk in some sweet corn hybrids is causing herbicides to linger in the crop, discovered Agricultural Research Service scientists. Several herbicides used on sweet corn kill weeds, but not the crop due to protective enzymes in corn that rapidly degrade the chemicals. However, some sweet corn hybrids harbor a genetic defect that impedes the enzymes, causing herbicides to linger in the plants, which suffer stunted growth or other harm. Full Story

USDA established the Honey Packers and Importers Research, Promotion, Consumer Education and Industry Information Order. Full Notice

USDA amended the Fluid Milk Promotion Order by reducing the burden of late-payment charges applied to processors. Full Notice