Coriolis Chart Watch Q1 2002

Chart Watch is an online publication featuring a brief view into our latest thinking on the evolving food and fast moving consumer good industry. It is sent to subscribers four times per year.

Top Line: Category Managers have increased condensed milk range, driving down sales per sku.  Over the past decade the average supermarket has added 0.7 condensed milk skus, which, in a declining category, has driven down average sales per sku per store per week by $22.44.

So what? Are Category Managers idiots? Often in conversation with manufacturers I get the impression that at some level they think their counterpart on the other side of the table is an idiot. Why? Because "they don't understand the consumer" or "the category" or "our brands." On reflection, I believe manufacturers are saying "I don't understand their decisions."

In my mis-spent youth I spent a short period as a buyer. These were the days when sanitation engineers were called plumbers and category managers were called buyers. I was the beer buyer, beer being a very important category in supermarkets the company in its wisdom decided to give it to someone fresh from the stores and wet behind the ears. Don't worry, I reported to the Head Alcohol Buyer, who kept me under close adult supervision.

While I knew nothing, I was by far the wisest person in the beer industry. Why? Because the Budweiser representative came to see me and told me everything I needed to know about the category, including their marketing plan and promotional calendar, and what my competitors were doing. Then the Miller Beer representative came to see me and told me everything I needed to know about the category, including their marketing plan, etc., etc. And so on through all the main beer companies. At the end of this process I knew more than any of the reps because only I could see the whole picture.

The annual cycle of resets (aka relays) came up and so I called in each of the main companies to discuss how we could work together to reorganise the department to better grow both sales and profits. Budweiser came to see me and made fancy presentation on how we could dramatically increases our sales and profits if only we stocked more Budweiser. Miller came to see me and made a not quite so fancy presentation on how we could dramatically increases our sales and profits if only we stocked more Miller. Well, you get the idea.

There can and will never be a meeting of the minds between the retailer and the manufacturer. There objectives are too different. This is why most industry initiatives are easier to talk about than to do. The one and only category champion able to look after the interests of the total category and the consumer is the retailer.

Which brings me to the condensed milk category. There's a great line, originally about the UK lamb market, that goes "Every time a hearse goes by there's one fewer customer."  Condensed milk is clearly a dying category: unit volume is declining at 1.5% per year and per capita consumption is declining at 2.5% per year.

Yet I'm willing to bet a Nestle or Anchor rep never crunched the data, prepared a presentation, scheduled an appointment, sat down with the category manager, and said: "There are too many items in this category - you should discontinue us completely."  Yet looking at the data above, that's exactly what needs to happen.

Why don't manufacturers see this? There is the obvious loss of sales and profit. But beyond that, manufacturers have an almost incredible belief in their own ability to create new products, choose new packaging, develop an advertising campaign and reinvent a category. There's a cycle: the hopeless categories go to the newly minted marketing graduates who are convinced of their own ability to turn sow's ears into silk purses. If they're lucky, their competition is ignoring the category and the retail buyer is new.  Anyway, they fail and are replaced by a new graduate.  Repeat.

Imagine a world where the retailer is an all knowing, all seeing god.   That world exists; it's called Wal-Mart.  Wal-Mart's Retail Link program has 106 weeks rolling history of product availability, margin and transactions by store, by product, by category, by promotional activity, by supplier at 15 minute intervals. The system drives replenishment and manages inventory levels.  A manufacturer told me that one-time, when he was selling to Wal-Mart, the buyer was watching actual sales of the product he was trying to sell during the course of the meeting. "'Dave,'" the buyer said at the end of his pitch, "I just don't see this product selling in our stores."

Understand your categories.  Be honest about their prospects for growth.  Take your poorer performing sku's out the back and shoot them. Invest your scarce resources in categories with real growth prospects.  Because one day, sooner than you expect, you may find that instead of an overworked buyer with a computer system out of the 1970's, you're facing a all knowing, all seeing category manager.

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