SALISBURY, Md. -- Eight supermarket chains are testing a meat department category management program developed by Perdue Farms here, in a bid to improve poultry category sales and meat department performance as a whole.
"The bedrock idea is to improve the business at retail, to take that meat case and make it more productive," marketing research manager James D. Mendelsohn told SN. "And at the end of the day everyone's objective is the same: we want to sell more pounds, we want to satisfy consumers and we want to do it profitably."
Mendelsohn would not disclose which supermarket operators are already involved in the new category management program. He did say that Perdue is trying to persuade another 10 chains to participate as well.
Initial experience with the program indicates that sales increases of anywhere from 5% to 15% are possible through the category management strategy, Mendelsohn told SN.
He said Perdue's premise is to capitalize on the concept of meat as a major attraction in any retailer's store.
"If you look at reasons consumers like a store, they can buy packaged goods anywhere, but the quality of a store's meats is going to direct how the consumer relates to that store. So it's a tremendous opportunity," Mendelsohn said.
"At Perdue, there was a big challenge about how we could help our retailers, how could we make them more successful," Category management is the answer, he said. "What it really does is maximize assets for the retailer. The dollar ring for meat is a lot higher than the dollar ring for any other department."
Perdue's strategy is to approach category management from several different angles, Mendelsohn said. First is to determine the goals of the whole meat department as a business, whether it's a money-maker or just breaks even but attracts traffic. Then it takes a category as a whole -- either all of poultry, all of meat, or in some cases even all of the fresh departments of the store.
"Whatever that retail focus is, that's where we go with our tactics. Because the real competition for oven stuffer roasters from a center of the plate standpoint are high-ticket beef items or turkeys, the other center of the plate meals; so even a focus within the whole chicken category is sometimes even too narrow."
The next step is store-level customization. "You have to recognize that stores are different, consumers are different, and if you can recognize those differences you're going to do better.
"It's about breaking down the retail chain into its consumer-based components, rather than geography or store size or location.
"If you ask retailers how they segment their stores, they'll typically say, 'we have the ones in the North and the ones in the South,' or 'the ones in the inner city and the ones in the suburbs.'
"But it's possible that a store in the inner city is very similar to the one in the suburbs: they may be very different in terms of size, but they'll have the same consumer group. And that's an extraordinarily powerful idea," he said.
"You can look at a whole category or a whole chain. You can look at how chicken backs are performing, or you can look at how our brand is performing for a certain chain."
The point is that the supplier will take its cue from the retailer. "Before you add in any of the analytics, category management is about planning, it's about sitting down with the retailer and clarifying objectives, and saying, 'here's how we're going to lay it out.' "
Perdue can still help, even if the retailer is resistant to initial recommendations."Sometimes they'll say, 'we don't want you to do that, but we're interested in working that way,' and we can say, 'fine, here's just some stuff we know that's going to make you more successful.' Because when the retailer is successful, we're going to be successful right along with them. That's one of the basic premises."
Ultimately, the plan is malleable according to the idiosyncracies of a particular chain, he said, even if that means endless variations from store to store. "They may have different objectives in different stores, so it's like working with 12 different retailers at once."
One concept Perdue is testing with the retailers is assortment analysis.
"Take an item like chicken livers, for example; if you look at it in dollars per foot, it's almost never going to perform to standard, but you want to have chicken livers so that you have variety. At the same time, if you have four different brands of drumsticks, you don't need that. At the end of the analysis, the store manager receives a laminated, full-color planogram depicting the set Perdue suggests for the meat case.
"And we're looking at the whole category. In the field we've actually grown our competitors' business along with our own, because that's what's best for the category -- if you get a 5%, 10% or 15% bump in the retailer's business. For example, in one case we got about 11%, and our branded competitor got about 6% and the private label got about 13%. That's a big win."
But Perdue is prepared not to win all the time. "We're going to take our lumps too, if we have an item that doesn't perform. Let's say we have a facing of country cutup product. If [a retailer] doesn't need two, then we'll take one out and put in something with high movement, or use it to put in a specialty item, like a Cornish hen, or a turkey steak.
"Sometimes you have to bite the bullet on your own credibility. If you're going to hold every stockkeeping unit to the same scrutiny, you've got to put yourself under the microscope."
To handle items that are underperforming, the company developed a marketing program that uncovers weaknesses in particular products.
"We say, 'well, how do we fix that item -- how do we price it differently, promote it differently?' And we have changed packaging, we have developed new programs, we've changed the way a product is merchandised, before delisting an item. But we have delisted our own items if they don't perform."
Mendelsohn acknowledged that Perdue is not alone in pursuing category management. One thing, he said, sets the company apart, however, is research using a 15,000-household proprietary consumer panel.
"One thing we bring to category management is a lot of the consumer expertise. There's a real dearth of consumer data for random-weight meat items, so we've stepped in. If we come to a retailer and they're already doing assortment analysis and they already have the data, we can still add value. "Some of our competitors are buying data and delivering some analysis. In some instances we've been given data that our competitors have done, and been told, 'We don't understand this, can you help.' So we are providing some added value there."
The household panel enables Mendelsohn to provide retailers with an accurate description of what's going on in the department.
"I have a model that says, here's your store, here are the people who shop there, here's their shopping propensity by SKU, and here's your assortment that is customized to either that store or group of stores."
To avoid a situation where a 140-store chain has 140 different planograms, however, Perdue recommends groups of stores that logically fit together.
"Some retailers can handle four, some can handle 12; it just depends on what their buying staff and merchandising office want. Most of our more successful programs have been between five and 10."
Perdue also depends to a certain extent on scanner data, and has established a system to avoid the potholes that reliance can represent for some retailers.
"Because [scanner data] is not readily available, we have developed partnerships to provide that perspective. In some cases the meat department is not used to working with scanning data, and we can help them with that. In some cases they are used to it but they need a market-level perspective and we can provide that.
"In some cases retailers have said, 'we have a frequent shopper data base, and we want to leverage our use of it, can you help us apply it to meat?' I think that's what makes our program very successful, we're taking existing technologies and methods and applying them to meat."
To get the ball rolling, Perdue is making presentations at headquarters, discussing the company's own definition of category management. "We say, 'here's what we think we can offer you and here's why we think it works.' And usually there are some key issues -- some retailers want to be concerned with assortments, others are concerned with prices. We'll look at some stores, hopefully with the buyer or his merchandiser."
Perdue analyzes the situation and returns to the retailer with a data-based recommendation. "Then we'll normally do a field trial, they'll give us, say, 20 to 30 stores for 13 to 26 weeks, and we'll put some stuff in place and then come back and say, 'this is how it worked.' "
The program is in a perpetual state of development, Mendelsohn noted. "We're always testing new technology, new models, always finding better ways to do analysis, to do it faster, to take more variables into account."
For retailers who shy away from sharing information, the supplier can provide analysis templates. "Then they can load in the data and it will tell them what's going on."