SCOTTSDALE, Ariz. -- The grocery industry's two-year Efficient Consumer Response initiative has provided the tools individual companies and their trading partners need to sustain growth and profitability. That's the message that C. Manly Molpus of the Grocery Manufacturers of America delivered to 300 financial analysts and portfolio managers here at the annual meeting of the Consumer Analysts Group of New York last week. To better evaluate the value of companies, "you [analysts] should ask new questions about processes and concepts that did not exist even five years ago," said Molpus, GMA president and chief executive officer. To evaluate where the competitive edge in this industry rests, "you need to know what management is doing about ECR."
Molpus claimed that some analysts are skeptical about ECR's ability to cut costs and drive demand. "However, to misperceive ECR is to misperceive the future of this industry." "ECR is not just about distribution and logistics and saving 10 cents on the dollar. It's about demand and about how to grow your business. "Savings is important," he said, "but you can't save your way to prosperity. One of ECR's key elements, category management, has the potential to become one of the most powerful, sophisticated and comprehensive marketing tools this industry has ever had," he explained. "This is the enormous potential of
ECR that many people just don't see."
Molpus predicted that ECR will have a sig nificant impact on the value of companies. He recommended looking for companies that see the "true, expanded potential of ECR, as not just a cost-reduction tool, but a true strategic marketing tool. That's where you'll see the value built."
ECR is a joint manufacturer-retailer focus, according to Molpus. "It provides the tools needed to create demand-driven sales systems by managing categories and strategic units. This benefits everybody -- manufacturer, retailer and consumer -- because it reduces the assets required to support businesses and improve cash flow and profitability.
"So, you see," he said, "ECR can help focus both manufacturers and retailers on methods of creating a demand-driven system using category management to manage categories as strategic business units."
Molpus said ECR will provide the industry with the tools to grow and meet consumer needs better in the future. He said ECR will affect value, too. It will enable companies to grow volume because their products will be more profitable for the trade, while providing better value to consumers. In other words, he said, companies embracing ECR will increase their market share.
"ECR will enable companies to achieve incremental growth through significant efficiencies," he said. "These efficiencies can help avoid the need to increase prices to produce earnings growth. And lower prices to the consumer helps build share."
