CHICAGO -- Combining a strong brand with account-specific promotion is a formula that NutraSweet believes will equal success. The company here is patterning its formula after a business plan developed jointly with a major retail account last year. The plan aimed to increase category volume, increase dollar sales of the Equal brand and improve total category profit.
"We are very happy with the results," said Randy Jackson, vice president of retail sales of the table top group at NutraSweet. "This is what we expect to implement with all of our customers by the end of 1995," he said at a conference here hosted by Strategic Research Institute, New York.
Based on current performance and fourth-quarter projections, he said the retailer's volume in the sugar substitute category is expected to grow 44%, dollar sales volume of NutraSweet's Equal brand is expected to be up 42.1% and total category profit should have increased by 37.1% vs. last year.
The joint development of brand objectives and a business plan with the retailer followed NutraSweet learning some interesting information. Its Equal brand sales represented 58.2% of category dollar sales and 75.4% of category profit for the retailer, but it was allocated only 32% of selling space and given no major promotions in 1993, according to Jackson, who declined to name the retailer. The product was viewed as a "cash cow" by the account and carried a retail price slightly higher than the channel average, he said.
"We found that the consumer who bought our product had a much higher ring than other consumers shopping that retailer," Jackson said.
However, each side had its own ideas about what constitutes success for the category.
The retailer's objectives were to increase the sugar substitute category's sales and profits by 10%, eliminate or reduce nonperforming stockkeeping units, develop optimal planograms and pricing, and obtain a lower cost for the product from the manufacturer, he said.
NutraSweet's objectives were to increase Equal sales 20% while maintaining margins, increase display activity, conduct four merchandising events per year and increase selling space to 40% of the category. Also, NutraSweet wanted the retailer to lower its everyday price on the item, he said.
Too often suppliers have one set of objectives and retailers have another set, but no one considers the effect on the consumer, according to Jackson.
"The solution was to find common ground. Win/win does not mean we each win 100%. Maybe we each will get 75% of what we want," he said.
In this case, the brand objectives agreed upon included: use effective merchandising to increase category sales by 15%, create an optimal planogram and pricing, and drive down the cost of acquiring product by maximizing supply chain and transaction efficiencies.
"We found other ways to reduce the cost of acquiring the product. The customer was not taking advantage of some volume discounts and we did not have them on electronic data interchange," he said.
The joint objectives led to a joint business plan. NutraSweet did not gain 40% in selling space, but did get more linear feet. Two suppliers were eliminated. A minimum order size of a half truck was agreed upon. A customized pallet program was created for permanent displays. Transaction efficiency was improved with EDI. Also, the retailer agreed to feature price Equal three times a year, and display levels for the Equal brand were to be increased from no displays to 100% of the chain's stores, he said.
Conducting joint business plans is an important part of NutraSweet's strategy now, according to Jackson.
"If you are a $200 million to $300 million brand, implementing Efficient Consumer Response is not practical. But there were some things we were able to take out and apply from ECR and other concepts. The key to our trade strategy is to develop a shared vision for the category, set measurable objectives and agree to specific strategies and tactics," he said.
By expanding its thinking to increase the category rather than just the brand, both NutraSweet and its retailers have benefited, he said.
"Before we were in the react mode. Now we work on an annual calendar and set objectives. Shared vision and shared objectives are necessary to create a win/win situation."