SAN DIEGO -- Faced with exploding competition in the low-fat and no-fat snacks category, Quaker Oats turned to category analysis to help it gain more, and more prominent, display space for its line of rice cakes.
So far, Quaker has conducted the category management exercise for about 30 retail chains, said Kevin Hall, national customer marketing manager of snacks for Quaker Oats, Chicago.
Hall outlined the analytic process his company has been pursuing at AUGI '96, Chicago-based Information Resources Inc.'s 11th annual Apollo Users Group conference here last month.
"The overall rice cakes category is flat right now, due to alternative low-fat, non-fat snacks," said Hall.
Through a location study of the whole United States, Quaker determined that "adjusting the product mix, improving distribution and relocating rice cakes to the cookie aisle nets the retailer incremental sales," said Hall. Rice cakes are traditionally located in the cereal aisle in many stores.
"The biggest opportunity was actually moving [rice cakes] to a high traffic aisle where consumers are." Location in the snack or cookie aisle, for example, has been an advantage to products such as Nabisco's SnackWells low-fat cookies, which Quaker sees as competitive with its rice cakes.
When they have agreed to relocate the section, he said, Quaker has seen some customers double category volume. "The [consumer] issue was familiarity," he said. "Moving to the cookie aisle provided more exposure than any television commercial."
In addressing the category opportunity for its retail customers, Quaker focuses first on out-of-stocks, beginning with store audits by its sales reps. Then the stores in each chain are divided into four clusters, according to whether they were high or low sellers of rice cakes and high or low sellers of healthy (low-fat or fat-free) products.
Stores that sell a lot of rice cakes but not a lot of healthy products are labeled the "maintenance" segment, said Hall. The tactics for these stores are to continue current programs and bring in faster-moving new items.
"Limited opportunity" stores are those with low rice cake and healthy product sales. Those stores are subjected to a product mix review vs. the market at large, and poor-selling stockkeeping units are eliminated.
High rice cake and healthy product sales identify "core" stores. The tactics for these are to continue current programs; review space allocations to minimize out-of-stocks, add stronger performing items and review the section location.
Finally, "opportunity" stores are those with high healthy product sales but low rice cake sales. Here again the tactics are to review space allocations, add stronger performing items and evaluate section location.
Through section size analysis, Hall said, Quaker determines recommended days-of-supply for each SKU. Optimizing stocks to match product movement leads to reduced days of supply at many stores, while out-of-stocks are also reduced.
He also emphasized that the process was aimed at getting the right section size for each store, not just increasing everywhere.
"We represent 75% to 80% of the rice cakes category. It costs us $10,000 to $20,000 per account to do a whole analysis. But the payback is almost immediate because of sales of void items," he said.
Hall said that Quaker was presently working with 75 accounts. Of those about 30 went active immediately and another 30 have indicated they will explore the process.
"This is just one version of category management that we use where the only issues are space management and product mix," he said, explaining that this model does not attempt to address promotion at all.