HOUSTON -- When it comes to working salty snacks, promotions make the difference. But in a field crowded with competition, being different is what makes snack promotions work at Randalls Food Markets.
The chain has honed its own two-pronged strategy for standing out -- one that departs from more typical cycles of deep discounting.
First, Randalls makes sure to run on a calendar that doesn't mirror its competitors'
schedules; and second, it makes the unusual commitment of featuring an item from each of the salty snack segments every week.
"As far as dry grocery goes, salty snacks ranks about third in total dollar sales. It is a profit generator and extremely important," said Jeff Savage, a grocery buyer and the salty snacks category manager for the 126-store chain here.
In fact, the category pulls in about 7% of the chain's dry grocery sales, which makes it important enough for Randalls to risk breaking from the pack.
"We do not stick to the normal calendar of events that [manufacturers] put out. Therefore, we're not running the same type of promotional piece when all of our competitors are," Savage explained.
Frito-Lay supplies 70% of Randalls' salty snack products, and its promotional calendar bears the most watching, Savage continued.
"We know what their promotional calendar is; [therefore] we normally know what other retailers are going to promote. So we try to pattern our promotional activity around that knowledge. And we try to use our marketing funds to go one step better."
Part of that step is recognizing that the salty snack category really is not one category. It has distinct subsegments comprising potato chips, pretzels, tortilla chips, better-for-you items and others, he explained. "And although those segments cross over, normally these subsegments have a totally different consumer," Savage noted.
"We try to touch all the segments within a given week. You're not going to just see a promotion on potato chips and nothing else from us."
Randalls attempts to have each subsegment either on the chain's temporary-price-reduction program, called Budget Buys, or as a featured sale item. This way all salty snack consumers are targeted and the chain achieves total household penetration.
"This approach is going to draw the consumers down the aisle, and hopefully you can get a purchase. Touching all consumers has added to the category's gross sales, and total category gross profit dollars have increased because of it," he noted.
"It also has allowed us to get away from some of the extreme giveaway promotions that we have been notorious for in the past."
Indeed, Savage expressed concern that deep-discount promotions such as buy-one-get-one-free, or BOGOs, will drag salty snacks down to the loss-leader level of soft drinks.
"We're recognizing that BOGOs don't do us a lot of good, as far as making either the retailer or the supplier a good deal of profit," he said.
Savage noted that Randalls' strategy is to avoid promotions like BOGOs whenever it can -- except when the competitive need is the greatest. Holidays, he conceded, are a tough time to avoid the practice.
Instead, by "being able to manage the business much more efficiently and work smarter," Savage said he has been able to not only boost salty snack sales but margins as well.
For example, instead of having a deep-discount BOGO promotion on just one subsegment, Savage said Randalls spreads the pool of available marketing funds out over a larger base, touching all the relevant subsegments.
"We're still using 100% of our marketing funds, but we're capitalizing on more consumers and not having as deep a margin discount over the larger base. We get the same sales levels, but we're carrying a better margin across the entire category."
Budget Buys were evident throughout the salty snack section during a mid-February visit to one Randalls unit. Snacks ran about 65 feet, in an aisle near the front of the store and quite early on in the consumer traffic pattern.
Randalls offers more than 200 SKUs of salty snack products, ranging from corn chips to fat-free tortilla chips and low-fat popcorn to cheese balls and potato sticks.
A variety of salsas and dips, as well as clip strips of potato chip bag clips for resealing purposes, also are included in the aisle.
Before Randalls could coordinate the mix of promotions for this many product subcategories, Savage first had to indoctrinate manufacturers to buy into the strategy behind it.
"These [manufacturers] are fierce competitors, and it's been a really difficult educational process, especially the way we've been looking at the promotional calendars, and touching every segment."
But the suppliers have come to realize that by working with Randalls' program, the entire category is more successful, said Savage.
"Basically, Frito-Lay is a large percentage of our business; our biggest bump in promotion is going to come from promoting their products. However, we don't own Frito-Lay stock, so we're not just trying to build Frito-Lay and its business. We have to maintain competitors within the category; and we have to try to grow their businesses as well," he explained.
The process works like this. Savage will sit down to plan in a weekly or two-week ad and put in a Frito-Lay promotion for a potato chip and one for a pretzel. "And then I'll say, now, what is left open? At this particular point, we can blend in all of our other suppliers so they've got a part in producing for the category.
"If I notice that the tortilla chip and the better-for-you subsegments are open for promotion for that particular week or two-week period, I may call up my Eagle Snacks representative and tell him I need a tortilla chip of yours between this date and this date. "They are more than willing to accommodate us on that, because they understand there is exclusivity -- that they're going to be the only tortilla chip promoted. Therefore, they're going to get the bump they're looking for in a well-spent promotional dollar.
"Suppliers are beginning to understand they each have their place; they individually are important to the category. And, that in trying to be cooperative, they are better off in the long run than trying to cut each other's throats -- which in the past they more or less did.
"Frito-Lay used to ask, 'OK, what can we do to really get into [a competitor's] pocket?' But now there's an understanding that there's opportunities for everybody in all the different subsegments."
In the end, the suppliers, especially the smaller players, recognize the benefits of Randalls' program. Otherwise, with the traditional method of promotional calendars and planning, "it's a crapshoot" for manufacturers, Savage said.
"If Eagle is going to promote their El Grande tortilla chip, the last thing they want is for Frito-Lay to decide it's going to run Tostitos," he explained, "because [Eagle] can't compete against that piece.
"And there again, to get their biggest bump, Frito-Lay doesn't want to have El Grande and two other tortilla chips promoted at the same time. It does not make a lot of sense within the category to promote that many tortilla chips at the same time. That is an unwise use of merchandising dollars," said Savage.
He said he considers his program "much wiser in using our merchandising dollars to best lift the volume in the category."
John Compton, vice president of national sales at Frito-Lay, agreed. "We think category management is important to us and for our customers to get behind aggressively.
"We doubled our running [growth] rate in 1994, the first year we embraced category management together with Randalls," said Compton.
In fact, Randalls is one of a group of chains that got involved with Frito-Lay's new category management program early on, explained Compton. By June, retailers will have access to 30 Frito-Lay category managers, skilled in finance, consumer marketing and retail sales, he said. "We are currently staffing category managers in all of our offices across the country."