SALISBURY, N.C. — Food Lion has introduced what it describes as the next evolution of vendor collaboration.
Launched last month, the new model consists of two tiers that manufacturers can join: standard and gold.
“Each tier requires a certain level of data sharing, a certain amount of collaboration and a certain amount of resources to understand and share insights,” Food Lion's chief operating officer, Cathy Green, said at Information Resources Inc.'s Reinventing CPG & Retail Summit, held March 3-5 in Kissimmee, Fla.
The new model comes at a time when Food Lion is running another vendor program called Vendor Pulse. Vendor Pulse is focused more on areas like the supply chain and out-of-stocks, whereas the new vendor collaboration program is customer-centric.
“The two go hand-in-hand, but vendor collaboration is a huge opportunity to partner on things that will create action at the point of sale,” Green said.
Manufacturers that participate in the new effort will collaborate with the chain on customer-centric marketing and merchandising; store-cluster-specific assortments; and banner-specific manufacturer programs.
“In partnership with [vendors], we can develop programs that make sense for specific banners,” Green said.
She stressed that the effort is not an attempt to build a profit center.
“We want to grow sales,” she said. “We believe this model will do exactly that.”
The new vendor collaboration program is the latest step in a major shift in operations at Food Lion. About five years ago, Food Lion stores acted almost as distribution outlets, whereby all stores stocked the same assortment at the same price, Green said.
But in response to growing competition from dollar stores and supercenters, it became clear that a new strategy was needed, she added.
Food Lion started a customer segmentation initiative that separates its consumer base into eight mutually exclusive groups, including “Country Living,” those who favor beer, NASCAR and tobacco; and “Golden Years,” older shoppers who visit the store between 9 a.m. and 2 p.m. and view food shopping as an experience. Food Lion uses these segments to group its stores into clusters.
“Our consumers are demanding that we need to change and innovate and meet their needs, so that they don't have to go to five different channels to complete their grocery shopping,” she said.
Food Lion uses segmentation and clustering to determine the makeup of each store, including design, assortment, pricing, community outreach, staff selection and banner (Food Lion, Bloom, Bottom Dollar or Harveys).
“Based on our segmentation and store clusters, customers should leave our stores and say, ‘Wow, this store was built for me. This store has the variety I want. It meets my everyday needs,’” said Green.
That means Food Lion no longer sells the same product across all stores, she said.
“We have found that when we put products into the right cluster, the performance of those products far outweighs putting them across 1,300 stores,” she said.
Meanwhile, other forms of vendor collaboration were discussed at the IRI Summit. ConAgra, for instance, said collaboration not only benefits retailers, but also vendors, who, like retailers, are facing media-fragmentation and channel-blurring challenges.
“Collaboration positively impacts top- and bottom-line results,” ConAgra's chief marketing officer, Joan Chow, said.
Chow cited how ConAgra is partnering with retailers for its new “Start Making Choices” free personalized meal and activity program, which focuses on achieving more balance in nutrition, activity and well-being (www.startmakingchoices.com).
For instance, ConAgra is running an account-specific “Start Making Choices” program at Wal-Mart via the retailer's “All You” magazine. ConAgra is also working with Safeway and other retailers for direct-mail pieces targeting “Start Making Choices.”