BURBANK, Calif. -- A strategy of actively pursuing direct relationships with supermarkets -- sometimes at the highest levels of the company -- is paying off in increased sales, said Ann Daly, president of Buena Vista Home Video here. While direct relationships usually don't translate into direct sales and shipping arrangements, they have become an effective way of capitalizing on the supermarket trade's unrealized sell-through and rental potential, Daly told SN in an exclusive interview. "Supermarkets are clearly the fastest-growing segment of the business for us, particularly for family programming like our Disney products. That is the reason we have continued to focus on that channel of trade," she said. The company's plan is to increase its sell-through business in supermarkets about 20% this year, Daly said. It expects to do that on titles other than its hits, such as "The Lion King," she added. Buena Vista, Disney's video sales, marketing and distribution arm, has been aggressively building its relationships with supermarkets. The studio has a large sales force that regularly attend shows, like the recent Food Marketing Institute convention in Chicago, to meet with retailers' upper management. Also, Disney's cross-promotional efforts have been targeting supermarkets with increasing effectiveness. The result has been a growing sense of partnership between retailers and the studio. "The greatest opportunity for supermarkets and for Disney lies in our ability to build the business together," Daly said. For Disney, this means "we continually have to bring better programs to the supermarkets that talk to their customers, move product more quickly and get their turn rates up. Supermarkets have to build their appetite for video, be in the business more regularly, and not pass on programs that could create a continuity with their consumers," Daly said. Although Daly declined to share the specific components of these partnerships, she said, "it's really a sharing of strategies. It is evaluating all aspects of the business together: who their customer is, who our customer is and how we most directly bring our products to their customer."
One very recent development from these close relationships with retailers is increased awareness about video shrinkage at supermarkets, said Daly. "We are aware that supermarkets have issues with both back-door theft and off-the-floor theft. In response to that, we feel that we have some solutions," she said. Distribution systems that minimize the amount of time that product sits in store rooms are a way to address back-door shrink, she said. "We feel that our distribution system, which is unique in the industry, can help [retailers] manage that business through an inventory replenishment system and short shipping windows," she said. Disney also is looking into ways to meet the challenge of curtailing off-the-floor theft. "We are reviewing in-cassette antitheft devices as well as fixturing solutions," said Daly. There is much talk in the video industry about the growing number of direct sales relationships between studios and retailers, circumventing video distributors and other intermediate suppliers. But these are not as important to Disney as its direct strategic relationships, in which studio sales people call on the retailers who get products from distribution. While the studio now ships directly to about six supermarket chains, "we have direct relationships with many other retailers. This kind of direct partnership relies on the retailers' interest in growing the business, their commitment to the sell-through category on a day-in and day-out basis and their willingness to have an ongoing relationship with their consumers," she said.
Disney's products do especially well in supermarkets because of another kind of direct relationship: extensive marketing programs aimed at the consumer. "What differentiates our products, besides the Disney name, are the types of consumer communications we do that are designed to expose the consumer to our product," she said. For example, the company makes extensive use of trailers (promotional previews) on related videos, she said. "The idea is to send those folks right back into the store for the next promotion that is going to be available in the supermarket," said Daly. Cross-promotions help the studio bring in even more partners into the video marketing equation. "Generally, these require multiple meetings involving Disney sales people, distributor sales people and the tie-in partner's sales people. In many cases, they will take a national promotion and customize it in some way for an individual account. That takes a little bit of effort, but it certainly pays off," she said. An indication that these programs are successful is that cross-promotional partners keep coming back, she said. "The partners' products are seeing gigantic increases in sales, and not only on the hits, but also on what we consider to be some of our catalog product."
Increasingly, Disney is gearing its major promotional efforts to products other than its big hits to create a continuous flow of video traffic and sales. For example, this summer the studio will work with General Mills to offer a $10 mail-in rebate with the purchase of three boxes of cereal and one video from Disney's Masterpiece Collection. This includes "Snow White" and "The Lion King," but also titles that have been on the market a long time, like "Dumbo," "Robin Hood" and "Mary Poppins." "We have always felt that these are great movies, but they never get feature focus because there is always something new coming out of the vault or at the theaters," she said.
The promotion will get the same level of advertising spending that big hits like "The Lion King" received, she said. The rest of the year will see many other hot-selling titles and programs from Disney, she said. "Cinderella" will be re-released in September and "The Santa Clause" will be out in late October in time for Christmas. Disney will also launch a sing-along video tied to "Pocahontas," which will debut in theaters this summer. The video will contain two songs from the movie.
Also during the summer, the company will launch a new business segment called "Bright Beginnings," which will target preschool children. "We have found that there is a real need in the marketplace for programming designed especially for young children," said Daly. Disney is backing its rental products with marketing programs that include heavy post-street date advertising. "Rental is one of our fastest growing business segments and we are going to be the No. 1 supplier of rental products this year. We are going to continue to put consumer advertising behind our rental titles, and we will be the only supplier doing that consistently," said Daly. With its acquisition of SuperComm, Dallas, late last year, Disney is now the only studio to offer supermarkets rental products on a shared-revenue, pay-per-rental basis. "It's our vision that SuperComm can be added to certain supermarkets that are interested in growing their rental business. We do see it as a marketing tool," said Daly. "Our intent is not to have all materials distributed on a revenue-sharing system. It should be part of an overall campaign that involves consumer advertising and copy depth in stores," she said.