A DECLARATION OF INTERDEPENDENCE

JAMES TENSER

When in the course of events it became necessary for brand marketers and supermarkets to work together for the common good of their industry, people of vision on both sides joined to establish a new framework for supplier-retailer relations and business practices.

With the advantage of a full two years of hindsight, that collaboration -- Efficient Consumer Response -- may be viewed as a "declaration of interdependence" by the total grocery industry.

As the results of a major SN/Brand Marketing survey strongly support, working together is tantamount to survival for the makers and sellers of fast-moving consumer goods.

The survey, fielded in the fourth quarter of 1994 by the

editors of Supermarket News and Brand Marketing, sought insights into the state of the union that exists between brand marketers and supermarkets. Reported here for the first time, the results indicate that both groups have already accrued substantial benefits from the common pursuit of ECR and related activities.

According to the survey, the industry has significantly "deloaded" its distribution pipeline in the past year. Supplier-retailer relationships are generally improving; strategic alliances are on the rise; and those already participating anticipate an even brighter future.

The practice of category management is widening among both brand marketers and supermarket retailers. The former are more likely to offer, and the latter to willingly accept, assistance with various category management tasks.

Brand marketers report mainly good performance from their trade marketing functions, and most consider the relationship between their sales and marketing functions to be productive. They expect their trade promotion spending to hold steady in 1995, as their courage to say "no" to excessive customer demands increases.

These and other results indicate an industry outlook that is clearly optimistic. But behind the averages, behind the notable successes with teamwork, alliances and removal of waste from the distribution system, there is also a relentless natural selection taking place that is dividing companies into two groups: the quick and the dead.

Throughout the survey, larger companies on both sides of the union tend to be the ones reporting the greatest progress. Here is a wake-up call to smaller firms that have been slow to act -- when it comes to forming strategic alliances, the window of opportunity is closing.

The 1994 State of the Union Survey is really two separate and parallel surveys -- one of brand marketers and one of supermarket retailers. A subset of the questions in each are designed to match up and allow for comparative analysis of certain critical issues.

The results confirm the reality of interdependence between retailers and suppliers. While their areas of consensus are happily broad, other findings reflect the inherent and fundamental differences between various participants in the supply chain.

What is the state of the union for brand marketers and retailers? The results on the following pages suggest:

It is better to be big than little.

It is better to lead than to follow.

It is better to have a few allies than none at all.

It is better to be nimble than strong.

Some of these truths may seem self-evident, but as the survey results also reveal, brand marketers and supermarket retailers were not all created equal.

Notes on the Surveys - Two simultaneous 1994 State of the Union surveys were conducted entirely by the editorial and research staff of Brand Marketing and Supermarket News between Nov. 1 and Dec. 15, 1994.

The two questionnaires were designed in part to explore issues of mutual interest to brand marketers and supermarket retailers from their separate perspectives.

The Brand Marketer survey form was mailed to either the president, vice president of marketing or director of trade marketing at 200 U.S. companies that market fast-moving consumer goods. A total of 48 usable forms were returned, for a response rate of 24%.

The Supermarket Retailer survey form was mailed to the president or top executive at 300 U.S. supermarket chains or divisions of chains. A total of 70 usable forms were returned, for a response rate of 23%.

Respondents had the option to return forms anonymously. They were not coded. Some respondents chose to sign their forms. Many returned separate postcards requesting a copy of the detailed survey report. From those returns, we estimate responding retailers' combined 1994 sales volume exceeded $125 billion, equivalent to 42% of total supermarket sales, which the Food Marketing Institute estimates were $292 billion in 1994.

While the response rate is significant, results are statistical averages and may not be projectable in all instances. Users of these data are therefore cautioned about their use.

Sales Growth - Percentage of companies with current alliances that report growth in sales volume.

Brand Marketers 93% Retailers 73%

Cost Reduction - Percentage of companies with current alliances that report reductions in operating costs.

Brand Marketers 37% Retailers 58%

Alliances Are Flourishing - Two-thirds of brand marketers have current strategic alliance activity ... ... and most retailers say yes, too.

Do brand marketers use strategic alliances? Yes 67% No 33%

Do retailers use strategic alliances? Yes 51% No 33% No plans to use 16%

Positive Thinking - Both supermarket retailers and brand marketers see relations improving over the next few years.

How are trade realtions changing?

Improving 58% (marketers & retailers)

Staying the same 31% (marketers) 28% (retailers)