ALLIED NEGOTIATIONS

DAN ALAIMO

LAS VEGAS -- Retailers, studios and distributors are pushing for a more efficient supply pipeline for supermarket video.

The rental and sale of videos in supermarkets is still a relatively young business, untouched in many ways by the animosities of the past that have hindered the development of partnerships in other categories.

In video, retailers, studios, distributors and all the related departments and third-party cross-promoters have had an opportunity to start fresh.

The result has been good for all involved, but there is still much room for improvement, according to panelists at SN's third state-of-the-industry video roundtable discussion held here recently. The roundtable proceedings are presented in this special supplement to Supermarket News, which coincides with the Video Software Dealers Association's convention in Dallas this week.

"We really want to grow our partnerships with the studios and with the distributors," said Clifford Feiock, video coordinator at Nash Finch Co., Minneapolis. "We have barely scratched the surface of what rental and sell-through can do in our supermarkets. I am asking for help from studios and distributors to help us grow that business."

There is a need to keep lines of communication open and to share objectives, the panelists agreed.

"Our objectives will not always meet, but certainly many of them can mesh together to grow the business further," said Dennis Maguire, vice president of sales at Buena Vista Home Video, Burbank, Calif.

The SN roundtable brought together 10 top executives who addressed many issues that will affect the growth of video rentals and sales in supermarkets this year and into the future.

Representing the retail side of the business were Feiock; Bill Glaseman, video specialist at Bashas' Markets, Chandler, Ariz., and Sandy French, video coordinator for Thrifty Food Stores, Burlington, Wash. Also participating was Steve Jones, vice president and corporate marketing director of Video Home Theater, Des Moines, Iowa, a company that leases video rental programs to supermarket chains such as Baker's Supermarkets, Omaha, Neb.; Eagle Food Centers, Milan, Ill., and Steele's Market, Fort Collins, Colo.

Studio participants were Maguire of Buena Vista; Andrew Kairey, senior vice president of sales and marketing at MCA/Universal Home Video, Universal City, Calif., and Craig Van Gorp, vice president of sell-through sales for Turner Home Entertainment, Atlanta.

Video distributors on the panel were Ron Eisenberg, president of ETD Entertainment Merchandising, Houston; David Ingram, president of Ingram Entertainment, La Vergne, Tenn., and Bernard Herman, president of Star Video Entertainment, Jersey City, N.J.

Moderating the panel were SN Executive Editor and Associate Publisher David Merrefield, Home & Health Section Editor Tina Veiders and video reporter Dan Alaimo.

Among the wide-ranging topics discussed at the roundtable event were:

· The continued growth of rental and sell-through in supermarkets.

· New supply-line strategies like shared-revenue programs, direct purchasing and implementing Efficient Consumer Response in video.

· Rental issues, such as increasing new release depth of copy, the future of B movies, games and CD-ROM, the Dove seal-of-approval program and retailer ownership of inventory vs. other types of programs.

· Getting more space and time on the sales floor for major sell-through titles, while minimizing returns.

· Other sell-through issues, including low-priced promotions through fast-food outlets, street date problems and making better use of cross-promotions.

While many issues were hotly debated, the panelists agreed that video is a strong and growing category in supermarkets, and that top management support is a catalyst.

"We are growing, and every new store will have a video department while remodeled stores will have larger departments than they had before," said Glaseman of Bashas'. "We're switching over to live inventory wherever it's appropriate. There's no holding back as far as our management is concerned."

Thrifty Food Stores is another chain dedicated to enhancing its video presentations. "Management is realizing that there is a lot of profit in the video department," said French. "I see some expansion ahead."

Because of the video rental programs it leases to supermarkets, Video Home Theater grew 25% in 1993 and 27% in 1994, said Jones. More than 40% of all supermarkets have no rental programs, "so there is a tremendous amount of potential," he said.

"In the Southeast, particularly in Atlanta, a couple of big chains that have never been in video before are going head to head with each and are looking for services to offer that the others don't. Some of those chains are starting to get real interested in video," said Jones.

"Supermarkets already have, in most cases, the best real estate and offer the most convenience," said Ingram. "Supermarket senior management ought to look at video rental as something that can give them a competitive edge. They should recognize that video rental is an important way that they can differentiate themselves from mass merchants and price clubs."

Studios are responding with more programs and personnel aimed at building sales in supermarkets. "At Turner, we are adjusting our marketing to this channel because we see it as a high-growth area. We are addressing the supermarket area specifically and adding sales staff to pursue this business," said Van Gorp.

"We have aggressively created, developed and acquired new family-type programming," said MCA/Universal's Kairey. "We believe strongly in the sell-through business and in how the supermarket trade can sell that type of product." The studio is becoming more aggressive in cross-promotions that tie-in food and nonfood products, he said.

"We also have maintained very strong relationships with supermarkets over the past years on a direct and a nondirect basis. We want to make sure that our product is represented and that our whole story is told to the supermarkets directly by the sales reps of MCA," said Kairey.

"We constantly change our marketing and sales approach to address what we think is a major factor in the overall retail landscape, and that is the grocery business," said Buena Vista's Maguire.

Sell-through increases in supermarkets have been phenomenal, with much potential yet to be realized, said the panelists.

At Nash Finch, which services independent stores as a wholesaler and runs its own corporate stores, sell-through is on the fast track, said Feiock.

"The percentage of independents out there merchandising sell-through on a regular basis is growing rapidly. People are learning its potential and starting to learn how to really merchandise that product well. So it's really taken off," he said.

"We think supermarkets contributed greatly to our growth, and we believe that there's more growth to be had," said Maguire.

To achieve that, suppliers and retailers will need to work more closely together, said the panelists. In some cases this may mean direct purchasing relationships, but not necessarily.

"Direct sales are not an objective unto itself," said Maguire. "I also think it is not about getting a better price. To us, direct sales means building a partnership to grow the business and nothing more. If we can meet that objective via a video distributor, I see no reason why we would not pursue that avenue."

This kind of partnership leads to the implementation of Efficient Consumer Response programs, he said. The direct-purchase relationship is "really not about price," said Ingram. "It's about things like partnership. It's about things like the amount of space the supermarket is willing to make available. In many cases, I don't think the supermarket is willing to provide space so that the direct relationship makes sense," he said.

In the video business, "I think ECR is about being more efficient and about the distributor partnering up with the supermarket. For distributors, it is about hooking up electronic data interchange, trying to get rid of paperwork and those types of things. Certainly, we've got a lot of customers interested in that sort of interaction," said Ingram.

"A lot of this just comes down to communication. How can we take this business to the next level? We have to keep the lines of communication open and work with each other," said Van Gorp of Turner.

This is especially important as the array of product choices in the video area proliferates. Already, there are audio books, video games and CD-ROM. Soon there will be new game platforms and digital video disks.

DVD, which will allow movies to be recorded on 5-inch compact discs, will give a big boost to video retailing, said Bernard Herman. "It may be one, two or three years away. But whenever it comes, DVD is going to have a positive impact on everyone's business," he said.

In-depth coverage of the roundtable discussion follows.