BUILT FOR SPEED

Mark Hamstra / Additional reporting: Elliot Zwiebach

Tom Grosserode, advertising category director for Affiliated Foods Midwest, Norfolk, Neb., was listening to a presentation by a group of vendors recently when one of them mentioned a new product that had already been rolled out. The only problem was, neither Grosserode nor any of his company's 830 retail customers had even seen the product yet.

"When I got back to Norfolk, I called our broker about the item, but it still took another three weeks or so to get it," he said.

All sides of the supply equation would like to see more speed-to-shelf when it comes to new products, but pressures from both ends make it a challenging task.

Retailers want the hottest new products on their shelves as quickly as their competitors have them, but at the same time they want assistance -- either in the form of payments from vendors or physical labor from the brokers -- to help get those products on the shelves.

Manufacturers are pushing for faster and faster rollouts of new products, often moving up advertising so that it quickly follows the first product shipments, creating the need for more rapid deployment. In some cases, they are providing incentives in the form of rebates to encourage quicker retail penetration, some observers said.

Caught in the middle are the sales and merchandising agents, or brokers, who more than ever are feeling the squeeze from both sides. Beyond their role of convincing retail buyers and category managers that they need to carry the new products in the first place, brokers often must deploy the human labor required to cut the new products into the shelves, provide merchandising and promotional support and then monitor retailer compliance with the in-store merchandising plan.

In addition, brokers are increasingly providing feedback on retail conditions and competitive trends to manufacturers in preparation for the introduction of new products.

"There are a couple of challenges in the execution of a new product," said Kevin O'Mahoney, partner, Meridien Consulting Group, a marketing and consulting firm based in Westport, Conn. "No. 1 is the sell-in of the new product to the buyers and/or category managers for acceptance of the listing in the stores, but the real work starts after that, which is the process of speed-to-shelf, and that's still one of the bigger challenges in the industry.

"The broker is a very important part of that because the elements involved in getting retailers' compliance and getting that product on the shelf are several-fold."

Some brokers said they are making some headway in this area, however.

Jack Parker, executive vice president of strategic initiatives and business development, Acosta Sales and Marketing, Jacksonville, Fla., said his company recently revamped its retail field operations to support greater speed-to-shelf.

"New-item speed-to-shelf is very important," he said. "It's an incredibly strategic area for manufacturers. As they innovate, sometimes a key point of differentiation is speed, so they want to get that product to market as quickly as possible."

Parker said Acosta has realigned its retail field function to place more emphasis on this area, resulting in an improvement in speed-to-shelf of about three weeks during the past 15 months. The realignment places a premium on the frequency of in-store visits, he explained.

"You can't work in the new item until you are there," he said. "The greater the frequency of your visits, the faster you can get that new item on the shelf."

In an effort to improve retail execution overall, including speed-to-shelf, Crossmark, Plano, Texas, has increasingly shifted to a strategy that involves the deployment of sales teams that are dedicated to one or two specific manufacturers, according to Ty Alford, vice president of retail dedicated teams at the brokerage. The company also still relies on a large workforce of "syndicated" sales teams who serve a range of manufacturers, he said.

The dedicated-team concept began about three or four years ago with a retail sales force dedicated to perishables, and it was expanded to include an additional four or five teams in 2004. By the beginning of this year, additional teams had been added.

"Almost all of the clients who came on started with a test of the dedicated teams, but they have expanded," he said. "There is value in a syndicated sales force -- we have a large syndicated force as well -- but for clients whose strategy is that they want to be aggressive at store level, it makes sense to have dedicated teams."

Each of the teams, he said, is also usually restricted to serving a limited number of retailers, which fosters greater understanding of store conditions and individual retailer idiosyncrasies, he explained.

Surge Teams

To get new products for major launches into stores quickly, Crossmark, like other brokers, often employs "surge teams," or temporary workers who augment the retail service teams that brokers traditionally use to stock and reset retail stores on behalf of vendor clients.

"Most brokers are in the store once a month to every two weeks, and many times it's going to take more than one sales call [to cut in a new product]," said Ben Fischer, president of sales, Crossmark. "The best you are going to get is a four- to six-week cut-in at 80% of the [all-commodity volume]."

When rolling out an air freshener product to Kroger stores recently, for example, Crossmark hired multiple surge teams and was able to cut the product in at 90% of the stores in a 10-day window.

"We could not get that done with just one sales force," Fischer said.

He said Crossmark has about 6,000 surge-force workers at its disposal to help launch new products.

While retailers want the hottest new products on their shelves as quickly as possible, manufacturers are putting on even more pressure by speeding up the window between when a new product launches and when advertising for the product begins.

"What we're finding is that in the old days, a manufacturer would launch a new item, and advertising wouldn't start for 120 days," Fischer said. "Now the dynamic is changing -- they are really moving the TV advertising and the [freestanding insert] up much closer to the first ship date."

The reason, he said, is that the manufacturers know that if the product doesn't sell well quickly, retailers will pull it from the shelves within about six months. Often if advertising for a product begins within four to six weeks after a product is first shipped to the stores, Crossmark will call up its surplus retail sales teams to expedite the cut-ins.

Some manufacturers also have recently begun offering incentives for retailers to roll out new products faster, according to Fischer. The rebates take the form of discounts on the cost of the items based on the percentage of stores that carry the products on their shelves within a specified period of time, he said.

Volume of New Products

The sheer number of new products compounds the problem of executing rapid deployment.

"There are probably 10,000 new items launched each year, and the longevity of each item is questionable," said Chip O'Hare, president, Johnson O'Hare, Billerica, Mass. "There are very few classics. The number of new products launched each year has probably never been greater, even with the high cost of slotting."

In fact, he said, the lack of slotting fees at discounters like Wal-Mart Stores, Bentonville, Ark., and dollar stores, may be encouraging the proliferation of new-product launches.

"Slotting has become less of a factor in certain segments of the marketplace, so there's more of an incentive for people to come out with new products than there was 10 years ago," he said. "You don't have the risk of $2 million or $3 million that could go up in smoke if you don't launch a successful item."

Retail category managers faced with this barrage of new-product introductions "are shoveling against the tide," O'Hare said. It requires that brokers be more knowledgeable than ever about their categories and be more prepared than ever to present new products complete with planograms detailing which products will be eliminated to make room for the new items.

"We would never go in for a call for a new item without a planogram, a recommended list of discontinued items through data analysis," he said. "We would make recommendations as to how the planogram should look before and after the new item is launched."

Brokers also face challenges in navigating the schedules chains establish for the introduction of new items. Most food retailers have gone to a strict schedule in which they only make changes to the planogram for a category at certain times of the year and only accept pitches for new products during those product windows.

"Even though it sounds simple to present an item to the chain with a planogram and recommended discontinued items, there are additional factors, such as when chains review the categories," O'Hare said. "You've got to make sure you feather into their schedules, and most of all you've got to execute in the field the way the chain wants it in the planogram."

"It's a little more complicated than it used to be," said Don Cox, president, Co-Sales, Phoenix. "Almost every chain has their own set of rules as far as when you can introduce certain items. It used to be that there weren't any time constraints, but now they will only look at certain kinds of items at certain times of the year."

Retailers also have increasingly gone to micromarketing strategies in which they tailor the merchandising of individual stores in an effort to cater to individual neighborhoods. This presents additional challenges for brokers, who sometimes work with different planograms for every store in a market.

Brokers say they support the concept, although in reality it makes their role more difficult.

"I think the future for retailers is to do micromarketing, neighborhood marketing," said Fischer of Crossmark. "I know they are all trying to get there, but it creates a lot of infrastructure stress to manage all that."

Ultimately, he said, "manufacturers are going to have to really decide what consumers they want to reach, and which retailer is best for that consumer, and only market there."

With ready access to scan data, the challenge for brokers is not so much deciding which products to eliminate when a new product gets cut in -- that is dictated by the data -- but calculating the finer points of merchandising, such as how many facings a particular item should have in each store.

"There is a lot more of the demographic and regional differentiation at the retail level than there used to be," said Parker of Acosta. "You need to be a lot more targeted in the products that you offer. There's a lot more specialization. The retailers themselves have become more targeted."

"It's more incumbent upon the sales chain to have the data to prove the need for that item."

Once a retailer agrees to takes a product in, "cutting it in can be a real challenge, because you have to make sure you've got the right product for the right store," he said.

Retailers Need Notice

Randy Slentz, senior director of merchandising for Save-Mart Supermarkets, Modesto, Calif., said he thinks brokers often don't get the information about new products far enough in advance.

"Brokers only know what suppliers tell them," he said. "We try to get them to give us the information as far in advance as possible so we can be more efficient, but they get it from manufacturers only two months before an introduction, and then the broker has to scramble to get it on the shelf, even though the manufacturer may have known a year in advance it would be coming."

He said Save-Mart is attempting to resolve that challenge by initiating meetings -- which it did for the first time a few weeks ago -- with suppliers, including brokers, "to talk about the prolonged planning process."

"Our idea is that during August and September, we want to know what products will be introduced over the next year -- not to have the information presented to us but simply what month products will launch, which will help us allocate personnel better in terms of planogram updates. We know manufacturers are providing this kind of information to some companies, including Wal-Mart."

In terms of being first in market with a new item, "some challenges are due to a lack of advance planning," Slentz said. "We may have just completed a new planogram one month -- including a store reset and a cost in terms of human resources to do it -- when we're told that a new item will ship early the next month, which means we have to do the process all over again when we could have altered our plans to do the reset later."

Jim Mizeur, vice president, non-perishables, for Price Chopper Supermarkets, Schenectady, N.Y., agreed that he'd like more advance notice on new product launches.

"They could give us information on new items earlier and more accurately and recommendations on how to do the best job of execution at store level in terms of positioning and what should be discontinued," he said. "Some brokers are good at doing that, others are not.

"Some manufacturers know what their plans are four to six months ahead, and brokers should be giving me that information that early. I would like to have the information at least three or four months in advance."

As an example of the costliness of new-product launches, Mizeur cited a recent incident in which a broker informed him about a large group of new items in a category that will be available Sept. 1. However, Price Chopper had just reset the section three weeks earlier. Mizeur said he would have postponed the reset if he had known about the new products.

"I like to be six months ahead in my planning, so I'm already past fall and holiday plans and working on plans for January," he said. "But the broker is still working on yesterday, and it's getting worse because there are fewer brokers, and the manufacturers are making more demands on them than they did three to five years ago."

Grosserode of Affiliated Foods Midwest agreed that retailers need to get information as soon as possible.

"They are presenting the items to us, but sometimes we get them late," he said. "We're constantly asking them to present the items to us in a timely fashion because timeliness is so important for new items."

The biggest improvement brokers can make to help the retail industry would be "to find ways to improve speed-to-shelf on new items," said Ron Taylor, senior vice president, purchasing and marketing, Hy-Vee Food Stores, West Des Moines, Iowa.

"Right now it's a very elongated time-frame from the time you see the item until the item is received at the stores, and very often other retailers already have the item. So what we'd like to see is a quicker response, and while the turnaround time has improved over the years, it's still a big concern to us because of the importance of new items."

He suggested that the solution might lie in automation.

"The more you can automate the process between the broker and the retailer and eliminate longhand paperwork, the better off we will be," he said. "That's where a good, accurate technology like data synchronization comes in, where you eliminate all the phone calls and faxes to move the process along. The industry is certainly moving toward more use of data synchronization, and it's become a more viable process over the years. But some brokers are not moving as quickly as we'd like, and there aren't as many suppliers, including brokers, implementing it as we would like."

He said Hy-Vee encourages its brokers to utilize data synchronization, "but we've gotten mixed responses. While more of them are using it, others are still lagging."

Rob Borella, a spokesman for Giant Eagle, Pittsburgh, said it has become increasingly difficult for retailers to introduce new products.

"We pride ourselves on our ability to be first to market with many new items in order to offer customers new and exciting products that accommodate their lifestyles," he said. "However, sales staffs have been reduced by many manufacturers and brokers alike, which is impacting the speed of bringing new products to market effectively. That places more responsibilities on supermarket management teams for performing category resets/product repositioning associated with new product introductions."