CATEGORY MANAGEMENT EVOLVES AT LIPTON

JOHN KAROLEFSKI

TAMPA, Fla. -- Category management evolved gradually and with "some pain" at the Thomas J. Lipton Co., said a top executive for the company, based in Englewood Cliffs, N.J. "If you're not prepared to pay, you're not prepared for category management. There are a lot of changes that need to take place in the organization, and with the way people think within the organization," said Rich Collins, director of sales strategies.

He described the phases of installing category management at Lipton for a standing-room-only audience here at MarkeTechnics, the Food Marketing Institute's annual convention on integrating merchandising with technology and operations. "There are three phases we went through in embracing category management," said Collins, "and all of them came with some pain." He listed the following:

· Window Dressing Category Management: "That's what we do because we have to do it. Category management is in vogue. It's not fashionable not to be in category management. Really, there's not much substance to [this phase]," he said. · Symbolic Category Management: "This is a mistake we made and a lot of people make. They rush and purchase the information technology capability. They rush and purchase resource capability. They put people in certain positions. But they forget to lay a foundation," he said.

· Process-Driven Category Management: "You lay the foundation first, before you buy the information technology, or invest in human resources. In our company, that means that you weave category management into the organization and throughout the supply chain," he said. As Lipton moved through these phases, Collins said certain myths of category management were proven to be untrue. For example, some executives believed that they already had been practicing category management for years. "I tell people to look again," he said. "Category management has changed and it's changing very fast. We need to keep pace with it," he said. The second myth -- "It's a sales thing, and really only impacts sales and trade marketing" -- was "strongly entrenched" at Lipton, according to Collins.

In reality, "category management affects the entire organization, and you are as much a part of category management as I am in sales, no matter where you are in the business," he said.

Collins said the Efficient Consumer Response Joint Industry Committee lists these "enablers" of category management:

· Information Technology: "Obviously, category management is fact driven and analysis intensive. Information technology plays a key role in the decision-making process of category management," he said. · Scorecard: This tool defines, measures and monitors a category business plan, he said. It provides some discipline in the category management process.

"What are we measuring, what are we trying to achieve, and how do we know we are successful?" he said. · Organizational Capabilities: Is your organization structured to conduct category management? Are there systems in place to reward people for category management initiatives? "People forget training," Collins said. "There are huge training needs to succeed in category management."

· Collaborative Relationships: A new way of working together. Two keys are trust and commitment from top management of a company, according to Collins. In conjunction with ECR, he described category management as "the process by which ECR initiatives are translated into consumer benefits.

"Without category management, there is no real bridge to the consumer. There is no way to translate all the benefits from all the initiatives into consumer value," he said.

Collins listed these initiatives as micromarketing, continuous product replenishment, electronic data interchange, activity-based costing and cross docking. "You can realize the benefits of all these initiatives without category management," he said, "but don't think you can achieve an easy connection to the consumer without category management. It is a core strategy in the ECR initiative."

Category management is the "bridge" between the consumer benefit and the various initiatives of ECR, according to Collins. "That's the key role that category management provides: a linkage from the strategy to the consumer." According to Collins, there are some retailers who believe that ECR and category management are manufacturer led. "At Lipton, I get the opposite," he said. "ECR and category management is a retailer thing."

Collins said retailers could help manufacturers by telling them what their category management process is.

"You can explain it. We then can match up to that process," he said.