GIANT FOOD AT ITEM LEVEL IN EFFICIENT ASSORTMENT

MARC MILLSTEIN

CHICAGO -- Giant Food is drilling down to the item level using in-depth activity-based costing and category management practices as part of a sweeping efficient assortment program that will involve all products in its stores.

The chain expects to complete an efficient assortment analysis and resetting of all major "destination categories" by the end of the year and have a strategic plan in place for every other category by the end of 1997, said John Clutts, director of Efficient Consumer Response at Giant Food, Landover, Md.

Clutts spoke to SN about Giant's plans for rolling out its efficient assortment program to all product categories following a workshop presentation at the Food Marketing Institute's annual convention here.

"We will absolutely do them all. We've got 27 major destination categories targeted for [completion] by the end of this year and we'll have a business plan operational in every category by the end of next year," Clutts told SN.

"From a [traditional tracking] standpoint, there are about 180 product categories. But as we're going through it at Giant, we're grouping categories together, to do more of a meal solutions or total beverages type of approach, so I would imagine the total number of categories involved here to be 75 to 100," he said.

During the workshop, titled "Store Assortment: Giving Customers What They Want,"

Clutts shared examples of the chain's efficient assortment strategy implemented in two product categories, soft beverages and cookies.

At Giant, the soft beverage category includes carbonated soft drinks, new age beverages such as isotonics, waters, teas and juices, and beverages for immediate consumption, such as vending machine offerings, he said.

"The key point we found in this category is that assortment varied greatly by store at Giant. We also found there is strong brand loyalty in this category," Clutts said.

As a result of the category analysis and efficient assortment revamping, the chain deleted 46 soft beverage items, reduced the distribution of four, and added 10 items, including six private-label lines, he said. "We especially found some real opportunities with flavors in this category, as well as with private label and also particular package sizes, such as 2 liter."

In the area of cookies, which include both packaged and fresh baked, Giant's efficient assortment analysis revealed a highly fragmented category requiring a wide variety of products to satisfy customer needs. The review showed that Giant's cookie assortment was achieving a high level of sales and profitability overall, but was missing out on a prime opportunity in one segment.

As a result of the review, Giant deleted 18 items from the cookie category, but also added nine, including five private-label lines and four branded products, he said. Clutts declined to share specific results of any resettings but said the program had generated highly positive sales improvements for the chain. "Efficient assortment is probably the one area that provides the fastest and easiest win," he said.

"We learned early on that you have to go beyond acquisition costs to truly understand the value of carrying a product and the value of a particular activity. At Giant, we expect to have fully loaded ABC costs, down to the stockkeeping unit level, by the third quarter of this year on our data warehouse," Clutts said.

"We've invested heavily in enhancing our traditional mainframe system and in a new data warehouse. We now have by-store by-item sales and profitability information covering two years on every item," he said.