MAKING DOUGH IN THE '90S
CORONADO, Calif. -- The most elusive commodity for brand marketers in the remainder of the decade will be growth, says Pillsbury Chief Executive Officer Paul Walsh."All consumer foods companies are struggling for it," he says. "We are in a flattish environment from a population point of view and certainly from a pricing point of view. So in our company, what that means is we have got to work harder
April 4, 1994
JAMES TENSER
CORONADO, Calif. -- The most elusive commodity for brand marketers in the remainder of the decade will be growth, says Pillsbury Chief Executive Officer Paul Walsh.
"All consumer foods companies are struggling for it," he says. "We are in a flattish environment from a population point of view and certainly from a pricing point of view. So in our company, what that means is we have got to work harder at getting the
consumer's attention. We've got to work harder at making sure we've got the support from our retail partners. Growth is the name of the game."
Walsh spoke with Brand Marketing during a rare pause in the action at the 35th Pillsbury Bake-Off finals at the Del Coronado, a resort across the bay from San Diego. The century-old hotel was buzzing with food writers, video crews, guest retailers and executives from Minneapolis-based Pillsbury Co. and parent company Grand Metropolitan.
Upstairs in the Grande Hall, 100 contestants had been sweating for three hours over 100 identical Sears Kenmore ranges before a crowd of judges and onlookers and a 7-foot-high costumed Doughboy character.
Walsh had been playing host to this gathering of more than 600 people for the past three days. He had been making the most of the opportunity to showcase his company's accomplishments in consumer marketing, trade relations and Efficient Consumer Response.
At a briefing for about 50 retailer and broker guests held the previous day, a team of Pillsbury executives had presented an upbeat progress report on the company's activities in several key ECR aspects related to category management and electronic data interchange. Those technology-based tools form a platform for the company to translate ECR theory into concrete action.
"The ECR initiatives can become quite an esoteric subject. What we've been working very hard to do is to bring some tangible differences to it," Walsh says.
"If we do nothing else for the next 12 months but drive those deeper with our customers, then that's fine with me. We don't want to be a mile wide and an inch deep. We want to get things moving on those fronts."
At Pillsbury, Walsh says, those activities all have management information systems as a basis.
Perhaps furthest along in deployment is what the company refers to as the electronic buy. This is a paperless, EDI system that tracks each sale from purchase order origination right through to payment. "Something like 70% of our orders now come through the EDI center," he says.
Second is what the company calls demand invoicing, a system that Walsh says has "fundamentally eliminated" off-invoice deductions by allowing field promotion funds to be given as either a lump sum or case rate off the invoice in the first place.
"When you remove the issue of deductions, you free up an awful lot of buyer and salesperson's time so that they can concentrate on building the business rather than haggling on whether the deductions they've taken were proper or improper. That's what it is about: It's freeing up the buyer and Pillsbury sales rep to develop jointly winning strategies for growth," he says.
The third component is continuous replenishment, a process that depends on cultivated trust, since it involves vendor-managed replenishment based on the retailer's scanner data.
In pilot programs last year, Pillsbury's system improved in-stock positions and shelf freshness while reducing inventories. Walsh says the company is currently expanding continuous replenishment beginning with its line of refrigerated dough products.
The final -- but by no means least -- component at Pillsbury is category management, an area in which the company has gone far with proprietary systems and sales force training.
"Category management, if you want to distill it down, is about understanding what the consumer needs, and then doing everything you can with our partners in the trade to maximize those opportunities."
Walsh says Pillsbury gained a head start on ECR compared with some other brand marketers by starting to invest aggressively in its systems capabilities four or five years ago. "Getting MIS in line is a high priority for us, not only for the 1990s but for the next millennium," he says. "We now have a platform from which we can really start to drive customer service in a manner in which we had not been able in the past."
The next step for Pillsbury is convincing more of its customers of the benefits of those capabilities.
"The best way to resolve that is rather like we did yesterday -- by getting a group of trade people together and just letting them hear what Pillsbury can offer," says Walsh.
"Not everybody will wish to embrace those initiatives, and that's fine also. But it's pretty compelling when you introduce something like category management in the case of our sugar cookie dough or pie crust, and you get the kind of sales bumps that we've seen. Once you've got a few trophies on the wall, you get people's attention."
To the notion that Pillsbury's category management trophies -- holiday sales increments that in some recent cases reached 50% -- were "low-hanging fruit" that will not easily be equalled going forward, Walsh offers a pragmatic outlook.
"Whether it's 5% or 50 -- if I can't get the 50% I'll take the 5," he says. "Growth is hard to come by."
In addition to economic and demographic challenges, Walsh observes that consumers are growing far more selective in their purchasing decisions. "They are very savvy and they have numerous options, whether it's store formats, whether it is brand, whether it is store label or whatever.
"The most efficient systems will only get you so far," he adds. "You then have to have products that the consumer really wants. And you need to have the merchandising to really get the attention of the consumer."
Pillsbury's trade relations activities have been focused on leveraging its ECR tools so as to free its field salespeople and brokers to work more creatively with the trade. While much industry talk has focused on multidisciplinary account teams, Walsh says the company first re-engineered itself to use the teaming concept internally.
"We are organized with multifunctional teams handling each of our brands. It kind of breaks down some of the 'silos' of the functional experts. It gives a far more cohesive approach to taking our products to market," says Walsh.
Pillsbury presently uses "team captaincy," an interim approach to handling certain key accounts. "Even though we may have different sales forces -- some brokered, some direct -- we have one senior person for each of our key accounts. We all know who that person is, and if there is an issue of any particular question, or an opportunity, that is the person who deals with it," he says. So far the company has not taken the step of forming full-blown teams dedicated to each key account. "We will get to that point," Walsh says. "We are doing a lot of work on re-engineering and considering new approaches."
He cautions, however, that not all accounts are ready to work with teams. "Whatever we do, we have to be flexible enough to make sure we keep the needs of the customer uppermost in our minds," he says.
"That is why on something like ECR we are taking the approach we are taking," he says, reasoning that few retailers will probably want to take advantage of all of Pillsbury's programs at the same point in time. "But equally, at least they will have some kind of menu from which to select. Maybe after they get comfortable with the Pillsbury Co. from a certain aspect of ECR, then they will want to move on to the next issue."
If creating a separate approach for each account on the areas of best affinity seems to be a comparatively slippery way to conduct business, Walsh turns back to the basic goal.
"I don't mind if it's slippery if it gets us to increase volume. But I think we are in a period where we both have got to take some chances. And to serve customers very well we've got to earn their respect from them."
Pillsbury presently employs a direct sales force of 800 people who represent its "ambient" (shelf-stable) and chilled product lines. Field sales responsibility for Pillsbury's frozen product lines, primarily its Green Giant frozen vegetables and Haagen-Daz ice cream, are handled through a broker network.
If Pillsbury is to maximize leverage and influence with its larger accounts, that means the two sales forces must more frequently work together. That reality is evident in promotions like the Bake-Off, which is designed to benefit the entire Pillsbury and Green Giant brand families.
"We work hard at getting their hearts and minds and making sure that we are all marching to the same beat," says Walsh.
"Both the retail trade and ourselves and our distributors, we only make money when the consumer consumes. We can fool ourselves in the short term by doing big promotions that load warehouses, but increasingly we have to focus on the consumer and we have to judge ourselves based on consumer take-away. We have actually started to move in that direction with regard to incentive programs. So we are starting to change the behavior," he says. Recently the market has seen at least one pioneering attempt to compensate brokers purely on a pay-for-performance basis. Walsh suggests that greater reliance on scanner data for that purpose could come to Pillsbury in the future.
"We do have certain of their income based on performance, but not all of it. We are happy with the way that it is structured at the moment."
He sees this as an evolving situation, however, as Pillsbury works to instill its brokers with consistent goals.
"It's a challenge, but I think it's one that we have to be up to. Otherwise, you have to question whether you want to operate your brokered sales force. What it means is that we have to make sure our brokers are equally as commmitted as our direct sales force."
That means cultivating partnerships with the broker community, according to Walsh. "We feel that there are certain things that we have to furnish them with. For example, all our brokers have access to our mainframe computer. They have access to the same kinds of things that our direct sales force has. And we have supplied them with laptop computers on which they can interface with our systems. It is a responsibility that we have.
"I expect them to step up to the plate with regards to training -- constant development of their salespeople. And making sure that Pillsbury is top-of-mind in their execution priorities."
When it comes to supporting broad promotional activities like major holidays and the Bake-Off, through key accounts, Pillsbury's field people regularly make joint calls with area brokers. Walsh says retailers have been fairly receptive to this approach. "There was at first a lot of resistance within our own company. Our Green Giant brand did its thing; our Pillsbury brand did its thing. We didn't always get the appropriate level of leverage. That has definitely changed."
As Pillsbury evolves to provide closer and more customized attention to key accounts, profitability of those accounts becomes a new measure of success. Walsh says he is careful not to let his people take their eyes off the brand equity ball.
"That is an issue we face on many fronts. There is no silver bullet. Many people try to seek out one overriding measure that we judge our success by. There isn't one measure. You've got to look at the brand as equity through the eyes of the consumer. "So we do a lot of checking with our consumers on where our brands stand. How quality is perceived. Price points. Different things. So I think it is not an either-or situation. You can accomplish both."
While for many brand marketers a key aspect of trade marketing begins with managing how the trade money is spent, Walsh says he prefers to characterize Pillsbury's approach in terms of the consumer.
"We are trying to ensure that when we are investing trade marketing dollars with a certain customer, we want that to be targeted at the consumer. We recognize that our customers all have certain needs themselves. The challenge is to come up with a way which satisfies everybody's goal. That is, more product ends up being sold to the consumer.
"But there is no question that the industry -- all the industry -- has seen escalating costs in dealing with the trade. Those increases have been funded at the expense of the consumer goal."
Walsh says Pillsbury is working toward getting those trade marketing dollars to carry its consumer message.
"Also we're trying to change in step-fashion. We can't expect the accounts to just give them up over night. We need to work through to a common benefit."
The consumer focus is a persistent theme in Walsh's conversation. "I think it is a journey, not a destination. We've made a lot of inroads. Even to the point of getting as many of our head office people into the field to see what's going on. We have a tremendous consumer affairs department that is very good at tracking consumer trends. We are trying to get the whole organization focused on the consumer. But again, we're not there; we still have a ways to go," he says.
"The fact that we have to embrace is that we know we are in permanent white water. Change is constant. And people have to get comfortable with that."
What that means for Walsh is creating a framework, an environment that will allow people to grow. "Pillsbury is a company about growth. Growth of our brands, growth of our people. I think we are in good shape to compete in the next decade."