MANUFACTURERS SHIFTING TO THIRD-PARTY NATIONAL FIELD SALES PROVIDERS

JAMES TENSER

NEW YORK -- In an unprecedented surge of activity, a diverse group of brand marketers are contracting third-party retail service providers for field sales and merchandising functions on a national basis.

While this trend is hardly limited to manufacturers in the soap and household cleaner aisle, it is especially pronounced there. Competitors Lever Bros., Benckiser Consumer Products, Procter & Gamble, Dial Corp., Colgate-Palmolive and S.C. Johnson & Son have all either expanded previous relationships or entered into new national contracts with third-party merchandising service providers in recent weeks or months.

Similar new contracts either have been signed or negotiated at Ralston Purina, Hormel, Scott Paper and Nestle Beverage Co., among others, said sources in the industry.

Their decisions have come at a time when Efficient Consumer Response is driving manufacturers to restructure or reduce the size of their sales forces in search of greater economies and more effective store coverage:

Lever's new contract, which coincides with a restructuring that will cut one-third of its 850-member sales force, became effective May 1.

Benckiser went to a national contract on Feb. 1 for its supermarket business and on March 1 for its mass merchandising and chain drug store segments. The company is executing a major sales force re-engineering.

Ralston Purina, which just cut its sales force by 125 people, entered into a contract for third-party retail services effective April 1.

Dial Corp. signed a national contract concurrent with its sales force restructuring at the first of this year.

Linked to many of these events is PIA Merchandising Co., an Irvine, Calif.-based firm that provides

national retail coverage for brand marketers. The coverage ranges from shelf sets and schematics to cut-ins, display execution and field selling. PIA won the recent contracts from Lever, Ralston, Dial and Benckiser. It also has ongoing relationships with Colgate and S.C. Johnson, and had a relationship with P&G that lasted two years.

"We have been with them for seven years [on a regional or project basis]," said William Rodgers, director of sales development at Benckiser. "But the national contract is new."

Benckiser reduced its sales force in January, eliminating its direct sales function and transforming its reps into business development managers, Rodgers said.

"Our focus will be on the headquarters side," he told Brand Marketing. "PIA is now our main merchandising arm in the field, and they are doing selling for us as well."

For Dial, the main objective of contracting PIA was not to save costs, said Richard Alt, vice president of national accounts and trade relations, but gain coverage. "It is coverage, along with their planogramming," he said. "We want to make sure that our brands are well-represented the way they should be at the point of sale."

Alt said he agreed with industry sources who estimated that current execution rates for in-store merchandising programs are astonishingly low -- as few as 5% to 10% of stores in some cases.

Rodgers of Benckiser concurred, "With PIA, we have a 22,000 store universe covered entirely in six weeks. On our own trying to cover 22,000 stores, we were barely getting half of them done on an acceptable frequency basis. Many were only visited twice a year."

Procter & Gamble, which industry insiders said has used a network of part-time in-store merchandisers for a decade or more, has re-engineered its sales force in the past year as well. It reportedly decided earlier this year to review a relationship with PIA which was about two years old.

Following a systematic review of 20 service providers, P&G selected Spar Marketing, a unit of Spar Group, Tarrytown, N.Y., as its third-party service provider for 25,000 retail stores covering most of the United States. In the Southeast, P&G has reportedly retained Pims, a regional retail service provider.

A source close to Colgate-Palmolive confirmed its relationship with PIA but would not elaborate. However, other observers said that it was the Colgate contract that provided the basis for PIA to begin expanding its network on a national basis two years ago. S.C. Johnson signed on soon afterwards, creating an immediate advantage of scale.

"We currently represent 200 manufacturers across nearly all supermarket categories except perhaps highly perishable ones like milk or bread," said Clint Owens, chief executive officer of PIA. Currently about "a dozen or 15" of those clients have retained PIA on a national or near national basis, he added.

Owens bought PIA, then a business focused on the southwest, in 1988. At the time, he said, he had a vision of expanding the company nationally, a goal that was essentially achieved about a year ago. Only Alaska and Hawaii remain to be opened up later this year, he said.

"Our timing has been superb," he said referring to the wave of sales force restructurings sweeping the industry since the ECR initiative has begun to take hold. "We are hiring outstanding people who were formerly with consumer packaged goods companies."

With new hires being made daily, PIA's current full-time field force will number about 3,000 by mid-year, Owens predicted. Many of those individuals arrive highly qualified, from positions at major brand marketers.

"I see our services evolving into providing headquarters coverage at secondary accounts, wholesalers, independent groups, while the manufacturers will be putting teams against their top 100 accounts," he said.

Spar Merchandising is one of very few service companies besides PIA presently capable of providing nationwide supermarket coverage for brand marketers. Bob Brown, CEO of Spar Group, said his company's clients now number about 70 manufacturers.

"Ten years ago manufacturers never had an alternative way to do in-store merchandising," he said. Third-party field forces provide "a new structure in the business, an option that was not available before."

Those options are evolving rapidly, said Tom Palumbo, vice president of sales for Powerforce, a Chicago-based service organization that also has been vying for new business among brand marketers. Through its network of part-time personnel, Powerforce provides in-store services in 250 markets to numerous manufacturers, including Lever -- at least until recently.

"The retailer wants to reduce product-handling costs. The manufacturer wants to reduce sales operations costs," Palumbo said, observing how that puts a squeeze on mature brands competing in mature categories for market share.

Powerforce can offer economies through its use of a predominantly part-time work force for most in-store merchandising work. "We should be like an extension of their sales organization," he said.

"Why go to service merchandisers and not brokers?" said William Wyman, president of Rockwell Consulting, Ridgefield, Conn. "Uniformity of management across many markets nationally may be one reason, rather than choose the best broker in each market and wind up with 26 or 70 different locations to manage."