SIZE MATTERS 1999-10-04

JOHN KAROLEFSKI

RESTON, Va. -- The Association of Sales and Marketing Cos. has morphed into a leaner, feisty trade group, whose four largest members have the size and clout to sit at the same table with the biggest retailers and manufacturers in the consolidating consumer packaged-goods industry.

"Our members -- the visionaries, the movers and the shakers -- saw what was coming on the manufacturing and the retail side of the business," explains Robert Schwarze, president and chief executive officer of the ASMC, referring to the widespread consolidation that has taken place in the last few years. "If they were going to have a future and continue to add value in the supply chain, they would have to be in a position to satisfy the needs of a national -- and maybe even an international -- retailer, long-term," he says.

Consequently, the kind of geographic coverage that ASMC members provide has expanded over the last five years. In general, it evolved from single-market to multimarket to regional and, finally, national.

Of course, there are still regional members and quite a few companies that specialize in a single market, Schwarze points out. But here's the bottom line:

There are now four national broker organizations that account for more than half of the business: Acosta Sales, Jacksonville, Fla.; Advantage Sales & Marketing, Irvine, Calif.; Crossmark, Plano, Texas; and Marketing Specialists, Dallas.

There are now 986 agency members of ASMC, including corporate offices and all their branches; in 1983, there were 2,481 agency members.

The association has discontinued the trade-show part of its annual convention, scheduled for Oct. 6 to 9 in Chicago.

Instead of the expo, "we're encouraging the smaller manufacturers looking for representation to take advantage of a referral system that we've put into place, as well as to take suites and to set up meetings in advance," explains Schwarze in an interview at ASMC offices here, on the eve of the association's business conference.

Schwarze also told SN about a major transition at the association that will lead to his retirement in a little more than a year. (See Page 23.)

In assessing the new industry landscape, Schwarze says there may be a few more mergers among his members, "but I think most of our consolidating is behind us. What we're going to see now is the single-market or regional member lining up with manufacturers interested in being with that size or kind of an agency. I don't think you're going to see more massive consolidation. We've already been through that," he says.

Something else that his members have been through -- and continue to deal with -- is the demand for more store labor. Shelf resets, created largely by frequently changing category plans, combined with reduced labor supplied by the retailer, have resulted in work being dumped in the laps of sales agents.

The ASMC, not surprisingly, is opposed to this scenario. For the last few years, it has fought loud and hard to make its position known and understood.

"Asking a trained, skilled sales and marketing agent to provide free retail labor is an inefficient use of the limited dollars we have available," Schwarze said in a keynote address at last year's ASMC conference in New Orleans. "Devising complex analytical schemes over and over again at headquarters, when discipline has almost completely broken down at the shelf, is an inefficient use of everyone's money."

A year later, Schwarze has hardly calmed down.

"Retailers have to take ownership of their stores," he stresses. "They have to do things within their own shop to put things in place before they can ask other people to do all of this work."

According to Schwarze, several major food retailers last year tested programs designed to get retail merchandising work done and paid for fairly. Some tests involved a "home-store concept," in which the retailer divides work proportionately among the various vendors that supply products to its stores -- that is, according to what percentage of business each vendor represents.

"We are very pleased with the progress that we've made with Safeway, with Kroger, and with Supervalu," he reports, in the wake of their testing. "They're not quite right yet, but we're fine-tuning."

He says that some new programs are scheduled to be rolled out in the fourth quarter of this year, or maybe the beginning of next year. They will be customized for each retailer and designed to be win-win for all parties.

The ASMC continues to study the situation and issue well-documented reports to support its position. For example, preliminary results of the ASMC's latest study were released at its executive conference in August and will be highlighted in presentations at the annual meeting this month.

"Getting It Right at Retail: Understanding Costs and Activities to Improve In-Store Conditions" documents the great increase in demand for retail work, including resets, new stores and remodels. Category management has driven most of the demand, according to the study. Other factors include a surge in new items, a growing emphasis on solution selling, and store remodels resulting from mergers and acquisitions.

"We're spending in the neighborhood of a billion and a half dollars a year on resets, new product cuttings, etc. I mean, it's ridiculous," says Schwarze.

"You can say, 'Well, it's only a billion and a half dollars. That's only one half of 1% of the size of the industry.' But considering that it's us who are doing all this work, that's a lot of money. And we'd much rather be able to take that money and put it into more high-value activities, which would have bigger and better dividends. Right now, it's like opening a window and throwing money out into the wind."

Schwarze pins the blame for much of the shelf disarray on category management, the business process that essentially customizes shelf sets for stores.

"The study is allowing us to document -- for the first time -- the huge amount of waste that has taken place as a result of category management," he charges. "With all the work that was done in category management, no one looked at how much it was going to cost to implement it. And then what has made the situation that much more critical is the fact that there's no discipline at retail for the sections to stay the way that they've been set -- for all of the reasons that we know: lack of full-time employees, shorthandedness, consolidation, cutbacks, new product introductions.