STEPS TO CATEGORY MANAGEMENT ANALYZED AT CIES

JAMES FALLON

AMSTERDAM, Netherlands (FNS) -- Category management is helping to drive profits of all products, whether classified as "winners" or "losers," but fresh strategic thinking is required for success, according to speakers at a conference here sponsored by CIES: The Food Business Forum.

The conference, "Retail Marketing in the Information Age," was the first joint module of the CIES committees on marketing and information technology and attracted 250 delegates from food retailers, manufacturers and consultants.

Category management is gaining in importance among European food retailers as they begin to implement the principles of Efficient Consumer Response. But speakers at last month's forum warned that category management requires culture changes and is not simply a matter of technology.

"All category managers like to talk about assortment and information technology but those are not the main focus," said Jan Kempenaar, unit manager of Albert Heijn BV of Zaandam, Netherlands. "In principle, there are a lot of problems getting the right information out of the system but it takes a lot of sweat and adaptation of people and procedures, too."

Albert Heijn, which operates 640 stores throughout Netherlands and has a 27% market share, began implementing category management several years ago following a restructuring of its management procedures.

Under the new structure, every category is divided into four areas -- "premium nonfood," "crown jewels," "losers" and "commodities."

"The aim is to move 'losers' to 'commodities' and 'commodities' to 'crown jewels,' " he said.

The category management approach at Casino, in Paris, is somewhat similar to Albert Heijn. Christian Couvreux, senior vice president at Casino, also spoke at the forum and said the key to category management is defining the category roles and strategies.

The 3,000-store retailer characterizes products according to opportunities, labeling them "losers," "traffic builders" or "stars."

Among "stars," for example, 19 products account for 43% of sales and 61% of profits, while in "traffic builders," 16 products account for 40% of sales and 18% of profits, Couvreux said.

The strategy adopted for each area differs, he said. With "star" products, the goal is to maximize sales with the expectation profits will follow, while with "traffic builders" the objective is to improve profitability.

Couvreux said successful category management relies heavily upon good retailer-supplier relationships, but that can vary widely if both companies do not align their strategy.

With "star" products, for example, both trading partners clearly understand goals and objectives, he said. With "traffic builders," however, where the focus is profits, the relationship becomes more of a conflict and suppliers are less willing to cooperate with retailers, Couvreux said.

Albert Heijn's Kempenaar said the company monitors category management programs closely.

"The category managers work with scorecards to measure results of category management in each category. The logistics managers work on cost parity, logistics performance and channel management and optimization," he said.

To obtain qualitative measures, the company surveys 100,000 customers twice yearly to collect feedback in 14 critical areas.

"This enables targets to be set," Kempenaar said. "Category management can be helped by qualitative information concerning the development of that category."