TIME AND CASH NEEDED FOR CATEGORY MANAGEMENT: PANEL

AMY I. STICKEL

DALLAS -- The means to gather data have been developed, the models are available and the software exists. But produce executives who want to launch a serious foray into category management need to invest money and time to compile the information that will make the concept work.

Too few retail chains have made that commitment, according to a panel of speakers at the FreshTech '96 conference, held here earlier this month.

"The problem is not a lack of tools, but a lack of data," said Mark Degner, director of trade services for Information Resources Inc., Chicago.

Many industry members have always relied more on instinct than information, according to Steve Ahlberg, vice president of member programs for the Produce Marketing Association, Newark, Del., which sponsored the conference. "We have traditionally been a gut-based industry," he said.

"With the advent of generic [Universal Price Codes], with the advent of price look-up codes, we can generate data that's meaningful about what the customer really wants to buy."

According to Degner, the so-called "Information Revolution" could continue unabated for another decade.

"We are in a time of unprecedented change in terms of information," he said. "There is no hint that this is going to change soon."

In practical terms, that means prices for technology will go down, he said. For example, a Pentium computer that costs $2,500 now will cost $19 for comparable equipment in 2006.

Besides UPCs and PLUs, hardware and software necessary to compile and process the data are becoming more widely available and affordable, according to other panelists.

While the concept of category management is similar in produce and grocery, the applications are different, according to Bruce Axtman, vice president of Willard Bishop Consulting in Barrington, Ill.

To bridge the information gap, the produce industry needs access to microdata, Axtman explained; that is, information on a daily basis, for particular items. A successful category management plan also requires information about movement, retail and cost.

The grocery side of the business can access that sort of information, and produce needs it as well, he said. "Category management is valid and doable in perishables, but I think it's going to take a new fresh approach, an approach that's significantly different from what's going on on the [grocery] side," he said.

Comparative data is also necessary, to judge what individual retailers are doing compared to a composite group of similar retailers. Using relatively inexpensive and widely available software, such as Microsoft Corp.'s Excel, Willard Bishop is compiling data on shipments and point-of-sale. That allows the consulting firm to develop composite data from a range of retailers, Axtman said. Category segment reports, shrink reports, space productivity and promotional analysis can be done with data, once it is gathered, he said.

He echoed colleagues in emphasizing that too often information isn't gathered at all, a major hurdle for the industry to overcome.

"One of the limitations we keep going back to is that we're having a hard time getting access to quality data on a timely basis," said Axtman. Produce executives are still dealing with understanding product mix, promotional planning, retail pricing, merchandising and space management.

Axtman outlined seven key steps in implementing a category management program: conducting an internal assessment, conducting an external assessment, forming a category management vision, working on tools and capabilities development, initiating partner participation, conducting category reviews and developing category plans. Matt Wineinger, director of consumer marketing and brand development for Gargiulo Farms, Naples, Fla., offered an example of conducting a category review for tomatoes. Gargiulo is one supplier involved in category management partnerships with retail chains.

Like other suppliers who wish to form partnerships with retailers, Gargiulo is working to grow the entire category, not just its own brand tomato, he said. "We've seen very good cooperation from retailers," he said. Wineinger used a hypothetical chain as an example.

It's important to dedicate a person to work on category management, he said. In the case of Gargiulo, the grower-shipper outsourced those responsibilities to Willard Bishop.

The category review is the first step, he said.

"The review helps us understand what is currently happening in the marketplace," he said. That involves tracking data through the last quarter, to see what sold tomatoes and what didn't. The review consists of comparing a chain's dollar sales, gross profits, pounds sold, space allocation and weekly sales to a composite group of retailers. "The larger the composite group, the better," he said. "You need to be sure your comparisons are valid. Using data derived from PLUs, it's possible to break the tomato category down into different varieties. Category managers can use different comparisons, from individual varieties to designated category comparisons such as "hot-house" and "mature greens," he said.

"Once you've got the data, you can break it any way you want," Wineinger said. Unfortunately, generic PLUs do not allow for information about different suppliers, he said. "That's one drawback. Ultimately, we will need that information," Wineinger said.