YOUR PAYMENT, MY CAPTAIN?

David Merrefield

When is a category captain not a category captain, but a cash cow? It's when a retailer requires a manufacturer to produce $10,000 -- and sums of up to $100,000 have been mentioned -- to "captain," or lead, a segment of a retailer's category-management effort.

Maybe the foregoing question-and-answer exercise poses the issue a little too starkly, but there's no doubt that more and more light is beginning to shine on the previously obscure captaincy-fee matter, and that the fledgling practice has all the potential to dash cold water on the productive notion of retailer-manufacturer partnering.

The captaincy payment comes up when a retailer notices that it costs quite a bit of money to partner with a vendor to rationalize a category in ways that only category-management analysis can accomplish. Doubtless retailers recognize that both sides of the retailer-vendor partnership will be eventual winners, but a few decide that the prospect of an eventual payoff is indistinct. So they put the arm on a vendor to help defray the cost of, say, technology required for category management or the cost of hiring a consultant to make it all happen. Maybe some retailers also see a profit center, as easily can happen with ad hoc allowances. In any case, it's often the second- or third-tier vendors that actually pay the fee; stronger manufacturers generally have reason to resist.

The delicate matter of retailers charging for category captainships got one of its initial airings in a groundbreaking news article written by James Tenser, managing editor of Brand Marketing, for last month's issue. Brand Marketing is a supplemental monthly publication to Supermarket News. The subject won another mention in this week's issue of SN, as you'll see by reading the news article on Page 31 that is based on an interview with C. Manly Molpus, president and chief executive officer of Grocery Manufacturers of America. GMA's annual executive conference is now under way at the Greenbrier resort in White Sulphur Springs, W.Va. It runs through tomorrow.

As might be expected, Manly is against the idea that vendors should be required to pay retailers for the right to help them rationalize their product offerings. But because he made the expected response to a question from an SN editor, it doesn't follow that the answer is diminished in weight: Manly is quite correct to point out that such a payment requirement undermines fundamentals of Efficient Consumer Response. "The fundamental reason to move into these elements of ECR is [to facilitate] both partners' understanding of the value of working together to reduce costs so they both become more efficient and more profitable and serve the consumer better. That should drive partnerships, rather than [a requirement to] buy your way into a partnership."

Let's hope the partnership-for-profit whimsy -- or even a perceived necessity to defray actual costs -- represented by captaincy fees can be put to rest before it establishes so strong a foothold it stamps out much of the value of partnering.