PERISHABLES PROFITS TIED TO DATA MANAGEMENT

NANCY BRUMBACK

CHICAGO (FNS) -- Putting aside their reluctance, retailers will have to develop uniform coding for perishables if they want to reap the most rewards from their scan data and implement category management, according to a noted retail industry consultant.

Perishables present "a huge opportunity, but the problem is the data," said Robert C. Blattberg, a partner in Blattberg, Chaney & Associates, a Chicago marketing consulting firm, and executive director of the Center for Retail Management at Northwestern University's Kellogg Graduate School of Management.

He delivered the keynote address at a two-day seminar here on category management for perishables sponsored by the Food Marketing Institute, the National Cattlemen's Beef Association, the Produce Marketing Association and other perishables trade associations.

The perishables departments, Blattberg noted, are "the true destination categories" for most supermarket chains and a way supermarkets can differentiate themselves from each other and from such competitors as discount chain supercenters. "Perishables is where category management should have started," he said.

Yet only 22.2% of retailers surveyed last year by the NCBA were using category management in their perishables departments, versus 77.8% in dry grocery, he pointed out. A major reason, he added, is the UPC on grocery products, making possible uniform data across the industry.

Among the supermarkets developing extensive perishables category management, said Blattberg, are Kroger Co., with "category management training for the entire perishables staff;" Safeway, which is "rolling out the same process used in dry grocery to all perishable categories," and Wegmans.

Category management can, and should, be applied to perishables, said Blattberg, but with modifications.

He noted there are some similarities between packaged goods and perishables _ definable categories, the need to focus on the consumer, the likelihood of "significant payback" from category plans and particularly, "economic opportunities in logistics."

"Which has greater opportunities for improvements in logistics, packaged goods or perishables?" he asked. "Cutting shrink is a big, big opportunity."

The problems in adapting grocery category management techniques to perishables include lack of data; different tactical decisions, particularly because of varying costs over time and spoilage, and little support or pressure from suppliers.

The ideal solution to the data problem would be a uniform code, Blattberg said, noting that at present retailers that bar-code most perishables products do so with their own systems, and even the names for products vary by chain and by region of the country, making any standard industry data almost impossible to compile.

The absence of data should not delay development of category management plans, however, Blattberg warned. "You cannot wait until you have a perfect data set. Get started and the date will begin to evolve."

In the interim, he said, chains can use data from government sources, supplier information on shipments of specific products, industry publications, and industry trade groups and commodity associations to develop category management plans.

Given the spoilage factor in perishables, the tactical strategies in category management in these departments should focus on price, planogramming, promotion and assortment.

"You may not be able to set prices exactly" with fluctuating costs, "but you can decide what you are trying to do with the prices you set" in a category, he noted. Price strategy should deal with such issues as "how to price different cuts of meat from the same primal to insure the same sales rate" for all cuts.

Planning promotions is critical in perishables, he said, to avoid ordering excess products and having them spoil. "I'd put all my forecasting resources into perishables," Blattberg said.

He suggested category management might provide a tool for retailers to make the supply side more effective and further reduce shrink.

Category management in perishables can aid in developing "strategic planograms" that develop a strategy for case layout without specifically locating products, since availability changes with the seasons and other factors.

In assessing their perishables departments, Blattberg indicated retailers must also add "information workers" -- well-trained staff -- to answer customer questions about unfamiliar products.

Perishables departments also need to educate consumers about quality designations, perhaps "developing more detailed quality designations to insure a consistent experience with the product."

"Do you think your customers know the difference between 'choice' and 'select' grades of meat? They probably think 'select' means the store selected this product for me," Blattberg said.

Category management in perishables, provided it is effectively executed at the store level, can increase available data and remove some of the subjectivity from perishables planning, he noted. "It can help retailers understand spoilage and costs."

Other benefits are a focus on the consumer and clear strategies for retailers and suppliers to follow. Blattberg also emphasized that a supermarket's frequent-shopper program can and should be linked to category management.

By doing that, "you can determine if your best shoppers are buying in your produce or meat departments, and how to merchandise to them."

"At a fundamental level, a store can identify the good customers who don't buy certain perishables at that store" and work on ways to change that, Blattberg stated.

The combination can also help pinpoint cross-merchandising opportunities -- for example, not just spaghetti with ground beef, but Italian bread and salad ingredients as well, he noted.