COUPON CONNECTIONS

Carol Angrisani

Kroger, Stop & Shop, Albertsons and other retailers are increasingly partnering with manufacturer coupon programs to drive product movement of cereal, frozens and other key Center Store categories that have come under attack from other channels, according to a new report.

Over the past three years, co-marketing freestanding insert coupons -- manufacturer-funded coupons that feature a retailer identifier such as a logo, banner or loyalty card image on the same page or next to a manufacturer coupon and brand message -- grew at an average annual rate of 54%, according to a white paper from Marx Promotion Intelligence, Minneapolis, which tracks FSI coupon activity. Marx is a division of TNS Media, New York, a provider of advertising and marketing information.

Ahold USA's Stop & Shop/Giant-Landover division, Quincy, Mass., uses co-marketing FSIs because they produce a positive return on investment, said Amy Murphy, the retailer's merchandising program manager.

"These types of coupons have a very high circulation, allowing us to promote our brand in a large number of households," Murphy told SN.

The growing tendency of shoppers to pick up everyday items in nontraditional food stores has pushed retailers to ramp up coupon activity in Center Store categories, observers said.

"Items you could once find only in a grocery store can now be found in a growing number of venues, including department stores, drug stores and convenience stores," Murphy said.

Co-marketing FSI coupons emphasize shopper savings, showing a retail price reduction, manufacturer-sponsored coupon and "final cost."

"This allows for a prominent advertising message of value and savings to be conveyed to the consumer, while reinforcing the connectivity between the brand and retailer," the white paper says.

Americans today are clipping fewer coupons. Redemption declined 26.6% over the past four years, to 3.3 billion in 2004, according to Deerfield, Ill.-based NCH Marketing Services, which settles coupons.

Still, one observer sees benefits of the marketing tactic for both parties. Don Stuart, a partner at Cannondale Associates, Wilton, Conn., a sales and marketing consulting firm, said that for retailers, co-marketing FSIs represent free exposure. They won't significantly boost coupon redemption for manufacturers, but they can be effective for manufacturers if their primary goal is to drive retailer support, Stuart said.

"There will only be a marginal improvement in redemption," he said.

Still, at a time when coupon redemption is sliding, co-marketing makes sense, he said. "It shows that manufacturers and retailers are taking a more holistic view of what they can do to change consumer behavior and stimulate purchase."

Co-marketing FSIs grew 21% to 5.4 billion pages in 2004. Dry grocery, excluding cereal and beverages, was the main area of interest, representing 1.7 billion pages, a 36% rise. Since 2001, dry-grocery participation has grown by 1.2 billion pages, a 240% increase. (Health care was another popular segment, climbing 29% in 2004 to 1.4 billion pages.)

While the tactic is being used less for household products, accounting for 865 million pages in 2004, a 32% slide from 2003, other Center Store categories posted significant page increases.

Cereal was the largest growth area, with about 237 million pages in 2004, a 103% jump. Frozens also got plenty of notice, with 1.2 billion pages, up 23%.

Retailer involvement in FSIs took off in 2000 as a way for companies to differentiate themselves in the food-retailing marketplace, said Andy Rumpelt, vice president of business development and marketing, Marx Promotion Intelligence.

"Co-marketing promotions allow grocery retailers to achieve key goals, such as maximizing loyalty program usage, increasing volume and building brand awareness and equity," Rumpelt said. "The bottom line is to make shoppers aware of good deals and drive shoppers to the store."

Last year, 150 retail banners used the tool, an 11% increase from 2003.

Grocery retailers are participating in co-marketing FSIs more frequently throughout the year. In 2004, the top 25 retail banners with the highest co-marketing frequency participated in co-marketing events in about 67% of the weeks with FSI activity, vs. 36% in 2001.

Seventeen banners, including Meijer, Publix Super Markets and Bigg's, increased their frequency of participation more than 100% from 2003 to 2004.

Cincinnati-based Kroger dominates the co-marketing FSI business in terms of frequency and page participation.

Kroger represented eight of the Top 10 retail banners with the highest frequency rate last year. The Kroger banner appeared in 43 of the 45 standard FSI drops in 2004 and appeared on more than 1.7 billion FSI pages in 2004.

After Kroger, the remaining Top 10 banners in frequency, from biggest to smallest, were Ralphs, King Soopers, Fry's Food & Drug, Dillon's, Smith's, Fry's Marketplace, Giant-Landover, City Market and Albertsons. All but Giant and Albertsons are Kroger banners.

Kroger and Albertsons did not respond to SN's requests for comment.

Looking at page participation, Smith's and Albertsons increased their activity the most in 2004, upping the number of pages by 315% and 86%, respectively. CVS was the only Top 10 retailer to post a page decrease (-16%).

Stop & Shop/Giant uses the tactic because co-marketing FSIs produce higher redemption rates than other couponing methods, Murphy said.

"It gives us a competitive edge," she said.

Since 60% of households use coupons to plan their shopping lists, co-marketing FSIs can attract more customers to the store, said Amber Gadsby, FSI product manager for Valassis Communications in Livonia, Mich., a marketing services company that provides co-marketing FSIs.

"[Co-marketing FSIs] reach consumers at decision points of where to shop," she said.

Along with retailers, manufacturers are relying on co-marketing FSIs more than before. In 2004, 186 manufacturers used the tool, up 32% from 2003. The Top 10 manufacturers were Altria Group (parent of Kraft Foods and Philip Morris), Gillette, Unilever, Procter & Gamble, Nestle, Johnson & Johnson, ConAgra, Colgate-Palmolive, Reckitt Benckiser and Campbell Soup.

Johnson & Johnson and Reckitt Benckiser had the largest growth in pages, 151% and 138%, respectively. Activity from Procter & Gamble, meanwhile, slipped the most (-49%), perhaps a result of its focus on brandSaver, a solo FSI, or a separate FSI booklet comprising solely P&G products.

Of 69 new manufacturer participants, most were companies with smaller sales volumes compared to the big consumer packaged goods firms. Co-marketing FSIs help such companies -- which often have less shelf space and trade dollars -- gain retailer display and merchandising support, according to the report.

Along with the number of manufacturers, the rate of manufacturer participation also increased. The top 25 manufacturers with the highest frequency ran co-marketing promotions in more than 32% of the 45 weekly FSI drops in 2004, up from 14% in 2001.

The report attributes the strong manufacturer participation to the fact that CPG companies want to break through the promotional clutter.

"Through the use of co-marketing promotions, manufacturers have found an effective way to differentiate their FSI coupon promotions, drive sales, build brand equity and maximize trade dollars through increased merchandising opportunities like displays and in-store features," Rumpelt said.

Co-marketing programs are effective and will continue to grow, predicted Lorraine Gallaher, marketing director, CMS, Winston-Salem, N.C., a provider of promotion management solutions.

"They work because they communicate to the consumer why certain retailers offer the best value," Gallaher said.

CPG MARKDOWNS

Top 10 Co-Marketing FSI Manufacturers

Johnson & Johnson and Reckitt Benckiser, parent of the Lysol and Spray'n Wash brands, more than doubled their FSI page participation in 2004.

Manufacturer: % Change in FSI Page Participation

1. Altria Group: 46%

2. Gillette: -2%

3. Unilever: 5%

4. Procter & Gamble -49%

5. Nestle: 75%

6. Johnson & Johnson: 151%

7. ConAgra: 25%

8. Colgate-Palmolive: 95%

9. Reckitt Benckiser: 138%

10. Campbell Soup: 23%

Source: Marx Promotion Intelligence

COUPON CONFIDENCE

Top 10 Retail Banners by Page Participation

Smith's increased its involvement in FSIs more than any other retailer in 2004, while CVS used the tactic least among the Top 10.

Retail Banner: % Change (2004 vs. 2003)

1. Kroger: 14%

2. Albertsons: 86%

3. Ralphs: 25%

4. King Soopers: 21%

5. CVS: -16%

6. Fry's Food & Drug: 28%

7. Fry's Marketplace: 24%

8. Stop & Shop: 27%

9. Giant-Landover: 3%

10. Smith's: 315%

Source: Marx Promotion Intelligence

AISLE ACTIVITY

FSI Page Participation by Product Area

FSI activity is growing in most areas of the Center Store, except household products.

Segment: FSI Pages (2004); % Growth

Cereal: 237.0 million; 103%

Other Dry Grocery: 1.7 billion; 36%

Frozens: 1.2 billion; 23%

Shelf-Stable Beverages: 665.0 million; 11%

Household Products: 865.0 million; -32%

Source: Marx Promotion Intelligence

SUPERMARKET SAVINGS

Top 10 Co-Marketing FSI Retailers

Kroger was the most frequent user of co-branded FSIs in 2004.

Retailer: No. of weeks running FSIs (2004)

1. Kroger: 43

2. Ralphs: 42

3. King Soopers: 39

4. Fry's Food & Drug: 38

5. Dillon's: 37

6. Smith's Food & Drug: 37

7. Fry's Marketplace: 37

8. Giant-Landover: 35

9. City Market: 34

10. Albertsons: 34

Source: Marx Promotion Intelligence