SURVEY LISTS TOP CATEGORY MANAGEMENT RETAIL CHAINS

DENISE ZIMMERMAN

EVANSTON, Ill. -- H.E. Butt Grocery Co., San Antonio, is viewed as the most successful U.S. retailer implementing category management today, according to a new industry survey.

Cincinnati-based Kroger and Wegmans Food Markets, Rochester, N.Y., also earned accolades and were followed by Giant Food, Landover, Md., and Wal-Mart Stores, Bentonville, Ark., in a ranking by manufacturers compiled and released this week by the Center for Retail Management at Northwestern University's J.L. Kellogg Graduate School of Management here.

Retailers also were asked to name the most effective category managers among manufacturers. Procter & Gamble, Cincinnati, topped the list, followed by Quaker Oats, Chicago; Frito-Lay, Plano, Texas; Kraft, Northfield, Ill., and Nabisco Biscuit Co., East Hanover, N.J.

All survey respondents, which included 43 retailers and 17 manufacturers, indicated there was still much progress to be made and obstacles to overcome before category management is transformed from theory to profitable practice.

Among retail survey respondents, 67% said category management is delivering a positive economic return for their companies, primarily in better product assortment and space management. Next year, retailers said they expected to begin seeing gains from more efficient promotional practices.

"I was surprised they expected to see positive returns in promotions because efficient promotion is much more difficult to achieve," said Eric Sorenson, managing director at the Center for Retail Management.

The complex area of promotions is sure to become a battleground for retailers and manufacturers as they attempt to work out an equitable way to distribute promotional funds, added Robert Blattburg, the center's executive director.

The survey also examined retailers' perception of manufacturers' strengths and weaknesses in category management and asked manufacturers to assess retailer partner performance.

Retailers said manufacturers' most significant weakness is their tendency to be "brand focused" and "self-serving." Forty-nine percent of retailers polled said that single issue is most crippling to category management success.

"A retailer really has to take ownership of this because a manufacturer does not have the best interest of the category in mind," said a Kroger category manager who did not participate in the survey but agreed with the findings. "When it comes right down to it, they are interested in selling their brand."

As an example, the category manager, who requested anonymity, noted that one national brand manufacturer recently responded to a competitor's new product introduction by pushing a major two-for-one promotion for its brand.

"They are trying to load up the consumer so they won't buy the new product," he said. "So the question is: Is that best for the category or is that best for the manufacturer?"

Blattburg noted that the brand focus problem is carried over in the type of data manufacturers provide their retailer partners.

"There is a huge problem in the kind of information a manufacturer delivers," he said. "Most of it is for the brand groups and that's not what the retailer needs. [Manufacturers] are more focused on brand switching," he said.

Manufacturer respondents acknowledged their brand focus is hindering category management programs; in fact, when asked to name their own internal obstacles, 18% of manufacturer respondents said "brand focus" was ranked in the top three. A more significant internal obstacle cited by more than half the manufacturers polled is a poor organizational understanding of category management and its benefits, as well as inadequate resources and time devoted to the initiative.

Retailers also identified their major internal obstacles and most often pointed to manpower and time constraints and well as inadequate information systems.

While 45% of retailer respondents have category plans for more than 20 product categories today, 65% of respondents hope to be at that level next year. The survey results revealed a similar pace of expansion among manufacturers: 47% of those polled today are partnering with more than 20 retailers on category management and 67% intend to be at that level next year.