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fast forwardfast tracking the future

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INTRoDUCTIoN

ExECUTIvE SUmmARy

KEy FINDINgS

manufacturer Rankings

Retailer Rankings

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8

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CoNTENTS

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INTRoDUCTIoN

Kantar retail sponsored the first annual poweranKing® survey in 1997. The survey originated from our industry benchmarking studies on category management and trade promotion management, which for the past 20 years have provided insight into industry best practices in these areas. The objective of the PoweRanking study is to research and benchmark how retailers and manufacturers view each other in the most important areas of the manufacturer-retailer relationship.

the poweranKing study identifies those retailers and manufacturers who set the standard of performance as ranked by their trading partners. This provides benchmarks for retailers and manufacturers across trade channels.

The specific goals of the research were to:

• Identify the best manufacturers and retailers, as evaluated by their trading partners

• Provide insight into what makes them “the best”

• Define the importance of key metrics between trading partners

• Highlight areas for improvement

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Customized questionnaires were developed for retailer and wholesaler respondents in food, drug, mass merchandiser, dollar, convenience and club channels and for manufacturers in food, household products, general merchandise and health & beauty care categories. These questionnaires were distributed each spring from 1997 to 2014 to personnel at all levels of management, with the assurance of total confidentiality of respondents.

over 600 manufacturer and retailer respondents participated in this year’s study. The results of the 2014 survey were compared with the results of 2012 and 2013 to determine the causes behind shifts in the rankings.

retailers were asked to rank manufacturers on criteria that fall into two broad areas:

Manufacturers were asked to rank retailers on similar criteria:

strategiC MetriCs

• Clearest company strategy

• most important consumer brands to retailers

• Best combination of growth and profitability

Business fundaMentals

• Best customer/sales teams

• most innovative marketing approach

• most helpful consumer/shopper insights; category leadership

• Best supply chain management

• Best shopper marketing programs

strategiC MetriCs

• Clearest company strategy

• Best job of branding their stores

• Projected to be Power Retailers in the next 15 years

Business fundaMentals

• Best retailer with which to do business

• Best category management/buying teams

• most innovative merchandising approach

• Best supply chain management

• Best practice category leadership

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INTRoDUCTIoN

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Results were tabulated on a two-year rolling basis, reflecting the percentage of respondents ranking each company among the top three. Additionally, follow-up qualitative interviews were conducted among a diverse group of manufacturers and retailers to provide further insight into the data.

The PoweRanking® methodology reflects mergers and acquisitions that have occurred in the past. We have consciously rolled up operations into the parent company where appropriate for this year and versus a year ago. At the same time, where retailers and manufacturers are operating largely as independent companies, they are treated as such in the data. As a dynamic monitor, the PoweRanking will continue to consolidate or separate companies as retailers perceive them.

poweranKing CoMpositesThe 2014 PoweRanking survey includes the overall PoweRanking Composite, created by weighting the three strategic rankings equally with the five business fundamental rankings (see previous page) — thus placing greater importance on the strategic rankings. This reflects the importance of sound strategy as an overall driving force in business performance.

strategiC CoMpositeThe Strategic Composite combines the three strategic measures into an overall composite to provide better insight into which manufacturers and retailers are most strategically important to their trading partners.

Business fundaMentals CoMposite The Business Fundamentals Composite combines the five fundamental areas of business (see previous page) into a composite, which reflects the retailers’ and manufacturers’ opinions of those trading partners who have the strongest organizations and personnel and provide the best tools for solid business development.

digital MarKetingBeginning in 2011, Kantar Retail added a measure for Digital marketing. given its increasing influence on retailers, manufacturers and consumers, digital is now a measure to be monitored. It is not included as part of the PoweRanking Composite.

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INTRoDUCTIoN

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over 600 manufacturer and retailer participants provided input. Respondents included all levels of retailer/wholesaler and manufacturer management. Below is an alphabetical listing of some of the leading retailer respondents.

Ahold USA Inc.Albertsons LLCAssociated Wholesale grocers, Inc.Bi-Lo HoldingsBJ’s Wholesale ClubBozzuto’s, Inc.Brookshire grocery CompanyC&S Wholesale grocersCentral grocers Cooperative, Inc.Circle KCorner StoreCostcoCvS HealthDelhaizeDollar generalExxonmobilFamily DollarFred’s Inc.giant Eaglegiant Foodgolub CorporationHEB grocery CompanyKroger Company

Lowe’s Foodsmacy’smartin’s Super marketsmeijerPetcoPilot oilRite AidSafeway, Inc.Sam’s ClubSave martSave-A-Lot, Ltd.Sears HoldingsSpartanNashStaplesSupervalu, Inc.Target CorporationTrue valueUnified grocersUnited grocersWakefern Food CorporationWalgreen CompanyWalmart Stores, Inc.Wegmans Food markets, Inc.

retailers

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INTRoDUCTIoN

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Below is an alphabetical listing of some of the leading manufacturer respondents.

3mAB InbevAbbott LaboratoriesACH Food CompaniesBayer CorporationBeiersdorfBemis manufacturing CompanyBIC CorporationBig Heart Pet BrandsBush Brothers & CompanyCadbury Adams USA LLCCampbell Soup CompanyCaterpillar Inc.Church & DwightThe Clorox Company The Coca-Cola Company Colgate-PalmoliveCombe Inc.ConAgraContinental millsCoty Inc.CrayolaDawn FoodsDean FoodsDel monte Foods, Inc.Demet’s Candy CompanyDiageoDr Pepper Snapple groupE. & J. gallo WineryElmer’s Products Inc.Energizer Holding Inc.Farmer JohnFrito-Laygeneral Electricgeneral millsgeorgia-Pacific

glaxoSmithKlineH.J. Heinz CompanyHallmarkHamilton Beach BrandsHasbroHeineken USAHelen of TroyHenkel Ag & CompanyThe Hershey CompanyHewlett-Packard Co.HmS mfg. Co.Hormel FoodsJ.m. Smucker Co.Jarden CorporationJohnson & JohnsonJohnsonville SausageKAo BrandsKellogg CompanyKeurig green mountain Kimberly-Clark CorporationKraft Foods groupLand o’LakesLEgoL’orealmarsmaybellinemcCormick & CompanymcKee FoodsmcNeil Consumer Healthcaremenasha Corporationmerckmeyer manufacturing CompanymillerCoorsmission FoodsmondelēzNestlé USA

Nippon Suisan Kaisha Ltd.Novartisocean Spray CranberriesPactivPepsiCoPerduePerfetti van melleThe Perrigo CompanyPfizerPhilipsThe Procter & gamble CompanyReckitt BenckiserRed BullReynolds Consumer ProductsRich Products CorporationRicos Products Co. Inc.SamsungS.C. Johnson & SonSeneca Foods CorporationSkyy SpiritsSouthern Wine & SpiritsSun maidSun ProductsTime Inc.Tom’s of maineTree Top Inc.Tyson FoodsUnileverUnited Sugars CorporationvF CorporationvitaCeutical LabsWarner BrothersWD-40 CompanyWelch’s FoodsWorld Kitchen

ManufaCturers

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INTRoDUCTIoN

executivesummary

fast traCKing the future

One thing that’s certain among retailers and manufacturers alike is the uncertainty around U.S. shoppers.

CHANgINg SHoPPINg BEHAvIoRS — Shoppers are making fewer trips across a smaller number of outlets — approximately a 20% decline over past six years1. It is increasingly difficult to maintain loyalty as shoppers narrow their consideration set of retailers to meet their needs. Purchase patterns are in flux as shoppers change the way they define value — e.g., convenience, health and experience.

mILLENNIALS — They have different shopping behaviors and expectations than other generations. They don’t think about meals in terms of three squares. growing up in a world of multi-tasking and constant stimuli, they demand more from brands and the store experience. There is an urgency to understand how to engage with this key group while they are forming shopping patterns and habits they will carry into peak earning and family life stages.

omNI-CHANNEL — From search to e-commerce, no one disputes the impact technology will have on the shopping experience and fundamentally how business operates. Time for talking is over — action is needed to develop new business models and capabilities for where the industry is headed.

ECoNomIC FACToRS — The income divide continues to widen among have and have-not households. The 2008 recession left a lasting impression, driving more value-seeking behaviors, and consumers continue to shop differently than they did in the past. The low-income shopper is feeling the pinch of rising consumables prices and SNAP reductions. Those with more discretionary dollars are looking for specialization that can meet their selection, personalization and experiential needs.

None of this is news. The media and analysts have been sharing these trends for some time. But now companies are seeing these changes impact their business in very tangible ways.

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“We’re looking for companies with more breadth who are able to provide that broader perspective and THoUgHT LEADERSHIP on the mACRo TRENDS and challenges.” >>l SvP gRoCERy mERCHANDISINg

Source: 1Kantar Retail ShopperScape® 2014

a need for speed and a future vision

“my data tells me what was, but suppliers can tell me what may be and where customers are going. I know where customers have come from. Suppliers are much better at UNDERSTANDINg WHERE CUSTomERS ARE movINg To.” >>l CATEgoRy mANAgER BEvERAgES

Retailers are seeking suppliers that can help them better understand and capitalize on this rapidly shifting shopper and competitive landscape. Business is not as usual, and the future doesn’t look anything like the past. Changes to the retail environment mean both retailers and manufacturers will need to adjust infrastructures that are operationally designed to meet the demands of a brick-and-mortar world.

In this dynamic retail environment, our 2014 PoweRanking® participants are looking for added value through solutions that allow them to quickly analyze data, improve decision making time and operational speed and provide a future perspective. There is a big opportunity for those who can dissect information and increase the speed and quality of analytics to rise above the competition.

This year’s study also recognizes that big is not always better. Some smaller companies that may be more nimble are reaping big wins with key retailers, leaving traditional CPg powerhouses to increasingly run the risk of getting trapped in outdated processes and paradigms.

The need for FAST FoRWARD action is now. missing or falling behind on key trends, new technologies and enhanced ways of working will limit growth and opportunity in the marketplace. Winners will be those who can act quickly and provide a futuristic view and clear action plans.

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“Some of the smaller companies are bringing BETTER THoUgHT LEADERSHIP. These smaller brands are really helping us figure out millennials and adjust our stores and assortments to win with them.”>>l gvP FooD

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faCtors to faCilitate “fast forward”

Four leadership traits arose from our 2014 PoweRanking® participants that enable a Fast Forward partner interface

eMpowerMent 1

“LEADERS are consistent, collaborative, flexible and engaged. They must have a clear understanding of our vision, understand where we INTERSECT AND ALIgN and make things happen.”>>l SvP gRoCERy mERCHANDISINg

1 eMpowerMent 2 flexiBility3 transparenCy4 antiCipation

An environment of rapid change and disruption requires not only leadership, but the permission to operate at a different level of planning and collaboration.

The “ask” is more than a call for out-of-the-box thinking. It requires more than just an open-mindedness and willing partnership. Fast action requires having the authority that allows teams to truly be actionable. It means having the right people at the table who have the power to make decisions. It means having internal approval before presenting options to a customer. It may require enabling teams to lean on a higher level of acceptable risk.

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over the past several decades, businesses have driven profits through operational efficiencies gained by leveraging mass production and servicing large-format outlets. In the new world of shopper demands for faster innovation, more variety, personalization and localization, the old models that worked in a relatively stable business environment will not cut it. In an environment of uncertainty and rapid fundamental changes, retailers and manufacturers must find ways to increase oPERATIoNAL FLExIBILITy in order to succeed.

Forward-thinking companies are exploring options that include joint distribution centers, tethered supply chains and e-commerce fulfillment models.

flexiBility2

“We don’t have a ton of room to hold products — need to get it there JUST IN TImE with full truckloads, use our DCs as mixing centers, reliable carrier networks we both know, figure out how to optimally box and mix loads for various sites... the whole logistics package from end to end.”>>l gvP gRoCERy

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TRANSPARENCy AND oPENNESS between business partners can help all parties mitigate risks. our 2014 PoweRanking® respondents addressed transparency in two key areas. The first area relates to the ability to integrate data sources and analytical capabilities to improve speed and accuracy of forecasting and analysis. There is a clear need for alignment on the data, so that “you see what we see”.

The second aspect of transparency speaks to a desire for greater sharing of long-term strategies so both partners can start to work in a more collaborative way to go where the industry is going and improve operational efficiency. A deep sharing of information, long-range calendar and innovation plans that require a high level of trust — where the right people are key.

greater transparency demands greater accountability. Think in terms of evolving to “ALWAyS-oN ACCoUNTABILITy,” where both parties equally have skin in the game. you can’t just launch a product or campaign and then walk away.

transparenCy3

“We sit around the table and develop a joint plan. There is TRANSPARENCy ARoUND BoTH oUR NEEDS, and we deliver against them together. We work together to drive joint profit. We lean in together.” >>l vP mERCHANDISINg

“We like to see suppliers BRINg A vISIoN — ‘Here is where we want to go and here is how we can get there.’” >>l vP DSD

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most best-in-class companies have established comprehensive business planning processes. There are top-to-top meetings, innovation summits and annual joint business planning sessions that acknowledge the importance of engaging the right players from Sales, marketing, Insights and Supply Chain. By and large, these are focused on a six-to-12 month window. Short term needs are often fire drills or missed opportunities. The longer term plan and vision has limited visibility.

given the changing environment, there needs to be a new process that operates both in terms of engaging for the future while meeting the demands for delivering in the now. Best of the best manufacturers are now sharing three-to-five year growth plans that include a more shopper-centric approach. Progressive retailers are also instituting more frequent planning check-ins, evolving toward a more continuous, real-time partnering model.

antiCipation4

In the past, given a more stable and predictable environment, finding common ground through collaboration was an effective way to create mutual solutions. But as the retail landscape shifts more rapidly, we are entering an era of high uncertainty. Leading trading partners must develop new infrastructures and approaches that link them more closely and allow them to move in unison as the ground shifts beneath their feet.

Winners in the marketplace will be those retailers and manufacturer/suppliers who make the leap from CoLLABoRATIoN To INTEgRATIoN. Integration means moving from point to point connections to seamless interactions working towards shared goals.

A view of best-in-class organizations points the way to move from CoLLABoRAToR To INTEgRAToR

aCtions to faCilitate “fast forward”

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Fast ForwardLeadership Traits Collaborator Integrator

Empowerment>> open mindset, willingness

to listen to new ideas and suggestions

>> Combined decisions

>> Decision making authority

Flexibility>> Accommodate

demand shifts>> Customized programs

>> on-site shared resources>> Integrated supply chains, shared DCs>> Jointly developed programs

Transparency >> Access to data/information — need to know basis

>> Sharing real-time data>> Unfiltered/unbiased data>> Sharing total shopper view

Anticipation>> Alignment on the basics;

systems, plans, metrics

>> Annual/semi-annual Joint Business Planning

>> Real-time, always-on management of the business

>> Holistic in-store/digital plan

>> Sharing of long term goals and plans