SHELF READY PACKAGING (SRPSHELF READY PACKAGING (SRP)) ––THE FUTURE OF RUSSIAN RETAILTHE FUTURE OF RUSSIAN RETAIL

Galant AlexanderMerchandising head of discounter format

Lapenok SergeyLapenok SergeyMarketing managerSCA Packaging

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SRP. WHAT IS IT?

Transport package that

1.Meets ergonomic requirements of the retailer;

2 E t2.Easy to open;3.Customer friendly design;4.Easy to ID;4.Easy to ID;5.Easy to dispose;

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p. 3SCA Packaging St. Petersburg3

p. 4SCA Packaging St. Petersburg4

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EVOLUTION IN SHELF READY PACKAGING

Non SRPCases (0201)

1st gen. SRPCases with

2nd gen. SRPTwo piece

Dynamic SRPProduct in frontCases (0201)

Wraps (0406)

Cases with perforationWraps with perforation

Two piece boxesTray & lid

Product in frontGravityAlways visible

perforation No re-work

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SRP DEVELOPMENT IN FMCG SECTOR IN EUROPE

2005 2010% annual growth

l 2 % l 2 %mln, m2 % mln, m2 %

SRP 7 064 40 5 9 670 47 6 6 2SRP 7 064 40,5 9 670 47,6 6,2

Conventional packaging 10 379 59,5 10 645 52,4 0,2packaging

Total 17 443 100 20 315 100 2,9

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RETAIL COSTS

Stock keeping15%

Receiving15%

Shelf service30%

Service5%

Cashier25%

OH 10%

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Replenishing shelves is often close to 20% of total cost

THE TARGET

OUR TARGETOUR TARGETOPEX reduction in terms of payrollp y

Out of stock reduction

Feeling of wide choice despite limitedFeeling of wide choice despite limited assortment

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MODERN GROCERY DISTRIBUTION

The discount channel to benefit from the focus on value/price

The discount channel is set for the strongest growth.

Global: Store Number Growth by Channel, 2009-2011

2009 saw strong discount store growth in the key markets of Europe and North America.

Hypermarkets will see relatively low growthHypermarkets will see relatively low growth due to saturated markets, the high cost of investment per store and growing pressure on non-food sales.

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EUROPEAN DISCOUNTERS PRACTICE

80% SKU in SRP→

F li f id h i d i• Feeling of wide choice despite limited assortment (1,5-2 th. SKU);

• Store looks colorful

• Minimal staff needed for shelving

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TOP10 RETAIL CHAINS IN RUSSIA

NameSales

mln. RUR Growth 09 / 08,

%Market share,

%Stores

quantity

X5 366,777 +21.6 5.0 1,923

Magnit 165,999 +24.5 2.3 3,197

Auchan 109,573 +25.1 1.5 64

Kopeyka 65,762 +25.8 0.9 659

Dixy 60,685 +27.1 0.8 638

Lenta 55,600 +9.4 0.8 35

Vi t i 50 111 22 1 0 7 254Victoriya 50,111 +22.1 0.7 254

7 Kontinent 40,281 +20.9 0.5 143

Okey 40 171 +37 0 0 5 47Okey 40,171 +37.0 0.5 47

Real (Metro Group) 15,036 -2.6 0.2 15

Joint projects with SCA Packaging Russia

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MANUFACTURER VS. RETAILER. PROBLEMS

LACK OF INTERACTION BETWEEN MANUFACTURERS AND RETAILERS IN TERMS OF TRANSPORT PACKAGING

Large one-off investments needed to implement SRP

Not all manufacturers realize d t f SRP

Lack of SRP manufacturers on the market

advantages of SRP

Lack of experience

Retailers are not consolidated

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MANUFACTURER VS. RETAILER. PROBLEMS

What are the Key Barriers in Adopting RRP Across the Industry?

67,4%

62,5%

63,8%

64,8%

Supply chain costs(including production)

Lack of commonstandards

58,3%

48,6%

45,7%

46,7%

Different shelf sizez

Implementation costs

29,2%

52,1%

25,7%

36,2%

Packaging redesign

Equipment costs

7,6%

20,1%

12,4%

20,0%

Shopper disapproval

Reluctance to particpate

14,6%15,2%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Other20072006

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PACKAGING PROBLEMS IN RETAIL

SRP imitated by merchandisers

Other supplier's/producer’s packaging is used

Product damage when opening package

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PACKAGE COMPARISON

RUSSIAN MADE -

• Упаковка бурая, безликая. Hard to find the product in DC;ур p• No design, no colour;• Упаковка хрупкая, мятая;• Hard to open;• Doesn’t fit the shelf;

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PACKAGING PROBLEMS IN RETAIL

SRP imitated by merchandisers

Other supplier's/producer’s packaging is used

Product damage when opening package

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RETAILERS ADVANTAGES

OOS andOOS and OOD reductionOOD reductionOPEX REDUCTIONOPEX REDUCTION

Easy to IDEasy to IDEasy shelvingEasy shelving

Feeling of Feeling of

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E i d i iE i d i i t kt k

RETAILERS ADVANTAGES. MIX BOX

Wider assortment on the same Wider assortment on the same spacespace

Easier goods receivingEasier goods receiving, , stock stock takingtaking, , product IDproduct ID

All tastes are All tastes are blocked togetherblocked together

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MANUFACTURER’S ADVANTAGE

Guaranteed facingGuaranteed facing BrandBrand--block creationblock creation

Brand promotionBrand promotion Face to customersFace to customers

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MANUFACTURER’S ADVANTAGE

Advertising space ~18 м2 Advertising space ~0 5 м2Advertising space 18 м2~30 000 RUR/ monthTotal: ~ 1670 RUR/m2

Advertising space 0,5 м2~134 RUR/monthTotal: ~268 RUR/m2

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MANUFACTURER’S ADVANTAGE

Merchandisers costs reductionMerchandisers costs reduction

dOOS reduction

Easy to ID

Shrinkage reduction

Easy to make a display

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PRIVATE LABEL

PRIVATE LABEL –h b l f lis the best example of SRP implementation

SRP usage achieves 80 100% for goods under PL among WestSRP usage achieves 80-100% for goods under PL among West European retailers (Carrefour, TESCO, Aldi and others).

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PRIVATE LABEL

• X5: Plans to increase PL share up to 30-50% in the medium term.

• METRO GROUP: Plans to increase PL share from 8% up to 10-11% by 2012 year.

• MAGNIT: Plans to increase PL share up to 20% by 2015 year.

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SHELF READY PACKAGING

SCA Packaging together with retailers and suppliers pplaunched a project to implement SRP

ConsumerProducer Retailer

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SHELF READY PACKAGING

RETAILER

PROBLEM SOLVINGPROBLEM SOLVINGSUPPLIER SUPPLIER

SCA PACKAGING

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PROJECT TEAM

Sales manager

Designer

Merchandising managerMerchandising manager

Category managerRetailer

Key account manager

Logistics manager and/or purchasingSupplier Logistics manager and/or purchasing manager

Brand manager

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PARTICIPANTS AND THEIR INPUT TO PROCESS

Retailer Producer SCA

SRP proven designsing

CostsResponsibility for implementation

Customized shapes and graphicsm s

olvi

Quantity of products in a box

Productinformation

Customized shapes and graphics

oble

m

SCA tools

Pro

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TOOLSОптимальное размещениепродукции

• Cape

Дизайнерские программы

• Artios CAD

Ad b CS

Программа расчета прочности коробки

SAM• Adobe CS • SAM

Во время проведения совместных с клиентамиклиентами семинаров мы используем логистический

Библиотека готовых решений

• Midas

3-D визуализация

• ImagineПлоттерлогистическийподход и собственные средства

• Midas

проектирования

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STREAMLINING THE DECISION PROCESS

MANUFACTURERRETAILER

SPEEDSPEEDSHOPPER

SPEEDSPEED

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Costs afterCosts beforeCosts after…Costs before…

12000

14000

12000

14000

8000

10000

8000

10000

6000

8000

6000

8000

2000

4000

2000

4000

0Price per

secondaryPackagingprocess at

Primarydistribution

Storage andhandling at DC

RetailerDistribution

Store logistics Total cost0

Price persecondary

Packagingprocess at

Primarydistribution

Storage andhandling at DC

RetailerDistribution

Store logistics Total cost

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pack customer sitepack customer site

SRP IMPLEMENTATION

Before… …after

While cost for packaging increased by 76 000 RUR, return losses decreased by 1 500 000 RUR per month.

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FIRST RESULTS

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SUMMARY

1. Mutual advantages for retailers and manufacturers. SRP provides instant result;

2. SRP projects with category leaders, holders of world’s best

provides instant result;

p j g y ,practice-

3. Package requirements are listed in PL tendering terms and conditions

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LET’S DO IT!LET S DO IT!Our ergonomic requirements

DEPTH max 40 CM

WIDTH max 30 CM

HEIGHT max 30 CM

THANK YOU!THANK YOU!

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