shifting gears - kantar...shifting gears the 5 gears of growth in a post-cost-cutting era 2018:...
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SHIFTING GEARSThe 5 Gears of Growth in a Post-Cost-Cutting Era
US 2018
Established in 1997
"Leaders who have shifted their mindset from cost-cutting to investment for the future are perceived as successfully driving both their top and bottom lines."
A Growth Company has an investment mindset because it has confidence in its strategy, brands, and people to achieve real growth. It can be confident because it has identified the right insights, allocated resources appropriately, and achieved strategic intimacy with its trading partners.
Gear
Stage Starting Moving Cruising Passing Racing
5-C Focus Core Consumer Customer Commerce Community
Action Fulfillment Obsession Connection Enabling Technology Commitment
What it Takes Grit Passion Passion Perseverance Perseverance
st nd rd th th
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The 5-Speed Growth Gearbox
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Introduction................................................................................05
Executive Summary.....................................................................10
2018 Results (Available in Full Report)
Manufacturer Rankings...........................................................20
Retailer Rankings....................................................................36
In This Issue
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The survey originated from our industry benchmarking studies on category management and trade promotion management, which for the past 22 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 are 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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Introduction
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Customized questionnaires were developed for retailer and wholesaler respondents in food, drug, mass merchandise, dollar, convenience, and club channels, as well as for manufacturers in food, household products, general merchandise, and health & beauty care categories. These questionnaires are distributed every spring from 1997 to 2018 to personnel at all levels of management, with the assurance of total confidentiality of respondents.
Over 444 manufacturer and retailer respondents participated in this year’s study. The results of the 2018 survey were compared with the results of 2016 and 2017 to determine the causes behind shifts in the rankings.
Retailers were asked to rank manufacturers on criteria that fall into two broad areas:
STRATEGIC METRICS
� Clearest Company Strategy
� Most Important Consumer Brands to Retailers
� Best Combination of Growth & Profitability
BUSINESS FUNDAMENTALS
� Best Sales Force/Customer Teams
� Most Innovative Marketing Approach
� Best Consumer & Shopper Insights/ Category Leadership
� Best Supply Chain Management
� Best Shopper Marketing Programs
� Best Use of Digital Platforms
AD HOC METRIC
� Best Revenue Growth Management
Manufacturers were asked to rank retailers on similar criteria:
STRATEGIC METRICS
� Clearest Company Strategy
� Best Store Branding to Shoppers
� Projected Power Retailers in 15 Years
BUSINESS FUNDAMENTALS
� Best Retailer to Do Business With
� Best Category Management/Buying Teams
� Most Innovative Merchandising Approach
� Best Supply Chain Management
� Best Practice Category Leadership
� Best Use of Digitial Platforms
AD HOC METRIC
� Best Revenue Growth Management
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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, PoweRanking will continue to consolidate or separate companies as retailers perceive them.
PoweRanking® COMPOSITES
The 2018 PoweRanking results include the Overall PoweRanking Composite, created by weighting the three strategic rankings equally with the six 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 COMPOSITE
The 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 six fundamental areas of business into a composite, which reflects the retailers’ and manufacturers’ opinions of those trading
partners that have the strongest organizations and personnel and provide the best tools for solid business development.
DIGITAL PLATFORMS
Beginning in 2011, Kantar Retail added a measure for Digital Platforms. Given its increasing influence on retailers, manufacturers, and consumers, as of 2016, digital is a measure to be monitored and is included in the Business Fundamentals Composite.
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2018 Participating Manufacturers
3M
Abbott
Bayer
Beam Suntory
Beiersdorf
BIC Consumer Products
Campbell Soup Co.
Chattem, Inc.
Chobani
Clorox
Coca-Cola
Colgate-Palmolive
ConAgra Foods
DanoneWave
Diageo
Domtar
Edgewell Personal Care
Florida's Natural
General Mills
GlaxoSmithKline
Hamilton Beach Brands
Helen of Troy
Henkel
Hormel
J.M. Smucker Co.
Johnson & Johnson
Kellogg Co.
Kimberly-Clark
Kraft Heinz
Land O'Lakes
LEGO
Lindt & Sprungli
Mars
Mars Petcare
Materne
Mighty Leaf Tea
Mondelēz
Morton Salt
Nestlé
Newell Brands
Pepperidge Farm
PepsiCo
Pfizer
Pinnacle Foods
Procter & Gamble
Red Bull
Sargento
Scotts Miracle Gro
Seneca Foods
StarKist
Sun-Maid Growers
Tom's of Maine
Tree Top, Inc.
Treehouse Foods
Tyson Foods
Unilever
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2018 Participating Retailers
84.51°
99 Cents Only Stores
Ace Hardware
Acme Markets
Ahold USA
Albertsons Companies
Aldi
Amazon
BJ's
Brookshire Grocery Company
C&S Wholesale Grocers
Costco
County Market (SuperValu)
CVS
Dollar General
Dollar Tree
Dollar King
Fairway
Family Dollar
Food 4 Less
Food Lion
Fred's Inc.
Giant Eagle, Inc.
Harris Teeter
H-E-B
Home Depot
Hy-Vee
Ingles Markets
Jet.com
Jewel Osco
Kmart
Kroger
Kum & Go
Meijer
Osco Drug
Peapod
Pet Supplies Plus
Petco
PetSmart
Publix
RaceTrac Petroleum
Ralphs
Randalls
Rite Aid
Safeway
Sam's Club
Save-A-Lot
Sears
Shaw's Supermarkets
Shell
Shopko
Speedway
Stop & Shop
Target
The Fresh Market
Wakefern Food Corporation
Walgreens
Walmart
Walmart.com
Wegmans
Whole Foods Market
Winn Dixie
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SHIFTING GEARSThe 5 Gears of Growth in a Post-Cost-Cutting Era
2018: Leaders who have shifted their mindset from cost-cutting to investment for the future are perceived as successfully driving both their top and bottom lines.
Executive Summary
A Growth Company is able to have an investment
mindset because it has confidence its strategy, brands,
and people will deliver real growth. It has identified the
right insights, allocated resources appropriately, and
achieved strategic intimacy with its trading partners.
For the last several years, it feels as though the U.S. CPG/Retail ecosystem had been stuck in neutral. Brick-and-mortar retailers seemed locked in an Amazon-centric malaise, with near-daily headlines describing a “retail apocalypse” reshaping the industry. The manufacturing landscape was beset by challenger brands and rumors of acquisitions and mergers, and intense pressure on their U.S. business to fund international expansion. This pressure has begun to cause “stress fractures”
to appear in many companies. Not only is the new work hard to achieve, but even the old work has gotten harder as organizations struggle to manage a more complex world with fewer resources. Cracks have surfaced in terms of the basics, and many retailers and manufacturers struggled with executing the basics in 2018.
At the same time, 2018 has seen the industry back on a growth footing. Retailers are beginning to understand and execute omnichannel strategies, and a strong economy has bolstered consumer spending that manufacturers can leverage. Their strategies are beginning to catch up to a changing consumer, and through acquisition and innovation brands are moving to address new consumer
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and shopper behavior with increasing speed. This speed has resulted in best-in-class companies “shifting gears” to be able to capture new growth opportunities.
This gear shift comes at an opportune time. The cost pressures remain, as shareholders remain voracious for year-over-year earnings growth far in excess of topline growth. And although the omnichannel world is becoming more familiar, many companies are going through “digital adolescence,” where their instincts and behavior have not quite caught up to the growing size of the digital opportunity.
The PoweRanking® leaders for 2018 — Walmart and PepsiCo — are two companies who have handled this gear shift with skill. Walmart achieved the #1 position for 22 years in a row, this year driven by clarity of strategy, supply chain, digital platforms, and manufacturers' belief in their future performance. PepsiCo not only achieved the overall #1 position for three consecutive years, but they
also achieved the #1 position on all nine metrics for 2018.
These, and the other best-in-class businesses, have mastered outstanding agility and have executives in place with a growth mindset who are willing to look beyond quarterly results to achieve real growth over the long haul. Some are investing in core brands, some in innovation, and others have made significant acquisitions. In any case, these business leaders, while staying true to their strategy, have “pivoted, achieved returns on change, and have been courageous” over the past three years and now are “shifting gears” to stay on top.
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The 5 Gears of Growth
First Gear: Getting Started
Executional ExcellenceThe “stress fractures” mentioned previously are exacerbated as change in the landscape accelerates. The competition is fierce: “This is the slowest change it will ever be. The dollar and value segments have ticked up. Walmart has stepped up their game. Amazon is raising the expectation of now.” The shopper is more demanding than ever before: “Consumer preferences are changing in how, when, and where they want to shop.” Supply chain issues are causing missed sales: “We have had more shipping issues than is the past. Vendors have been cutting demand forecasting too close. They have been struggling to keep inventory up for popular items, and click-and collect models are causing outages at shelf as shopping lists are picked in the morning, leaving product gaps for our brick-and-mortar shoppers.”
Throughout this year’s study, consistent themes
emerged. Like any good transmission, each gear
plays a slightly different role, but they all work
together for speed and acceleration.
Without first gear, the rest of the gear shifts are impossible. More so than in many years, PoweRanking® revealed executional challenges in a number of established and historically strong industry players. Those overcoming or preventing stress fractures were well-positioned for growth.
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Second Gear: Forward Momentum
Customer First: Consumer/Shopper ObsessionIt seems that everyone has adopted the famous “Customer First” strategy, but growth leaders are beginning to take it to a new level, and one manufacturer characterized it by telling us: “Putting our consumer first isn’t enough anymore. We have to become obsessed with them." Real growth comes from consumption and not deliveries, and the only way we can achieve this is if we truly understand and serve our consumers and our retailer’s shoppers. "Many companies are (re)committing to their insights functions, with the end goal of them understanding their consumers and shoppers' wants and needs before they realize them.”
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Third Gear: Reaching Cruising Speed
Connection and CollaborationDuring the “cost-cutting-years,” relationships were strained as manufacturers reorganized and pulled back assets, while retailers looked to entrepreneurial brands to fill growth gaps. While some of the craft manufacturers have been successful, retailers have realized that successful ones are often purchased by their traditional trading partners, and that even the independent ones cannot bring the retailer critical resources they need to drive profitable, long-term growth. As a result, both have concluded that they need each other more than ever and are finding new and deeper ways to partner: “Trading partners who have moved past worrying about who has the ‘power’ and are able to put their assets and resources together (for the benefit of the shopper) are finding ways to not only compete, but win.”
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Fourth Gear: In the Passing Lane
Tech-Enabled CommerceThe transition from an eCommerce strategy to an omnichannel one is one where suppliers and retailers simply embrace a completely digital future. “We know that we are quickly transitioning from a digitally enabled retail landscape to a digitally dominant economy. We know that retailers are becoming digital media companies, and fulfillment centers are bursting at the seams. We are imagining a go-to-market model where buyers no longer buy, shoppers no longer shop, and fulfillment centers no longer fulfill. We are building the sales force of the future, learning to market to algorithms, and building a supply chain where we can ship direct to consumers.”
As we look to the future, the 5G network is right around the corner. The significantly increased speeds and capacities will further enable mobile consumers to interact and shop in ways never before seen.
Fifth Gear: Efficient, High-Speed Travel
People and CommunitiesAchieving growth is one thing, but maintaining it and growing from growth is another. “We have to flip the script on our growth algorithm. Historically, we have focused all of our energy on driving sales and cutting costs, hoping our people understand and stay. To be successful in the future, we have to shift our focus on developing our people and communities, knowing that we will achieve real growth and profitability.” In this environment of low unemployment, people have more options than ever, and the best talent is being courted by industries outside of CPG and retail. Given the number of restructurings that have occurred over the past few years, the industry has some work to do to attract and retain talent, and that can only be achieved by looking beyond financial returns and creating a more nurturing environment with a greater purpose.
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1st 2nd 3rd 4th 5th
Growth Gear Getting Started Forward Momentum Reaching Cruising Speed In the Passing Lane Efficient,
High-Speed Travel
Insights The digital economy is creating growth opportunities, but also causing some fundamental outages.
Identifying insights is a perennial need, but how the industry finds them is changing.
Entrepreneurial companies often find growth in uncomfortable places, but frequently lack the resources retailers require.
Technology is automating marketing, merchandising, shopping, and buying, which is rapidly changing retail.
Our society is evolving from "me" to "we" and will require businesses to build communities to achieve company profits.
Actions Get Gritty with online and in-store details to ensure you are on time and in stock everywhere.
Be Obsessed about your Consumers and Shoppers to unlock not just facts, but consumption-driving insights.
Invest in Connectionsand Collaboration with trading partners to drive long-term mutual success.
Prepare for Tech-Enabled Commerce by building your omnichannel go-to-market strategy of the future.
Develop your People and invest in building Communities to unlock long-term growth.
Output Executional Excellence Real Consumption Growth
Partnership for Growth Future-Proof Commercial Plans
Committed Employees; Loyal Consumers
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The 5-Speed Growth Gearbox — Roadmap
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Closing StatementWe are (at least) five years into this chaotic, disruptive, and uncomfortable retail market, and while crazy may be becoming the new norm, it is perhaps the most exciting time to be in the industry. As we shift from a cost-cutting mindset to an investment mindset, real growth is likely to be accelerated as businesses are operating more efficiently and will generate enough money to both invest in the business and drive greater returns to shareholders.
Leaders who persevere with executional excellence, embrace technology, and are passionate about fulfilling the needs of their consumers, customer, and employees will be able to shift from digital
adolescence to an organization that is not only built to survive in a digitally dominant world, but will be built to thrive.
Find your next gear!
Daniel RaynakChief Client Officer
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FIND YOUR NEXT GEARReach out to Kantar Consulting to obtain
a full report of the 2018 manufacturer and retailer Rankings.
Learn how YOU can get deeper insights into how to return to growth in 2018 and beyond.
For a copy of the full PoweRanking® report, contact [email protected]
Study Price: US $2,500