Can category management catch up to the omnichannel shift?

Photo: Walmart
Nov 25, 2020

Through a special arrangement, presented here for discussion is a summary of a current article from the bi-monthly e-zine, CPGmatters.

The Category Management Association recently announced “a new strategic direction” called Cat Man 2.0, which is focused on “the evolution of category management in an omnichannel world.”

“It took the pandemic to really shake the behavior of the CPG industry,” Mike Gervasio, vice president of category leadership for PepsiCo and the new chairman of the association, told CPGmatters after the CMA created the new position.

Indeed, the pandemic was especially disruptive to major players such as PepsiCo that are “category captains” in bricks-and-mortar chains. These leading suppliers are essentially put in charge by the retailers of managing the vast array of offerings that can fit into specific aisles and help optimize sales of an entire category, not just their own brands.

“We have lots of capabilities and tools and inherent knowledge for category management in a bricks-and-mortar environment,” Gervasio said. “But now consumers can buy their products anytime, anywhere and in any way, a reality that’s been accelerated by five years over the last five months.”

Mr. Gervasio said companies have to “acquire whole new sets of data and tools, hire data scientists and get new skill sets. Then, members need to make sure data is consistent and accessible across all retailing channels.” They need to solve challenges such as “figuring out how digitally curated search engines can create the category management equivalent of the front page of a newspaper ad or a lobby display or a [selected] assortment of products in a store. It’s all the same, but digital is different, with different levers.

“AI and machines are going to carry the ‘what just happened’ and help us decide what to do next, and how we should grow, and what choices to make and accelerate in regard to shopper behavior.”

Unfortunately, in the status quo, Mr. Gervasio said, “a lot of tools and capabilities and approaches are somewhat siloed in the ecosystem of bricks and mortar. The data and information, and the analysis, don’t necessarily connect with what’s happening in e-commerce. The tradeoffs and data sets aren’t apparent. We have to build new data sets and new mindsets to take advantage of shopping behavior and fully understand it, to be a half-step ahead of where shoppers are.”

DISCUSSION QUESTIONS: Do you see opportunities for category captains to help guide and speed omnichannel journeys for retailers in CPG categories? What near and long-term challenges may retailers face further translating category management to omnichannel practices?

Please practice The RetailWire Golden Rule when submitting your comments.
"The reality is that it is a more complex set of variables now and therefore the category management tools will need to be more sophisticated than in the past."
"This is indeed an opportunity for category captains to step up and help usher their retail partners into the world of digital commerce."
"A major challenge today is retailers have the data, but have trouble creating insights from the data."

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13 Comments on "Can category management catch up to the omnichannel shift?"

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Jeff Weidauer

Opportunity abounds in this new reality, and not just for category captains. Leadership is required to break out of the status quo and that might come from any CPG – not just those traditionally anointed as lead. While the tech and data tools are beneficial, old assumptions and practices need to be abandoned in order to get the benefit of those tools.

Raj B. Shroff
This is a topic near and dear to my heart. Yes, I see opportunities for category captains to guide. The first is pushing retailer top management to set internal structures around the shopper, not around digital or physical channels. For optimal success, CPG need retailers to break the silo and CPG needs to live that in their structures too. The second is education. While some in this space are digitally savvy, many are not and it’s hard for teams to talk with each other when they don’t speak the same language. We see silos all the time in our work. Near-term you’ll see not enough people versed in both the physical and digital worlds. You have people coming up in one or the other and few have had enough time to spend time in both, either agency or customer side. Near-term there are systems issues too, disconnected creative, tools and data sets, etc. Longer-term I think you’ll have the reverse issue with digitally native retailers trying to figure out the physical space. However I am… Read more »
Richard Hernandez
Richard Hernandez
Director, Main Street Markets
1 year 7 months ago

It is the “we’ve done it this way for years syndrome” that will keep companies from looking at technology that will take category management to the next level. It takes bringing in fresh eyes to evaluate the current state as well as investing in software to help manage and make the decisions to keep up with ever-changing customer shopping habits. It will definitely be interesting in the next few years as large retailers undertake this to keep ahead of shopper desires.

Bob Amster

The game of retail has changed and the category management tools will need to change with it. The reality is that it is a more complex set of variables now and therefore the category management tools will need to be more sophisticated than in the past.

Michael Terpkosh

Category management has always required a strong partnership between retailers and CPGs. Both parties share in the “heavy lifting” of data analytics to better understand the consumer, category and competition. As the retail journey into omnichannel grows, there is definitely a place for CPG category captains to support and provide insights to retailers. A major challenge today is retailers have the data, but have trouble creating insights from the data. CPG category captains need the retailer’s data to better understand the omnichannel and the consumer. Together they can rise to the data challenge to create strategies and tactics resulting in mutual sales growth.

Di Di Chan

Absolutely! Category captains are still the captain. Successful omnichannel solutions and strategies start by listening and responding to the retailer’s needs, not the other way around. Technology is capable of answering many of the retailer’s pain-points. It is also capable of answering too many not-yet-pain points. Category captains have the experience to know which questions are a priority to their business. Their navigation skills will be critical in keeping their omnichannel journey focused, relevant, and successful.

Mohamed Amer, PhD

Category management arose in an era in which the retailing world revolved around a product-driven view fueled by a mass-marketing model actualized on a set of physical store shelves. That worldview is no longer dominant, and in time will be even less relevant. I won’t even touch on the cross-brand trust issues that come with a category captain. A more profound trend over the past two decades is that the consumer has gained more power due to expanded channel choices and mobile technologies’ convenience. She is influenced by and engaged on social media and receives personalized campaigns that acknowledge that power shift. No matter what version of category management we have now or tomorrow, the fundamental premise is out of sync with today’s reality and tomorrow’s dominant trends.

Ralph Jacobson

I still see far too many retail organizations suffering from their internal functional silos. Additionally, there is emotion being injected into category management decisions. The tools available today are indeed capable of driving the maximum gross margin/revenue intersections by category, however the users of these best-in-class systems need to let them optimize without so much custom manipulation.

Dr. Stephen Needel

I’ve been writing about this for years ever since my Nielsen CatMan days – there is no theory of category management that applies to stores, never mind applying to online shopping. Until that exists, AI is not going to do anything to help. AI does not tell you a better assortment or manage your pricing – that involves research, not large number crunching with black-box time-dependent algorithms. Category captains aren’t going to do much for online because the whole theory of online is the long tail of products – in juxtaposition to category management.

Jeff Sward

To me, this whole subject immediately breaks down into two parts — product and process. And within process there is both supply chain and distribution. And then within each part there are separate problems and solutions. The same product may have completely new supply chain/distribution problems. In the early stages of the pandemic demand for paper products surged, but it also surged in a distribution channel that was not equipped to handle the volume surge. And it turns out the supply chain for grocery store distribution was different than the supply chain for e-commerce distribution. Not as easy as just sending a truck to a different warehouse. So product development is a whole different assignment than managing supply chain and distribution networks. Turns out that day-in, day-out execution of omnichannel has become really complicated. I always thought that product was king, but now product has to share the throne with process.

Rachelle King

If we can be honest, this pandemic caught category captains at CPG companies on their heels, as well as retailers and every one else. Still, captains are expected to lead with intelligent data that guide and inform category strategy. This is indeed an opportunity for category captains to step up and help usher their retail partners into the world of digital commerce.

However, even as CPG companies and their Cat Man Teams push forward, retailers need to evolve too. For many retailers, brick/mortar is still separate from ecommerce right down to buying teams and revenue reporting. This division may make it challenging to execute a fully integrated omnichannel strategy. While retailers have been working towards more holistic organizational structures, they need to be prepared to execute holistically if they want to win in this new digital-driven marketplace.

James Tenser

In the Incredible Dissolving Store, category boundaries extend into the digital realm and that means all the classic decisions — space, assortment, price, promotion, inventory — must be reconsidered in a new framework. Retailer-brand collaboration is even more essential and shared access to data and insights still leaves much to be desired for many. Shared data platforms are a must, and tools that automate data analytics will make use of that information to enable smarter decision making.

Mike Gervasio’s assertions about the persistently “siloed” nature of decision resources and the potential for AI to change the game ring true. Category management is about to make a leap from descriptive analysis to prescriptive decision support.

Peter Charness

2.0? Try 10.0. There is nothing in current category management processes that can effectively deal with the need to localize say 30-40% of the product selection by store. Not much thought for how to stock product in local fulfillment centers (or stores as a fulfillment center) to support online. Velocity SKU management on planograms; how about a planogram and stock forecasts for a picking/shipment/curbside preparation area in the back of a store that now has less selling space, and more stock room/shipping area?

I think the needed changes in thinking and processes are so dramatic, even the term category management is not descriptive enough. What’s needed is a blend of category management, space planning, assortment planning, supply chain management, demand planning, price management all squeezed together as a Unified Product Management, capability … UPM 1.0. Which way is the trademark office?

"The reality is that it is a more complex set of variables now and therefore the category management tools will need to be more sophisticated than in the past."
"This is indeed an opportunity for category captains to step up and help usher their retail partners into the world of digital commerce."
"A major challenge today is retailers have the data, but have trouble creating insights from the data."

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