CPGmatters: Cadbury Schweppes Plans to Collaborate with Retailers on Pricing and Promotions
By John Karolefski
Through a special arrangement, what follows is an excerpt of a current article from CPGmatters, a monthly e-zine, presented here for discussion.
Cadbury Schweppes Americas Beverages is planning to start collaborating with retailers on pricing and promotions. Its first trading partner in this new effort will be Food Lion, the operator of 1,300 supermarkets largely in the southeast.
The beverage marketer will be building on a successful relationship with Food Lion in the areas of space management and assortment planning.
According to Craig Hodnett, vice president of category management at Cadbury Schweppes, many retailers are using the different strategies of category management very effectively with their pricing and promotion strategies. For example, say next month the retailer wants to drive traffic.
"Typically a manufacturer would give a deal (to the retailer)," he said. "But what we're really talking about is an opportunity. Before the manufacturer throws out a deal, we can understand what the strategy is. What's the best package to do that with? How does that differentiate the customer in the marketplace? Now, let me present the deal to the customer. That's new thinking. It doesn't work that way today."
He outlined the new initiative following a presentation on trading partner collaboration at the recent National Retail Federation (NRF) convention.
"We'll be doing 'what if' strategies," adds Mr. Hodnett. "Because of the speed, we can quickly evaluate different strategies. That will be a real point of difference. These guys already deal with assortment and space. We can take it to another level by applying strategy to price."
Marc Dietz, vice president of product marketing of DemandTec, the pricing and promotion software provider, said the discipline of category management is changing in three fundamental ways: "One, it is becoming more analytical and integrated. Pricing and promotion are certainly linked; assortment and space have always been linked. It's really a holistic process. What is the right assortment often depends on whether the price is right. Second, category management is becoming more shopper-centric, and third, it is becoming more collaborative."
Indeed, collaborative planning can deliver significant benefits to trading partners through better strategic pricing, product assortment and promotion optimization decisions, according to DemandTec's president and CEO Dan Fishback.
Mr. Hodnett said trading partner trust built up through collaboration in space management and assortment planning can carry over to price and promotions. It is shaping up to be a win-win.
"Price is so strategic," he said. "That is where 80 percent of your funds are being spent. I predict a lot more companies will get on board. I sit on two share groups with all the big CPG companies and we talk about this area a lot. I know it's drawing the attention of my peers. The collaboration doors are really opening up with retail partners."
Discussion Question: What do think of extending category management beyond space and assortment to pricing and promotions? What challenges do you see in suppliers and retailers collaborating around pricing and promotions at this level?