CPGmatters: Pepsi and Coke Urge CPGs To Consider DSD to Drive Growth
Through a special arrangement, presented here for discussion is an excerpt of a current article from the monthly e-zine, CPGmatters.
PepsiCo and The Coca-Cola Company are urging other suppliers of consumer packaged goods to consider direct-store delivery of their products to drive and sustain growth by effectively delivering what shoppers want at the shelf.
"DSD drives product flow that is almost a just-in-time replenishment engine for stores," said John Phillips, vice president, customer supply chain & logistics at PepsiCo. "Manufacturers can use it throughout the year to leverage promotional events, to ensure the right amounts of product are in stores, displayed as planned, to satisfy demand on a local basis."
Ann Dozier, vice president, collaborative customer capabilities, The Coca-Cola Company, said, "CPG companies have an opportunity to focus on superior execution at the shelf. DSD is a key driver of flawless execution in stores."
The executives made these comments as part of an exclusive interview with CPGmatters about a new study from the Grocery Manufacturers Association (GMA) that highlights the value of the DSD distribution model, even for some CPG products that currently go through retailer warehouses. The benefits of DSD are indisputable and appropriate for targeted new-product launches and seasonal promotions year-round and store-wide, according to Phillips and Dozier, who were key contributors to the research.
"DSD done right is a great demand-sensing mechanism," said Mr. Phillips, a member of the GMA committee that spent more than a year developing 'Powering Growth through Direct Store Delivery,' the new report that quantifies DSD performance and predicts a strong outlook for its use.
The study, using Nielsen data, states that DSD products account for 24 percent of unit sales and 52 percent of retail profits in the grocery channel. Noting these figures have been consistent the past two years, Ms. Dozier portrayed DSD companies as among the most innovative suppliers and collaborators.
"We're seeing the top new items and top sellers overall coming out of DSD," she said. "That's happening in an environment of rapid change where people seek more variety in the stores they shop, and retailers are placing a focus on understanding the shoppers they want to attract. The speed-to-shelf for DSD goods is unparalleled, a day or two versus 10 days through the warehouse. This gives CPG flexibility to try new products, get them to the shelf faster, and continually analyze the shelf to ensure the right assortment."
Analytical-minded retailers that understand cash flow and the benefit of turning products three or four times before they pay the manufacturer are the biggest proponents of DSD, according to Mr. Phillips. He called "effective collaboration the key to unlocking the next generation of improvements in DSD productivity and in-store execution."
Discussion Questions: What do you think of Coke and Pepsi's push to convince other CPG suppliers to consider direct-store delivery? Does DSD have to be a supplier-driven initiative? Who benefits more from DSD: suppliers or retailers?