CPGmatters: Simplifying Product Assortment Leads to More Efficiency, Sales for ConAgra Foods
Through a special arrangement, presented here for discussion is a summary of a current article from the monthly e-zine, CPGmatters.
A category management program that aims to make it easier for shoppers to find what products they want and when they want them is paying off for ConAgra Foods whose diverse portfolio includes such iconic brands as Orville Redenbacher's, Hunt's, Chef Boyardee, Healthy Choice, Pam and others. The program, called SPACE (Simplifying Product Assortment & Creating Efficiency), is also designed to help clear out inefficient SKUs, drive baseline growth, and spur incremental sales.
"We're fine tuning. We're learning more and continuing to build the program," said Andre Hawaux, president and COO of ConAgra Foods. He spoke recently in Philadelphia at The Food Industry Summit, hosted by the Food Marketing Department of St. Joseph's University.
The company launched the SPACE program 18 months ago in three categories: microwave popcorn, canned tomatoes, and canned pasta. Over the 12-weeks ending Oct. 11, 2009, one major retailer that introduced the program in the microwave popcorn category grew dollar sales by nearly six percent and volume by more than seven percent over the previous year.
Mr. Hawaux said that SPACE leverages four primary principles that work together to help retailers optimize assortment:
- Leverage the right fit to determine the category size that results in the best performance. "What is the most effective category shelf set to optimize space and sales for our customers?" asked Mr. Hawaux.
- Organize the category based on shopper behavior. Enhancing "shopability" makes it easier to find the most popular items. For example, the food maker's "Calorie Continuum" of Butter, Specialty, and Better-for-You microwave popcorn optimized the shelf set for the retailer and grew the category significantly.
- Give the best-selling SKUs the placement and space they need to boost sales and limit out-of-stocks. By taking this approach, the same retailer boosted dollar sales and volume in the microwave popcorn category while reducing the number of SKUs it carried by 10 percent. The move also increased both pack-out and days of supply on top-selling items. Treating valued SKUs right pays off.
- Add the proper assortment of new and unique items to drive the greatest incremental sales in the space allocated. Find the smart mix; in other words, the right combination of new, on-trend and trusted products to retain loyal shoppers, gain trial, and increase incremental sales.
"We have brands that are number one in a category," said Mr. Hawaux, "and we have brands that are three and four. Those are the ones that we have to fight really hard as to what their point of difference is."
Discussion Questions: How big a need in grocery retail is there for SPACE-like (Simplifying Product Assortment & Creating Efficiency) programs? Has category management, on balance, helped or hurt the ability of grocers to drive top line growth?