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Suppliers, retailers at odds over trade promotions
Hershey picks Hernquist
Javo goes Wild for coffee
Kroger weaves supply chain web
GBG Awards itself ICS
P&G to raise Wella offer?
Trade
promotion
Suppliers,
retailers at odds over trade promotions
Trade promotion spending, also
known as slotting fees, continues to cause friction between retailers and
manufacturers, according to a new study from market researcher ACNielsen.
Accounting for slotting fees seems
to be the underlying cause of a $500 million hole in Dutch supermarketer
Ahold’s profits. Regulatory investigators are currently questioning
suppliers to Ahold’s US subsidiary, US Foodservice, about accounting
procedures.
Spending levels are shifting, at
least partly because manufacturers believe they don’t get value for what
they spend, according to ACNielsen’s 12th study on trade
promotion practices and emerging issues.
ACNielsen questioned 79
manufacturers companies and 40 retailers in October and November 2002. It
found total dollars spent on all trade promotions rose to 14 percent of
gross dollar sales, compared to 11 percent the previous year.
While 65 percent of manufacturers
surveyed said they increased their total marketing budgets for trade
promotion, consumer promotion, and media advertising, nearly 60 percent
said they spent less on trade promotion as a percentage of sales in 2001.
Only 16 percent of the
manufacturers reported that they spent more, compared to one-third in 2000
and one-half in 1999.
Food and general merchandise brands
paid around 15 to 16 percent, while health and beauty care makers spent
less than food only nine percent, extending a nine-year trend.
But that’s not the way the
retailers saw the figures. Less than half said they saw an increase in
total promotional spending.
Manufacturers are clearly concerned
about what retailers give them for the money. Only 24 percent said they
received excellent or good value from their investments. That’s down
from 37 percent in 2001.
One of the reasons for the
differing views could be the proliferation of products and/or stock
keeping units. More than 80 percent of storekeepers said they get too few
trade dollars; 14 percent were happy with funding levels, but that is less
than half the 30 percent of two years ago.
The manufacturers’
dissatisfaction with perceived value received is evident from a shift in
spending patterns to reward performance more directly. Some 69 percent
increased spending for pay-for-performance; 56 percent spent more on
frequent shopper programme, and 51 percent more on slotting allowances.
Chopped budget items include bill-back ad allowances at 28 percent of
those polled, off- invoice allowances at 27 percent, and bill-back display
allowances at 21 percent.
When it comes to evaluating
spending on specific trade promotion practices, retailers and
manufacturers fall fairly close in line-except for the touchy issue of
slotting, of course. Retailers do report being a little light in the
pocket in the areas of market development funds and bill-back display
allowances, in opposition to manufacturer claims of increases. Here's one
anomaly: 33 percent of retailers said they saw rises in bill-back ad
allowances, while only 25 percent of manufacturers reported increases.
ACNielsen reports a growing
asymmetry in information from programmes such as loyalty schemes. Seven in
10 retailers offer frequent shopper programs and some 80 percent of
manufacturers take part in them. But only one in five manufacturers said
that retailers "frequently" share data with them. For their
part, retailers acknowledge this: fewer than ever say they share shopper
data often with manufacturers, and then only with a very select few.
One may wonder why retailers have
loyalty programmes. Less that half use frequent shopper data in everyday
decision-making, and then it is mostly to target direct marketing
programmes.
People
Hershey
picks Hernquist
Hershey Foods has appointed Thomas
Hernquist senior vice president and chief marketing officer. Hernquist
joins Hershey from Fortune Brands where he was responsible for the
company's distilled spirits business. Before that he was president and
chief executive officer of Vivendi Universal's Sierra Software unit.
Flavours
Javo goes
Wild for coffee
With coffee becoming the new black,
US coffee products supplier Javo Beverage Company has teamed up with Wild
Flavors to supply coffee flavours to packaged food and beverage companies.
The two will jointly develop and
sell custom-made turnkey flavour systems for customers who want to
introduce coffee flavoured beverages, ice creams or other food products.
Wild’s senior vp for sales &
strategic planning, Roman Kupper, said "The trend towards premium
coffee flavoured products has come to the fore rather quickly and has
produced a large number of flavouring projects."
Javo chief executive Cody Ashwell
added "The partnership with Wild is really about working together on
behalf of the customer to make sure Javo's high-quality coffee flavours
are at the laboratory bench where products are being developed."
Wild, which does business in over
50 countries, will use Javo's coffee extracts to expand its range of
products and services.
Javo recently built a new
coffee-brewing facility with a capacity of over two million gallons (7.5m
litres) of premium coffee concentrates and extracts a year.
Logistics -
1
Kroger
weaves supply chain web
The US’s third largest retailer,
Kroger Co, will soon use the UCCNet's item registration service for 2,488
stores in 32 states and also join trading exchange Transora's
direct-to-store-delivery data synchronisation project.
Kroger says it believes that
UCCNet's service will improve its ability to collect new item data from
suppliers electronically. Kroger will work with GlobalNetxchange, a
business-to-business marketplace for retailers, to implement the service.
Transora's direct-to-store-delivery
(DSD) initiative adds standards-based functionality to Transora`s data
synchronisation solution and UCCnet`s GlobalRegistry.
Transora is working with Coca-Cola,
Kraft Foods/Nabisco, PepsiCo and Sara Lee to develop industry standards
and processes for DSD. Kroger is the first retailer to join the steering
committee.
Logistics -
2
GBG Awards itself
ICS
Canadian specialist software house
Global Beverage Group is to buy Intelligent Computer Systems (ICS), make
of the Award software package for the beverage, snack, tobacco and candy
distribution markets. GBG sells software for the direct-store-delivery (DSD)
industry.
The deal adds over 200 customers to
GBG's customer base, bringing the total to over 450.
ICS recently won Anheuser Busch
(A-B) approval and Award is a recommended route accounting system for A-B
wholesalers. This complements GBG’s position with wholesalers of Miller,
Coors and other breweries, as well as in the soft drink segment.
M&A
P&G
to raise Wella offer?
It’s already won control, but US
consumer goods manufacturer Procter & Gamble may have to improve the
price it offers Henkel and holders of Wella AG's preferred shares to
complete its conquest of German hair products firm Wella.
Last March, P&G paid the Ströher
family a 22% premium and 3.2 billion euros for its 51 percent stake. It
said then it would offer 92.25 euros for each outstanding Wella ordinary
share and 61.50 euros, a one percent premium, for the preference shares.
Henkel, which holds a 6.9 percent
stake, and prefs holders sniffed at the offer, declaring there was room to
improve it.
Wella's 2002 operating profit was
up 10 percent to 214.3 million euros on sales six percent better at 3.4
billion euros. |
