2018 Category Management Handbook

In AllIAnce wIth

Inside C4 Editor’s Note C6 Executing CatMan 2.0 C8 So You Want to Be a Category Captain?

C11 Education C13 Shopper-Centricity C20 Superconsumers

2018 Category Management Handbook

December 2017 www.progressivegrocer.com

SP ON SORE D C ON TE N T

Q&A

Talking with…

Marissa Jarrett VP of Marketing, Dean Foods

Progressive Grocer: Retailers are focusing a lot on fresh as a differentiator for their stores. In what ways can dairy be a “power perimeter” department?

Marissa Jarrett: Consumers are being encouraged to shop the perimeter for health reasons and to incorporate fresh items into their diets. Dairy is a consumer staple, so it can benefit from this fresh trend—there is a lot of potential, which is where the term “power perimeter” comes from. Fluid milk/dairy is a potential traffic driver and basket builder. Companies are developing so many new, innovative products and brands in the category, and all the new products in the dairy case, positioned along the perimeter, can draw shoppers in.

Retailers can distinguish themselves by the quality and variety they offer in their fresh departments. The dairy department can be a destination for shoppers when the right brands are carried, products are shelved according to consumer usage occasions (3-D Insights), and items are kept in stock.

PG: From a category management perspective, what steps can retailers take to maximize fluid milk sales?

MJ: There’s actually a lot retailers can do to maximize their fluid milk sales: • Allocate space based on milk’s higher turn rates and AGMROII to keep it in stock.

• Provide all four milk fat types (whole, 2%, 1% and fat-free) in all package sizes.

• Offer a wide range of specialty and alternative milk products in both take-home and single-serve sizes.

PG: How are promotion strategies for milk evolving as shoppers, products and trip missions evolve?

MJ: As consumers move more and more toward e-commerce and click-and-collect to fulfill their regular food and beverage needs, milk promotions will evolve too. Due to the nature of milk consumption, it is on a frequent purchase cycle and on shopping lists very regularly. So making milk products like DairyPure and TruMoo top of mind for online shoppers is important. The holy grail is to be the top 1, 2, 3 or 4 item commonly searched and put on the e-commerce list; we are evolving how to drive that awareness and get in that position.

Beyond that, the advent of digital/mobile marketing presents ways to offer value. The Ibotta app, which lets consumers download coupon offers, is one example. There has been a 20 to 40 percent redemption rate with Ibotta—the redemption rate for FSIs (free standing inserts) is less than 2 percent. That’s because Ibotta can target offers to specific customers who are receptive to particular promotions.

Other promotional strategies tie into the on-the-go snacking trend. As Millennials have families and try to balance work, careers and kids, they’re looking for healthier solutions that allow them to fill up on the go. We’re introducing DairyPure Mix-ins in 2018—single-serve, clean-label packs of cottage cheese that have real fruit and real nuts that consumers can mix in with the cottage cheese. They fit in with the trend toward convenience snacking and are great for people who don’t want to compromise on nutritional benefits.

PG: With more consumers demanding “clean” products, how can retailers use dairy to meet those needs?

PG: What is the role of brands vs. private label?

MJ: DairyPure has always been a pure product! It is one of the cleanest-label products you can buy—and that’s an important message we want to communicate. Today, white milk is antibiotic- and growth-hormone free—but it is basically the same unadulterated beverage that it has been for hundreds of years.

MJ: From the shopper’s perspective, brands are crucial in building interest and engagement and long-term loyalty. Brands capture the hearts and minds of consumers, not just their wallets and stomachs! Brands create a point of differentiation from private label. For our retail partners, brands offer an important way to grow profits and sales. Private-label milk is a lower-priced item, so when there are price wars, retailers are not making

At Dean Foods, we have gone through our products to make sure the label on each one is as clean as it can be. If it isn’t, we ask, “How do we change it to make it better?” That is the value of our brands.

• Satisfy shoppers’ needs with a strong private-label program combined with the right brand.

• Keep milk’s low-price sensitivity in mind when discounting.

• Co-merchandise milk strategically with high-affinity products throughout the store.

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money selling a gallon of white milk. Brands are a profit pool— there is an important role for brands in the milk and flavored milk categories.

progressivegrocer.com

2018 Category ManageMent Handbook

Editor’s Note

Solution Centers hat headline is what all contemporary grocery retailers must be. Many are, while others are still working to break free of traditional merchandising tactics that are rapidly losing relevance as consumers shop not for miscellaneous components, but for complete need states.

This year’s Category Management Handbook focuses exclusively on ways that retailers can transform themselves from mere sellers of things to providers of solutions. Don’t just sell your customers meat and vegetables — sell them dinner. The end result is their true goal.

There’s a wealth of ideas on the following pages. First, we have the latest report from the Category Management Association, which has been rolling out its CatMan 2.0 initiative, the dramatic refashioning of category management standards first introduced nearly three decades ago, now being made relevant for a new era through the application of Big Data and detailed shopper insights.

Similarly, a collaboration of Food Marketing Institute, Deloitte

and Win Weber & Associates promotes the idea of shopper-centricity and a reinvention of the traditional grocery retail operational structure.

And we hear from Eddie Yoon, whose theory of “superconsumers” drives home the idea of how categories throughout the store are interconnected, opening vast new possibilities for packaging goods to meet specific consumer needs.

Consumers are looking for the end result — show them what it looks like before they leave the store.

Jim Dudlicek Editorial Director jdudlicek@ensembleIQ.com Twitter @jimdudlicek

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2018 CaTegoRY ManageMenT HanDbook

Executing CatMan 2.0

Bringing CatMan 2.0 To Life 5 ke Y CHOICeS re TaIlerS faCe In mOvIng fOrWarD.

By Ed Sheedy and Tom McDonald

Editor’s Note: At the IRI Growth Summit in April 2017, Ed Sheedy, of Weis Markets, and Tom McDonald, of the Category Management Association (CMA), spoke about bringing CatMan 2.0 — the next iteration of decades-old principles leveraging Big Data shopper insights — to life in the marketplace. Sheedy spoke about the issues from a retailer’s perspective, and McDonald spoke from a manufacturer’s perspective, based on his nearly 30 years of experience at Procter & Gamble.

The talk focused on the five key choices that retailers and manufacturers face as they look to execute CatMan 2.0: people, data and data warehousing, analytical tools, process, and presentation. This is a follow-up to that presentation.

1

How You Hire, Train, Develop and Retain People

Ed Sheedy: One of the biggest challenges on your team is that each person brings a different level of skills, talent and capabilities to work. Some are great at analytics, while others are excellent at process or developing insights. We need to take advantage of people’s strengths and put them in a position to succeed at their work. Having clear expectations on key performance measures and what the endgame looks like is crucial to your people. The more they understand the importance of category management to the retailer’s business, the easier it is for them to develop winning strategies and tactics.

Tom McDonald: We need to continually train — formally and informally — especially as we add new data types or tools. One of the biggest challenges in today’s market is finding and retaining top talent. If you don’t love the extraordinary talent that is on your team, then another manufacturer or retailer will. Creating centers of excellence on annual tasks, like clustering, and then staffing that group with your clustering experts, plays to people’s strengths. Creating a culture in category management that embraces innovation, gives people the tools to succeed and allows for work-life balance is the best way to retain your talent.

2

Data and How to Warehouse It

Sheedy: The plethora of data is one of the biggest challenges that a retailer faces.

Some retailers struggle in getting a handle on their own internal data such as sales, profit, inventory and cost of goods in their supply chain. The next challenge is marrying the internal data with external data such as

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syndicated data or shopper behavioral data. There are so many sources of data available that quilting it together to get to insights that drive the business is more challenging than ever before. The data warehouse needs to be the one source of truth while being flexible to deliver against the business needs. You need to choose your external business partners wisely, with an eye on how we can transform all the data into actionable insights.

McDonald: The data warehouse needs to be flexible and expandable to enable your people to do their jobs more effectively.

The flexibility allows you to look at the data from an internal lens for your bands, and an external point of view for your customers. The expandable part is needed due to the new data types that we have from our smartphones and ecommerce. We have added more data types to our analysis in the past five years than we had in total 20 years ago. The warehouse needs to enable your tools to work and deliver insights. One piece of advice on new data sets: Don’t buy a new set of data without a training plan, a delivery tool and an expert on the data to answer questions. Otherwise, you just frustrate your people, and the new data will not create a competitive advantage.

You need to choose your external business partners wisely, with an eye on how we can transform all the data into actionable insights.”

—Ed Sheedy, Weis Markets

3

Data Mining

Sheedy: The key is getting to the one version of the truth from your data. The tools and solution providers you choose must have experience and a track record of success. The tools need to be user-friendly and intuitive to use, as well as expand the capabilities of your people. We have some platforms and tools now built around the key business questions we need to answer, such as assortment, pricing and promotion. These tools allow us to answer key business questions quickly and efficiently. We need to ensure that our tools enhance our data warehouse usage and help us quilt together the various data sources.

McDonald: The analytic tools need to be user-friendly and provide outputs that a high school freshman can understand. Wherever possible, the integration of tools needs to be aligned before a purchase is made. Tools and platforms need to be enablers, not the one thing that your people complain about every day. There are great solution providers out there who can make a tremendous difference in your business. if you need a recommendation on a solution provider to help with your business issue, please reach out to us at the cMA.

4

The Process

Sheedy: if we have 15 different category managers, then you can have up to 15 different ways or processes used in delivering category management. The process provides a standard look at assortment and pricing and promotion. Process provides one set of key performance metrics that we use to build our scorecards and evaluate our business. The process calls for an evaluation of all our tactics, which allows us to build on strengths and correct any issues. The key is to follow the process from the starting point all the way through evaluation. The process provides the guidelines and the standards that keep our business working every day.

McDonald: Without a process, people will revert to their “favorite tool” or “favorite slides” or “favorite shadow system. cat Man 2.0 allows your group to implement a process that guides work from start to finish. The best processes focus on alignment upfront on data needed and the role of category. catMan 2.0 then moves into an analysis of the sales fundamentals so you can develop strategies and tactics. it concludes with an emphasis on execution, and then evaluation of the output to determine necessary revisions. catMan 2.0 focuses on the key business questions that we all need to answer: what is happening, why is it happening and how should i respond.

5

Bringing Insights to Life

Sheedy: The key to making a great presentation to us is to have the guidelines in place well before the meeting. We need to have alignment on the definition and role of the category, as well as the performance expectations for the category. When that alignment is missing, we see presentations off our strategies and numbers that don’t add up or match. The alignment builds trust into the process and allows open dialogue on the business. one thing to watch out for is manufacturers who only want to talk about their brand or brands without context to the category strategies or goals. The biggest opportunity is to have alignment upfront that drives collaboration on the tactics needed to win.

McDonald: our presentations need to be dynamic, not static, and focused on the what/why with clear, concise next steps. often, we attempt to PowerPoint someone into submission to our analysis, versus telling a compelling story. our presentation tools should be usable in front of our retail partners to collaborate on

The company that gets to insights by better managing their data will win over the next decade.”

—Tom McDonald, Category Management Association

better insights. Most presentations i see are not any different from 10 to 15 years ago, except for length due to more data types. There are great data visualization companies who can make a tremendous difference in your presentations. if you need some recommendations, please reach out to us at the cMA.

The Future Sheedy: The thing that concerns me the most is how quickly the retail landscape is changing and how that speeds up our need for better analytics. The landscape changes now happen from month to month — two recent examples are Amazon and Whole Foods and Walmart and Jet. The two examples have combined brick-and-mortar and ecommerce overnight for two giant retailers. it means we must be flexible and nimble on how we get to our shoppers, and we need to constantly evaluate delivering against their needs. The advice i would give to young people is that retail today is a dynamic business that is constantly changing, but if you work hard, it can be an incredibly rewarding career. it is a people-focused business that allows you to take ownership for a part of the business. Take that ownership, work hard and run with it.

McDonald: The thing that concerns me the most is the data overload on today’s category manager.

We appear to focus too much on the data and not enough on the insight that drives shopper behavior. The company that gets to insights by better managing their data will win over the next decade. We need insight on ecommerce shoppers, click-and-collect shoppers and the brick-and-mortar shopper. My advice to young people is to think — too often, we just work a to-do list or check into a routine each day. We need to think about what is happening in the marketplace and what we need to do to improve our business. Develop your strategic thinking skills, and you will have a rewarding and prosperous cPg career.

Ed Sheedy is director of category analysis, promotional income and retail strategies for Sunbury, Pa.-based Weis Markets Inc. Tom McDonald is best practices team lead and chairman of the advisory board for the Minneapolis-based Category Management Association.

Progressive grocer December 2017

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2018 CategoRy ManageMent Handbook

So You Want to Be a Category Captain?

The work of a category captain falls into the following buckets: planogram or modular responsibilities Weekly reporting of category results/key sales data (pricing/promotion/assortment) Marketplace analysis to determine whether a retailer is winning or losing, and why strategic yearly review of category for insights into needed tactics and strategies ad hoc analysis per buyer requests Planogram/modular responsibilities: Category review data pulling/cleaning/attributing pre-modular work Modular drawing/proofing post-modular evaluation

Over the Influence What does it take to be a Category Captain in today’s Cpg World? By Tom McDonald his article explores the role and work to be done, the data requirements, necessary skills, and the process outlined in CatMan 2.0. each retailer has a distinct set of expectations and deliverables for category captains; however, there are core job requirements. Manufacturers that deliver on the requirements will help influence strategies and tactics in the role of category captain.

Role and Responsibilities Let’s start with a definition: a category captain is a person or team of people who helps a buyer at a retailer drive the retailer’s sales through a focus on tactics and strategies that deliver that category’s shopper. the tactics and strategies are developed from insights obtained through marketplace analysis of what drives shopper purchases. a category captain is an unbiased analyst who works to deliver the retailer’s goals for the category.

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Weekly reporting: each retailer has key measures that it expects to be recapped and time-trended on Monday morning. one set of measures are from the retailer’s data: dollar sales, volume sales, inventory, turns and, potentially, profit dollars. another set of weekly reports comes from syndicated data — nielsen/iri — with a focus on the retailer’s market share on dollars/units/volume. there’s also a group of household panel measures that can be updated monthly: trips, dollars/ trip, closure, loyalty, leakage and others.

Marketplace analysis: a key responsibility of the captain is to be a marketplace expert on the category, with an ability to provide shopper insights and highlight which retailers and channels are winning and losing. the analysis of the marketplace is a daily responsibility that focuses on the sales fundamentals that drive the business: pricing, promotion/ merchandising, assortment/distribution and shelving. the captain uses all available data sets to review the fundamentals to ascertain how retailers are using them to drive shopper behavior.

We believe that the insights come from thoroughly answering and understanding the dynamics involved in these questions:

What is happening in the category?

Why is it happening?

How should the retailer respond?

Assortment and shelving in the marketplace and key retailer competition Pricing and promotion in the marketplace and key retailer competition

How should I respond?

Marketplace Analysis

The data necessary to succeed at the category captain position have increased dramatically over the past five years. The proper data warehouse is a must for category captainship. The category captain may not value all of the data sets below, but it needs to have expertise and understanding of the following data: 1. retailer Pos 2. syndicated data 3. Household panel data 4. Marketplace ads/coupons 5. retailer loyalty cards 6. ecommerce data 7. social data

What is happening?

Why is it happening?

The graphic above shows the workflow for a marketplace analysis:

Strategic Yearly Review The category captain should provide a yearly review of the category based on trends, sales and any innovation that has launched. The key deliverables from a yearly review are: strategic choice on which segments to drive to deliver goals strategic choice on which brands to drive to deliver goals shopper choices: focus on closure, loyalty and leakage

Data Requirements

The Process The introduction of category management via catMan 1.0 more than two decades ago marked a turning point in how retailers and suppliers approached merchandising, shelving and assortment-planning decisions. This process is now at an inflection point, thanks to the emergence of new industry dynamics. These dynamics include the ever-changing shopper, an explosion of new data sets, the dramatic decline in

data storage and processing costs, the development of analytical tools that allow for quicker insight generation, and the growing importance of ecommerce. catMan 2.0 is the new industry standard process to create a comprehensive plan that meets shopper needs in a superior manner to produce better results for retailers and manufacturers. The process looks to enhance the workflows created in catMan 1.0 by highlighting the key industry changes: an abundance of new data, and the emergence of ecommerce, smartphones and innovative technologies. catMan 2.0 establishes a framework for how to integrate the changes to drive insights, and the 17 workflows allow a captain to use the correct tool or process at the proper time to deliver insights that drive the business. catMan 2.0 will continue to evolve and add necessary best practices and standards as shopper behaviors are shaped by technology. The cMA is launching a major project on ecommerce category leadership that will define best practices for the industry on standards and analytics. category management is on the cusp of the biggest changes in its 25-year history. The combination of innovative technologies with a constantly changing retail landscape has given more power to the shopper. The retailers and manufacturers that turn their abundance of data into actionable insights will influence shoppers on their journey to purchase.

The Ultimate CatMan Advantage STEP 1 CatMan 1.0

Internal Alignment

Category Definition

Organizational Design and Development

Definition CDT

CatMan 2.0

Key Process Steps

Internal agreement on objectives and strategies

What products are included? What are the subcategories?

STEP 2 Category Role

STEP 3

STEP 4

Category Assesment

Category Scorecard

STEP 5 Category Strategy

Assessment What Assessment Why

How important is the category to the consumer?

To the retailer?

Who buys the category? What are they buying?

CatMan 1.0: “Shopper Facts” Behavioral Assessment: Who, what, when, where, how is the category bought?

What are the goals and objectives?

How will we measure success?

How are we going to achieve the objectives?

CatMan 2.0: “Shopper Insights” Attitudinal and Perceptual Assessment: Why is the category bought?

STEP 6

STEP 7

Category Tactics

Plan Implementation

Assortment Pricing, Promotion, Shelf Merchandising, Shopper Marketing

Deployment, Supply Chain, ROI

What are the elements of the plan for each subcategory or segment?

Who does what and when?

Drives Shopper Marketing Builds brand and banner equity, driven by facts and shopper insights

Source: Category Management Association Progressive grocer December 2017

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2018 CategoRy ManageMent Handbook

Education

What the Study Revealed here are the key learnings from the study: only 7 percent of the college students surveyed believed that their high school guidance counselors did a good job of explaining retail careers.

The largest influencer of choosing a career was the information available on companies and careers on the internet. The next two influencers were faculty at the university and their parents.

The three most important factors in selecting employment were advancement opportunities, worklife balance and compensation.

The three least important factors in selecting employment, of the nine factors in the survey, were diversity/inclusion, environmental policies and work-from-home options.

To more than 90 percent of students, benefits (health insurance, 401(k), education) were as important as salary in choosing employment.

Managing Talent gUiDeliNes To helP recrUiT for cATegory MANAgeMeNT Jobs AT UNiversiTies. By Dan Strunk n 2016, 10 universities collaborated with the category Management Association to field the inaugural “student employment Motivation study.” More than 1,000 students were asked questions about their motivations and influences in choosing employers.

More than 450 responses were received from students pursuing marketing, category management, sales and retail careers. The students were asked 36 questions that focused on the following five areas: 1. career awareness of cPg while in school 2. career and personal values 3. selecting work 4. influencers on selecting a career 5. Demographics of the sample The universities involved were DePaul University, Northwoods University, ryerson University, saint Joseph’s University, Texas state University, University of Arkansas, University of North Alabama, University of Texas-Tyler, Western Michigan University and Xavier University.

70 percent of the students surveyed believed that their career will define who they are, and 81 percent believed that society equates occupation and income as success.

More than 90 percent of the students would relocate for the right job.

Almost 90 percent of the students would take a job with salary and a bonus, versus one with a potentially higher commission. current university recruiting efforts employed by most cPg companies aren’t maximizing results. Most companies don’t understand the curriculum, know the faculty, or have an ability to discern a candidate beyond their resume and transcript.

Progressive grocer December 2017

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2018 CateGoRy ManaGeMent HandBook

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Career advancement opportunities are the No. 1 need for students, so paint a picture of the opportunities at your company.�

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Companies looking to recruit category management professionals should follow these guidelines to ensure a steady flow of talent to the industry: Establish university partnerships to deliver trained talent.

Many companies have moved away from this model over the past 20 years. Universities need these partnerships to train and develop young talent, and to highlight the industry. Internships provide key benefits for all parties involved and enable faculty get to know their students.

Your total compensation package (compensation and benefits) needs to be understood now, and what it can look like five years from now. Career advancement opportunities are the No. 1 need for students, so paint a picture of the opportunities at your company.

Work-life balance is important to these students, so they need to understand the social aspects of your company.

Student-debt levels are at record highs, so guaranteed compensation is much more important than commission. The company that develops a program to help pay off student debt will be a highly attractive employer to this generation.

The information on the internet is the No. 1 influencer of career choice for these students. Companies need to learn to use the technologies of campus recruiting, such as Handshake, so they can interact with students.

Also, a company needs to ensure that its website highlights opportunities for college students.

Develop relationships with key faculty members. They know their students and their strengths/ weaknesses and likes/ dislikes. Companies should spend the money on a job service at a university and get a two-tothree-times ROI.

Dan Strunk is managing director of the Center for Sales Leadership at DePaul University, and SVP of certification and education for the Category Management Association. *Nielsen Retail Execution Audit Custom Study 2015 Š 2017 The Coca-Cola Company

Shopper-Centricity

Shopper-Centric Retailing for Today and Tomorrow Focus oN soluTioNs ANd exPerieNce is A FouNdATioNAl requiremeNT iF reTAilers Are To eFFecTively eArN shoPPer loyAlTy.

By Win Weber

hopper-centric retailing is an all-encompassing and transformative business model that focuses all functions within a retailer on increasing sales by exceeding shopper expectations.

This means evolving beyond ingrained business policies and practices to a fully integrated, top-down, cross-functional focus on the shopper, shopper solutions, and enhancements to the shopping experience. considering the fact that the grocery industry is experiencing the most dynamic change in decades with expanding food lifestyles, digital connectedness, social media and increasing generational complexities, this new business model provides the support necessary in today’s shopper-centric environment to deliver sustainable incremental gain. it’s expected to be a key contributor to industry growth by delivering customer satisfaction for years to come.

The new shopper-centric retailing business model represents a major paradigm shift. This will vary from a few retailers requiring minimal change to a majority that will require significant change.

those solutions the shopper is seeking and enhancements to the shopping experience.

This aligns with what we know about today’s shopper. Traditional definitions of categories no longer dictate the shopping journey, with shoppers wanting solutions tailored to their lifestyles. it’s the combination of items, with a particular solution in mind, that often defines a shopping trip. in a recent survey, shoppers scored solutionsbased merchandising as significantly more attractive on almost all key metrics than item-specific displays and signage. shopper solutions planning is a continuous process allowing for adaptability to, and staying in front of, changing market dynamics. it begins with, and is driven by, an in-depth understanding of the “why” behind what drives merchandising solutions, with a focus on shopper insights that identify actionable shopping experience issues and opportunities. The internal/external assessment step, which looks at actual and anticipated market performance for merchandising-solution potential, is an in-depth collaborative process requiring transparency in the sharing of consumer and shopper insights between the retailer and cPg manufacturer. This leads to the development of solutions groupings. solutions groupings capitalize on the growth power of complementary categories and products comprising the solutions from a shopper’s perspective.

New Vocabulary to Reflect Evolution Job titles and the vocabulary within retailers changed 27 years ago, when the industry shifted from basic buying to category management. Now, with another significant change taking place, it’s important to reflect this commitment throughout the organization.

For example, at the department level, the term “category management” should be replaced by the term “shopper solutions.”

The category manager job title should be changed to shopper solutions manager or merchant. Also, the functional title “store operations” doesn’t convey the importance of serving and meeting the needs of the shopper. one retailer has already made the change to “customer experience team.” This helps put the shopper at the forefront at all levels.

Insights Into Solutions shopper solutions planning is the next-generation process specifically designed to translate insights into enhancements at the category, aisle, department and total store. it shifts focus from products and categories to Progressive grocer December 2017

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SPONSORED CONTENT

Q&A

Talking with…

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More than half of Natural and Organic category consumers purchase grass-fed dairy, and organic 100% grass-fed products are the fastest growing organic segments, driving 23% of the YOY organic dollar growth.1 Progressive Grocer spoke with Eric Snowdeal about the features and benefits Grassmilk products deliver.

Progressive Grocer: What is Organic Valley Grassmilk®?

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PG: Who wants Organic Valley Grassmilk?

PG: Does Grassmilk Milk look and taste the same as other milk?

ES: Our cows produce a rich milk infused with hints of herbs and grass and all the things we love about a perfect day outdoors. Though the color and flavor varies slightly from season to season depending on which plants are dominant in the pasture at certain times of year, the easiest way to sum up the taste is to say it has a barely perceptible light herbal flavor. Some refer to it as a “grassy” note.

PG: What are the nutritional benefits of Organic Valley Grassmilk products?

ES: Consumers who want Grassmilk love dairy, and they want delicious and nutritious food produced the way nature intended. They also care about what happens behind the scenes. They care about great quality, humane animal care, the environment, and fair pay for farmers.

Organic Valley’s Grassmilk products can deliver on all these levels!

1

Source: SPINS 52 weeks ending 10/08/2017 combined Mainstream / Natural

channels 2

Studies from Washington State University (2013) and Newcastle University (2016)

reported, respectively, 62% and 50% higher levels of omega-3 fatty acids, 18% and 34% higher concentrations of beneficial CLA fatty acids, and an ideal balance of

ES: Organic Valley Grassmilk milk, yogurts and raw cheddar cheeses contain naturally occurring calcium, of course. But a big benefit is that because our organic cows spend so much time on pasture, Grassmilk products also contain higher levels of beneficial omega-3 and C14

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omega-6 to omega-3.

3

Source: 2016 Market LOHAS MamboTrack Health & Natural Consumer Annual

Study MarketLOHAS.com

Sales that grow quicker than grass and drive growth

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Organic 100% grass-fed products are the fastest growing organic segments, driving 23% of YOY organic dollar growth** • Organic Valley is the #1 grass-fed dairy brand** offering a broad portfolio of 100% grass-fed products including milk, yogurt tubs and cups, and cheese.

• Made with 100% grass-fed milk. No grains.

• Always organic. We never use GMOs, antibiotics, synthetic hormones, or toxic pesticides.

© 2017 Organic Valley | 17-10058

Email salesadmin@organicvalley.coop to place your order.

Visit www.organicvalley.coop for more on our Grassmilk line!

*6 oz. cup flavors: Black Cherry, Strawberry, Wild Blueberry, Vanilla and Plain 32 oz. tub flavors: Vanilla and Plain **SPINS: 52 Weeks Ending 10/08/2017 combined Mainstream/Natural channels.

2018 CAtEgory MAnAgEMEnt HAndbook

Shopper-Centricity

Solutions groupings, combined with shopper insights, lead to the development of solutions strategies. Strategy statements must align with corporate strategic initiatives and be consistent with the role of the category. The preparation of the final plan is a retailer-driven, in-depth collaborative process that focuses on the shopper, shopper solutions, the shopping experience and building shopper loyalty. This process sets a new standard for the industry, with CPG manufacturers participating to date rating it better and more productive than any they have experienced in the past.

Focus on Solutions and Experience There are certain structural elements that should be applied to how a retailer structures its organization if it is to optimize its shopper solutions management capabilities, including how support is provided to the merchandising teams, how merchandising and operations should interact, and how store execution should be addressed.

Our experience suggests the traditional department structure (grocery, nonfood), based on merchandise attributes, needs to evolve to a solutionsbased structure focused on shopper attributes. The current siloed department alignment should evolve to one with a focus on shopper solutions.

In this new structure, there are solutions group managers. For example, pet care, including food, supplies and accessories, would be assigned to one solutions group manager. Other solutions group examples include baking needs, household care and baby care. Reporting to the group managers are shopper solutions managers, who would focus on driving sales, understanding shoppers, creating solutions and exceeding shopper expectations.

Within each solutions group team is a manager working with the solutions manager team on the promotional and solutions elements of the plan.

Analytic Support is Strategic and Essential Analytic support for a retailer’s merchandising solutions function, in the future, should be viewed as a strategic imperative and an essential investment.

Vertical Alignment of Merchandising and Priorities

Shopper-centric Retailing Vision — Strategy — Commitment

Shopper Solutions Planning

Infrastructure

Strategic Positioning

Organization Restructuring

Shopper Insights

Descriptive Job Functional Titles Core Merchandising Processes

Internal/External Assesment

Shopper Experience

Marketplace Assessment

Actionable Shopper Insights

Solution Goals and Strategy

Repository of Knowledge

Focus

Shopper and Shopping Experience Source: Winston Weber & Associates

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People Culture/ Behavior Business Practices

Solution Plan Implementation

This takes into consideration that the solutions manager’s role will evolve from a specific category and product focus to a more strategic solutions-oriented role with a multidepartment, total-store shoppingexperience perspective.

Solutions managers need the right information for making decisions in this environment. They can’t be expected to be experts in everything. They need to be supported by a number of specialists with deep expertise in specific areas.

This will require the consolidation of the consumer/shopper insights and category analytic functions into one group.

Consolidation better positions the analytic function to identify opportunities through integrated analysis of disparate data/ information, and is essential when considering the analytic complexity related to the digital revolution.

Consolidation has worked so well with one client that it’s planning to establish a solutions support team “center of excellence,” which, in addition to analytics consolidation, will include all merchandising support functions reporting to a centralized decision support team. This structure is designed to lead to standardization, simplification and continuous improvement.

Cross-functional Collaboration Required Skills Performance Appraisal

Retailers should create a senior-level executive position within their store operations structure that’s responsible for executing merchandising plans; interfacing with the solutions team to ensure that plans are implementable; communicating with the stores on all merchandising activities; providing input on the need for locally relevant merchandising, including local brands or ethnically important items for the neighborhood; and acting as the feedback loop from the stores to the solutions team on what’s working and what’s not.

This position establishes vertical alignment of merchandising responsibilities and shopper-centric priorities. As the solutions teams are developing plans, they should be interacting with this function to ensure alignment and execution.

Importantly, it creates an alignment that’s more conducive to collaboration between the two organizations.

Addressing the Old Execution Problem out-of-stock conditions have remained in the 8 percent-to-10 percent range for years, with 72 percent of the problem directly related to store ordering/ forecasting and “in-store, not-on-shelf” conditions. Add to this wide-ranging planogram, assortment, display and pricing compliance issues.

Apart from investing in new predictive technologies, improving execution and enhancing the shopping experience are directly related to the organizational structure and deployment of resources at the store level. A new management function, manager of merchandising solutions and execution, should be added to store management teams, to coordinate cross-merchandising activity, support execution of corporate initiatives, and serve as a conduit for local merchandising within tight guidelines.

This will improve a retailer’s capacity to tailor in-store merchandising to “touch” the local customer. This position is accountable for the execution of all crossmerchandising activities across the store. it should be understood that process and tools alone will likely not produce the desired results.

Alignment and Transparency a Must Most retailers and cPg manufacturers still need to establish the type of relationships required to support a shopper-centric retailing environment. Many joint- or collaborative-planning processes are too tactically focused on individual brand-building opportunities. The alignment of business strategies and capabilities in a solutions-oriented environment, with a focus on the shopper, presents a significant opportunity for both parties.

By seeking ways to rise above brand-centric biases, both sides can benefit from common goals: to grow the business, increase overall sales and forge valuable long-term shopper relationships. sharing information is also an essential component of a successful strategic alliance. it’s foundational to establishing shopper-centric strategic alignment, and it needs to be improved.

Finally, this evolution will have implications regarding how cPg manufacturers conduct business with retailers in the future. The manufacturers that wish to develop strategic alliances, and actively participate in the shopper-centric solutionsplanning process, will need to better align their capabilities with the retailer.

A Case for Change: Tops Markets “Becoming a shopper-centric retailer and incorporating shopper solutions planning is an evolution and a journey,” says Jeff culhane, svP of sales and merchandising at Williamsville, N.Y.-based Tops Markets LLc. “shifting course to shopper solutions planning takes time, internally and externally. We’re still learning.”

The idea of creating business solutions at store level, learning how key categories play together, and how items within those categories respond to particular customer behavior versus looking at categories in silos has been a change, culhane admits. “shopper-centric retailing can be broken into three lenses: customer, supplier partner and retailer,” he continues. “The foundation is all about understanding the customer and what drives their behavior. For Tops, shopper solutions planning takes tightening the definition of ‘local marketing’ to a new level. Understanding at both a macro and a micro level the demographics around a store, the social economics of the marketing area, customer segmentations with that particular market and shopper cohorts, all have an impact on our plan.”

All of these factors define a category’s role and assortment, as well as impact a product’s role within a category. “A product or category location within a store no longer determines category business manager (cBM) ownership,” culhane says. “it’s one store.” Additionally, he asserts, shopper solutions planning creates trust in vendor partners. “sharing of data and insights with trusted vendor partners, as well as gaining access to resources that only a supplier partner

A product or category location within a store no longer determines category business manager ownership. It’s one store.”

—Jeff Culhane, Tops Markets LLC

can provide, is the foundation to building the plan,” he says. “The retailer holds the data around product and customer interaction, along with insights into your customer’s basket ... [and] shopper demographics.

This is gold to vendor partners. Understanding how the customer behaves and responds to promotions, shelf placement and product adjacencies helps guide vendors’ decisions on growth and spend.”

The categories planned to date have seen results regardless of the category size, culhane says. “For example, one category that had been seeing erosion executed the plan as outlined with a new set, consumer awareness and education, along with a shift in promotional strategy to improve the category’s profitability,” he recounts. “The team has exceeded its growth goals in units by one basis point, and profit goals by a whole point. it also improved its sales versus trend.”

To accommodate this planning-process change, as well as support of the cBMs, Tops created two key departments, culhane explains: “First was decision support. Tops has a loyalty card, called Bonus Plus, as well as a warehouse full of data. We needed to sift through the data and compile it into something the teams could work with. We broke the department into two teams: product and customer. We bring them together to look at the basket. Their insight helps guide decision-making during the planning process. The second department is in-store merchandising and execution. This team works with both the cBMs and key vendors partners to ensure store execution of the plans.”

Becoming a shopper-centric retailer “is not a light switch for the customer, the vendors or the retailer,” culhane cautions. “As you work towards building plans from the perspective of the customer, they will come. customers will recognize retailers working hard to gain their business, and the vendors will jump on board, too.”

Read more about shopper-centricity at progressivegrocer.com/CatMan2018centricity.

Win Weber is the founder, chairman and CEO of Tampa, Fla.-based management consultancy Winston Weber & Associates, which introduced the shopper-centric retailing model in collaboration with Deloitte Consulting and Food Marketing Institute.

Progressive grocer December 2017

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Q&A

Talking with‌

Brent Ewing VP of Product Development, Southern Imperial

Progressive Grocer: Why are store fixtures and displays such an important component of category management in grocery retailing today?

Brent Ewing: Product merchandising has been an issue as long as retail has existed. In today’s environment, we see more and more stores reducing their footprint, or updating their existing stores to engage customers better. Choosing the right displays and fixtures is a critical component of maximizing the space that is available and making every product visible and accessible. With a growing selection of product options for customers, retailers need to be sure that they can get all of the items that customers are looking for in an appealing display and organized to make the shopping process easy and enjoyable.

PG: Does Southern Imperial have anything new that would be of special interest to grocery retailers who want a new look in their stores?

BE: Southern Imperial is continually reviewing retail market and looking for ways to help grocers enhance

their product displays. A new line of products that we will carry in 2018 is self-serve bulk bins. As shoppers are increasingly conscious of what they buy, how much they buy, and how much they are spending, we see a real opportunity with gravity and scoop bins to help retailers merchandise bulk products. With these bins, grocers can carry a broad selection of bulk items, from nuts and candy to coffee, cereals, pet food and more. This allows customers to quickly view the available products and purchase precisely how much they want, and not be constrained by additional packaging, which makes them more environmentally friendly.

PG: I understand you are carrying new electronic price tags. How do those work? And what benefits can they offer grocery retailers?

BE: Grocers spend thousands of hours a year with price changes, which happen on a weekly, if not daily, basis. Electronic Price Tags allow for a centralized source to set all pricing and be pushed out and automatically updated for any and all locations at designated times. These help grocers ensure they have pricing integrity and accuracy for every item in their store.

Our Electronic Price Tag solution offers solutions for almost any environment in the retail store.

They also have additional features that can help with setting store planograms, giving notification of out of stock items, or help notify store staff of items that need to be picked for an online order. This opens up the options for retailers to dramatically reduce labor in a mundane task like price changes by adding automation. Employees can be freed up to engage more with customers, or help execute any omnichannel programs the retailer is running.

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2018 CAtegory MAnAgeMent HAnDbook

Superconsumers

Superconsumer Solutions to Reinvent Grocery STorIES AND MErcHANDISING SoluTIoNS ArE WHAT WE NEED For ToDAy AND ToMorroW. By Eddie Yoon

intertime in Hawaii is the window for epic waves on the North Shore, which could lead to a thrilling ride of your life, or a frightening or even fatal wipeout. It’s much like being in the grocery business right now: Grocers face three major waves that will either propel the industry forward to new heights or leave behind bruised businesses and broken brands.

We need to take a step back, rethink everything and consider radical solutions.

Business as usual won’t work.

More money now is spent on eating out than buying, storing and cooking food at home. Eating out and delivery have always been fun, but have never been better. We have more multicultural options to eat, with a greater ability to personalize our food to be tastier or healthier, with more convenience and at lower prices than ever.

Technology has disrupted how we eat and drink. Domino’s not only improved its pizza, but also doubled down on technology. More than half of its orders are digital, and it’s now testing driverless cars for delivery. If you don’t believe that Domino’s is as much a technology company as it is a food company, then consider that an investment in Domino’s Pizza stock in January 2010 would have outperformed Apple, Google, Amazon and Facebook.

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Finally, we are migrating from a scale economy to a superconsumer (high-passion, high-spending consumers) economy.

Scale used to yield huge advantages, but that was when consumers had limited choices. When you had only three TV channels to choose from, then scale mattered a lot. Now that the consumer has exponentially more choices of what to watch, it’s far more important to anticipate what people want than to advertise what you make.

Superconsumers are the consistent theme through all of these waves. Pizza superconsumers love pizza, period, and buy frozen pizza and deli pizza, as well as delivery or restaurant pizza. They love new technology that helps them enjoy and learn about pizza. And they are less interested in the “lowest common denominator” pizza that results from scale, but rather are inspired by fellow superconsumers’ new creations at Blaze or Mod Pizza.

Having literally written the book on superconsumers and created growth strategies for many food and beverage companies for two decades, I offer three things grocers can do now to win in this brave new world.

Cross-promote to Drive Aisle Conversion one of the coolest findings from mining terabytes of Nielsen Big Data was that a superconsumer of one category was a superconsumer of as many as nine others. often, these categories were surprising and spanned beyond the store.

For example, someone who loved standby electric generators also tended to buy more life insurance than they needed, had two or more refrigerators and freezers, and were superconsumers of vitamins. These were “preppers” ready for the worst-case scenario.

The International Dairy-Deli-Bakery Association discovered that some superconsumers of cheese from the deli section were also superconsumers of pizza. For

example, one pizza superconsumer was a graduate student who loved pizza but was tired of spending so much money on delivery. so he started buying frozen cheese pizzas and combining them with specialty cheeses and meats from the deli to top them off at home. This enabled him to personalize his pizzas while still spending less money. cross-promoting frozen pizza and the deli is a novel idea that also gets shoppers to go down more aisles. superconsumers have unlimited creative, quirky solutions to solve the problems they have or to fulfill broader quests in their lives. They don’t just use one category, but teams of categories, to solve them. Figure out what those teams are, and cross-promote creatively.

Merchandise Stories to Grow the Category Big Data is, of course, important, but stories are even more so. every superconsumer has an “origin story” of how they became a superconsumer, as they’re not born, but evolve that way over time.

Understanding the evolution and key triggering events can lead to creative merchandising solutions that not only appeal to superconsumers, but attract new users to the category as well.

For example, more than a decade ago, a hot dog company realized its category superconsumers were households with teen boys, and that these teens were consuming many of the hot dogs in a surprising need state: the after-school snack. going deeper into the superconsumer origin story, the company realized a few key insights: The teen had eaten lunch hours earlier and was starving after school. But speed was critical, as they had loads of homework, sports or other after-school activities to get to. satiety was key, too, as they didn’t want a blood-sugar crash later.

These teen superconsumers discovered that hot dogs were the perfect after-school snack. Hot dogs took 30 seconds to heat in the microwave and 30 seconds to eat, so much faster than a frozen appetizer or snack. But because it was protein, it was more satiating than chips or other carb snacks. This was key, because if you asked Mom whether hot dogs were healthy, she’d generally say no. But if you asked whether they were healthier than chips or carb snacks, then she’d absolutely say yes.

The hot dog company partnered with retailers to merchandise this story and not only grew themselves, but also grew the category. Profits grew even faster, as the after-school snack was counter-seasonal to the summer hot dog season, where volume is very high but heavily discounted, so not very profitable.

This is where leaning into technology, specifically social media, can be helpful — not to “talk to consumers,” but rather to listen and learn. A huge portion of instagram and Facebook is photos of food. Look at what people are eating and combining together. i know of $100 million new products that emerged from an idea from Pinterest. People are telling their stories. We just have to be humble and remember that we still have much to learn.

Shift Assortment to ‘Eating’ Versus ‘Cooking’ i recently wrote in the Harvard Business review that cooking is likely to go the way of sewing. My hypothesis is that cooking is migrating from “most consumers, most of the time” to “some consumers, some of the time.” This means that a lot of food categories will likely face strong headwinds, which makes it very difficult for both food brands and grocery stores to grow.

Now, this doesn’t mean that no one will cook, nor that grocers have to be 100 percent foodservice. This means that grocers need to reflect the right ratio of categories and brands that you can more readily eat, versus focused on cooking. in fact, just being one step closer to eating and drinking can help, since you don’t have to outrun the bear, just the slowest person. each merchant needs to look at its category and map out a spectrum of

Understanding the evolution and key triggering events can lead to creative merchandising solutions that not only appeal to superconsumers, but attract new users to the category as well.” cooking to eating across grocery and foodservice, and ask itself what’s growing, and is this reflected in what i have?

For example, rotisserie chickens are a great example of eating versus cooking. But even that can go further, as with alreadypulled chicken. or by looking at chik-Fil-A’s growth, grocers might consider a wider array of fried/breaded chicken for sandwiches. Deli pizza might evolve to mimic what the fastcasual channel offers.

We see the same thing in center store.

For example, single-serve coffee reinvigorated the coffee category by being one step closer to drinking coffee than having to make a full pot. The growth of jerky similarly represents the desire to eat meat versus cook it. in the produce aisle, fresh-cut fruit remains a brilliant category that makes consumers happy — and grocers very happy, too — by making a nice profit on food that was going to waste.

This is where scale can be a hindrance and speed is likely far more important. shelf resets may need to occur more frequently.

We may need to redo aisles and create new sections to excite shoppers. We may need to invest more in labor to create exciting experiences that drive trips to the store.

My view is that the growth of Aldi and the threat of Lidl and price-driven ecommerce are perhaps the best medicine for grocers. it will force us to confront the truth that scale isn’t as valuable as it once was, and that superconsumer stories and merchandising solutions are what we need for today and tomorrow.

Eddie Yoon is founder of Eddie Would Grow and author of “Superconsumers: A Simple, Speedy and Sustainable Path to Superior Growth,” published by the Harvard Business Review.

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S P ONS OR E D C ON TE N T

QA &

Speaking with...

Mark Hardy CEO, InCOntExt SOlutIOnS

Embracing Innovation for Impact at the Shelf Progressive Grocer: We hear a lot now about how retail isn’t dying, it’s evolving. What does this mean? brand-owned apparel line.

Mark Hardy: It means a few things. I don’t think anyone believed brick and mortar retail was going away completely—but as malls became scarce, consumer trends shifted toward fresh and organic, and Amazon just kept getting bigger and bigger, there was a heavy sense of helplessness that hung like a cloud over traditional brick and mortar stores.

We know now that we shouldn’t have been worried about people no longer shopping in-store. According to Accenture, 77% of Generation Z respondents—those who were born into using mobile and social technology—said that shopping within a brick-and-mortar setting is their preferred channel. For these digital natives, shopping online, as well as convenience in general—has always been the standard. Excitement to them means actually experiencing products in new ways. So the problem wasn’t that physical stores were going extinct. It was that many retailers and manufacturers simply didn’t—and many still don’t—know how to respond to these changes in consumer behavior. The retail industry is finally coming around to the fact that it needs to evolve not only from a consumerfacing standpoint, but behind the scenes as well—starting with the use of emerging technologies, like virtual reality solutions and other technologies like AI and automation— to change outdated go-to-market processes.

“Category managers need to embrace innovation in order to get into the mindset of their shoppers, learn what resonates, and what will draw them into the store.”

PG: How should today’s category managers be thinking differently when it comes to driving in-store interest?

MH: At a basic level, the goal of a category manager stays the same: increase penetration and sales of a certain brand and category, while staying on budget and on time. But the way they go about achieving that goal needs an overhaul.

Today’s shoppers want an experience—we keep seeing it over and over. Target has invested heavily in reviving its instore look and feel, with new layouts, convenient click and collect entrances, and wine and beer shops. Amazon-owned Whole Foods is creating a new era of grocery shopping, in that it allows seamless integration of the online and in-store worlds. Even Kroger is expanding its offerings to include a C22

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So category managers need to embrace innovation. They need to use technology as a tool to get into the mindset of their shoppers, and learn what resonates, and what will draw them into the store. It’s no longer about throwing up a new shelf arrangement or promotional marketing signage and hoping it sticks—it should be about first learning what will entice shoppers and what will drive that foot traffic, and then testing those specific concepts to learn which concepts will, or won’t, promote positive change.

Because knowing which concept will fail before launching it in the store is just as valuable. At InContext, our virtual reality solutions for retail are the catalyst for that change in thinking.

PG: Talk about how virtual reality is promoting positive change for category management practices, and ultimately helping create a space where shoppers want to be.

MH: Using a cloud-based VR platform for store planning and in-store concept creation, brands and retailers are saving time and money by visualizing and testing within a virtual environment before creating anything in the real world. So that’s the up-front benefit.

But it also allows for iteration on concepts, and mining insights directly from real shoppers, instead of just guessing or relying on historical data. How would your customers feel about a different signage placement, or more visible seasonal displays, or an exciting new product launch? These are all insights that can be found by leveraging virtual simulations. So you’re getting customized feedback from real shoppers, but before having to physically prototype products or use expensive mock centers to figure it out.

Plus, with virtual, you can communicate your concepts like never before. If you’re in charge of a category and want to show the retailer that your concept will increase interest at the category level in order to gain buy-in, VR is a powerful tool. Decision makers can become immersed within a virtual environment to truly understand the impression your concept will make, creating an impactful way to present your ideas.

By embracing innovative technologies like VR, category managers can evolve their go-to-market strategies in a way that will truly make a difference.

To learn more, visit www.incontextsolutions.com/catman.

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Retail ROI starts with VR. ShopperMX™ gives retailers and manufacturers a faster, smarter, more proďŹ table way to bring new concepts to life.

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