CPGmatters: Simplifying Product Assortment Leads to More Efficiency, Sales for ConAgra Foods

Discussion
Apr 27, 2010
John Karolefski

By John Karolefski

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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?

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9 Comments on "CPGmatters: Simplifying Product Assortment Leads to More Efficiency, Sales for ConAgra Foods"


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Dan Desmarais
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Dan Desmarais
11 years 15 days ago

Retailers have a long way to go in executing effective space management systems at the shelf. This is a good thing because it is a huge margin opportunity for them.

The ConAgra SPACE Program is a unique way of re-inventing something that’s been around for decades, and I applaud them for their initiative.

Space is one of the biggest expenses at retail, and often the most inefficient. Get rid of the bad items sooner and give the space to those who turn. Give up on hard blocks and you’ll suddenly find very efficient shelves.

This is not rocket science. We just need to execute the plan that we already know works well.

John Boccuzzi, Jr.
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John Boccuzzi, Jr.
11 years 15 days ago
With a global economy you would expect retailers to have very diverse shelves because of the options available to them and the opportunity to really focus on the needs of their specific customers. In fact, just the opposite has happened. More and more stores are looking more and more alike due to over simplification of categories and sku rationalization that limits options on the shelf.This has the potential to not only hurt retailers and manufacturers, but more importantly the consumers. As we analyze shelf management and use Category Management solutions to help optimize our stores and assortment, we need to start using different variables to help make those decisions. Some Examples Include: Sustainability – Where is the product coming from and what is the transportation cost – not just dollars and cents but carbon costs as well. With consumers caring more and more about the environment this should play a factor in your assortment and shelf management. Country of Origin – Again this relates to travel costs, but also it ties in with health and… Read more »
Kai Clarke
Guest
11 years 15 days ago

SPACE is not just about effective shelf management and product placement, it is about the result of all of this…eliminating OOS! These 3 worst words in retailing drive profits lower, decrease sales, decrease consumer take away, and create fewer incremental (and future sales). By making their focus more succinct, keeping their best products out front, and eliminating the noise in the categories they compete in, ConAgra has maximized the effectiveness at shelf level for both their brand and the retailer! Everyone wins!

Dr. Stephen Needel
Guest
11 years 15 days ago

Good to see ConAgra stepping up and cleaning up the categories that they messed up years ago with their SKU proliferation.

However, simplifying is not as much the answer as is cleaning up. Getting rid of unproductive SKUs that don’t serve a purpose and replacing with more space for fast sellers or new/unique items should be done everywhere as a matter of standard business practice.

Bill Bittner
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Bill Bittner
11 years 15 days ago

The challenge of course is slotting fees…. As long as manufacturer representatives can buy their way onto the shelf through allowances, this simple method to improve margins will be too difficult for category managers to ignore and will encourage poor assortment decisions.

Category management, and shelf allocation specifically, are fundamental tools for inventory management, efficient replenishment, and enhancing sales. I don’t see anything about the ConAgra SPACE program that is remarkable; it is similar to other products and implementations. Space management activities are also susceptible to the “Hawthorne Effect,” because results improve merely because more attention is being paid to a particular category. So it is not clear whether this tool is revolutionary or just another implementation of category management.

Despite the futility that allowances introduce, category management is probably the best tool a retailer has for managing the vast variety of products in a supermarket. If nothing else, they can use it to recognize how much allowances are distorting actions from the optimal.

Gene Detroyer
Guest
11 years 15 days ago

“SPACE” is the latest name for what we have been talking about for 40 years. Unfortunately, what often happens with these programs is that they tend to migrate into specific shelf sets presented by the manufacturer that don’t necessarily reflect the optimum shelf sets for individual stores.

When will a manufacturer come into a retailer with a “SPACE” program and say, “Our brand is number three or four in the category. It only makes sense to cut our facings by 70% and reallocate the space to our competitors.”?

True optimization and control of the shelf can only be executed by the retailer. The retailer is the only entity that has all the information necessary to make the appropriate decisions and the retailer is the entity that suffers most from misallocation.

Ralph Jacobson
Guest
11 years 14 days ago

I continue to find it fascinating how we in the grocery biz make “brain surgery” out of everything. This is a simple business. It’s just not easy. Wanna increase sales? Give the stuff that sells more room on the shelves to carry the inventory from truck to truck. Trouble is, as you walk the aisles, SKUs with movement of one case per store per 13 weeks will have the same allocation as those SKUs with far greater movement. This is basic, and perennial stuff.

It’s great to see a major player take action, however, every supplier and retailer can and should do this. There are great tools to take the pain out of this challenge. Take advantage of them and kill off this out-of-stock issue once and for all.

Mark Johnson
Guest
Mark Johnson
11 years 14 days ago

Each store, like each individual, has its own unique personality, and thus its own set of needs. Therefore, marketing to them will be more effective the more personal you can make it.

Herb Sorensen
Guest
11 years 14 days ago
There is a lot of proper commentary here on the importance of emphasizing the top sellers, but simply giving them more space is inadequate. They need to be called out by signage, as “This is the Top Seller.” The reality is that most shoppers have very little commitment to any product on the shelf, they really want to just grab it and get on with their lives. Calling out the top seller assures them that more people choose this one than any other. Ergo, for me and millions of other shoppers, grab it and figure those people probably took the time to figure out the best choice, and I’ll just free-ride on all those other shoppers! It works, and you can get significant lift by this simple expedient. It’ll also give you more out-of-stocks. Thank God for OOS!!! Seriously, the worst store in the world is one in which every shelf is full and faced up. Nobody is buying anything. Anytime you accelerate sales, expect to see increasing OOS. Of course, frequent restocking, larger displays,… Read more »
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