Improving Your PoweRanking

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Improving Your PoweRanking

• February 28, 2005

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Cannondale Business Overview

• Cannondales business is organized around
  generating, organizing, and delivering insights
  to improve business performance in the CPG world

Primary Shopper Insights
Business Solutions Consulting
Executional Applications

• ShopperGenetics
• Benchmarking
• ConsumerCepts
• Controlled Store Testing

• Trade Promotion Strategy and Analysis
• Consumer Marketing at Retail
• Best Practices Benchmarking

• RichMix
• PriceRite
• Snapshot
• Ginsu ABC

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PoweRanking is one of four major Cannondale
surveys a year
Category Management
PoweRanking
Trade Promotion
FoodService Elite
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The specific goals of the PoweRanking

• Identify the best manufacturers and retailers, as
  evaluated by their trading partners.
• Provide insight into what makes them the best.
• Define the importance of key metrics between
  trading partners.
• Highlight areas for improvement.

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PoweRanking Background

• Ninth year of the PoweRankings.
• Surveys fielded in May/June.
• 250-400 respondents each year.
• PoweRankings released in mid-October.
• Percentages reflect Top 3 ranking in each
  measure.
• Composite reflects combined average of 3
  Strategic Importance and average of 5 Business
  Fundamentals scores.

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Measurement Criteria
Strategic
Manufacturers
Retailers

• Best combination of growth and profitability
• Most important consumer brands to retailers
• Clearest company strategy

• Projected to be Power Retailers in the next 15
  years
• Best job of branding their stores
• Clearest company strategy

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Measurement Criteria
Business Fundamentals
Manufacturers
Retailers

• Best customer/sales teams
• Best supply chain management
• Most innovative marketing programs.
• Most helpful consumer information
• Best practice category management/CMaR

• Best category management/buying teams
• Best supply chain management
• Most innovative consumer merchandising programs
• Best retailer with which to do business
• Best practice category management/CMaR

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Discussions are conducted with retailers and
manufacturers representing a wide range of
perspectives
Stater Bros.
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2004 PoweRanking Summary

• Manufacturers
• Significant movement among manufacturers versus
  past several years.
• PG is ranked highest among manufacturers.
• DSD companies in retreat.
• Non-food companies and Nestle gaining ground.
• Retailers
• Continued non-grocery strength
• Strength of privately-held regional chains

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The Best of the BestRetailer PoweRanking Winners
2004 PoweRanking Composite - Retailers
Point Chg.vs. 2003 -1 -1 -1 1 3 3 2 1 -7 -2
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Projected Power Retailers
Which Retailers are Projected to be the Power
Retailers in the Next 15 Years?
Pt. Chg. Vs. YAG
-2.4 -3.7 -1.2 3.9 2.2 4.4 1.0 -9.3 2.8 -7.7
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The Best of the BestManufacturer PoweRanking
Results
2004 PoweRanking Composite - Manufacturers
Point Chg.vs. 2003 5 1
2 3 -2 3
-6 NC -5 -1 4
NC
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Profiling The Big Four Manufacturers
Who is?
Why?
Top Two PoweRanking factors by company
PG Kraft/Nabisco PepsiCo General Mills
Clearest company strategy 29
Most important consumer brands 57 49
Growth profitability
Most innovative marketing 29
Best consumer information
Best sales/customer teams 31 26
Best supply chain management 55
Best practice category management 45

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PoweRanking Value Pyramid
PoweRanking Measure
Retailers Top 2 Box

• Growth Profitability
• Sales Teams
• Consumer Brands
• Category Management
• Consumer Insights
• Innovative Marketing
• Clear Company Strategy
• Logistics/Supply Chain

• 80
• 70-75
• 50-65
• 100

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If supply chain isnt working, nothing else
matters
Lowest
Internet strategy
Fixture approach
Priority
Frequent shopper card
Consumer insights
Highest
EPA/POG
Lowest
Trade Promotion Evaluation
Consumer Insights
Customer Category Management
Priority
Promotion Planning
Customer Service
Supply Chain
Highest
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Best Combination of Growth Profitability 2004
Which manufacturers provide the best combination
of growth and profitability?( Retailers Rating
Among Top 3 Manufacturers)
Point Chg.vs. 2003 3 10 4
1 2 -3
-4 4 NC 1
-5
HPC
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2004 PoweRanking Key Insights

• The two top issues that retailers and
  manufacturers identified as critical were
  innovation and execution
• Innovation New products, insights, processes and
  marketing
• Execution At retail with product on shelf,
  strategies and marketing programs

Generally the innovation leaders included
non-foods companies and execution leaders
included food and beverage leaders
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Industry Issue Importance Innovation and
Execution
Retailer Perspective
Manufacturer Perspective
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Innovation is perceived as the driver of Growth
and Profitability

• Food companies are very good at what they do.
  But, were in a period of relative stagnation
  where there isnt anything really exciting taking
  place in the market. The best example of this is
  the whole low-carb phenomenon.
• It never used to be that we would consider
  products coming from Unilever or PG as profit
  drivers. But thats all changed because theyre
  figuring out how to introduce products where we
  can make money as well as drive tonnage.

Innovation in insights, products and promotion is
the key to profitable growth
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The big manufacturer innovations driving growth
and profitability
Innovations in the Past Two Years
Unilever Nestle General Mills PG Axe Coffee Mate Whole Grain Whitestrips, Swiffer Wet Jet, Mr. Clean Jet Wash
Kraft PG Event Customization BrandSavers
Campbells Clorox IQ Shelf Listening Tour
Products
Promotion
Category Management Initiatives
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Best-in-class competitors excel in innovation,
execution or both

• Companies like PG and Unilever have introduced
  more exciting product over the past 12 months
  than they have in the past three years. They are
  really working hard to keep their current brands
  fresh and introduce new, meaningful brands.
• Kraft has continued to spend money against key
  brands like Mac n Cheese to keep it
  contemporary. Its important they do this
  because even though everyone knows what the
  product is, keeping the brand exciting is
  critical.

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Insights leadership is coming from non-foods

• Non-foods manufacturers have had to innovate
  because their categories were stagnant. The idea
  of savings and convenience as consumers have less
  time to clean. Now, youre seeing a whole series
  of new, really innovative products come out of
  those insights that are designed to save
  consumers time.

PG, Unilever, Kimberly-Clark and Clorox viewed
as insights/innovation leaders
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Key success factors for executional excellence

• Passion for the Customer
• Customer relationships are valued and cherished
  above almost anything else.
• Results Focus
• Culture of aggressively driving business results.
• Capability/Talent
• Continuous improvement mentality that drives
  constant renovation.

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Typical barriers for manufacturers

• Issues
• Seen as putting its interest ahead of the
  retailers
• Corporate arrogance
• Lack of listening
• Not considered responsive
• Siloed organization
• Lack of authority/empowerment
• Communication
• Not helping customers differentiate themselves
• Customization
• Flexibility
• Program and product development doesnt fit with
  retailers calendars
• Opportunities are lost

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Manufacturers must focus better on retailer
imperatives of differentiation and customization
Customized Programs
Shopper Insights
Segment Marketing
Broader Perspective
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A success formula has been identified for
PoweRanking leadership
Category Growth Profitability
Customer understanding/timeliness
Product and program innovation
Program customization/ timeliness
Supply chain



These four top drivers all received 90 top two
box response ratings
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Strong Consumer brands are critical to long-term
success

• The big brands are driving most of our very
  successful operations. We are now focused on
  only promoting the 1 or 2 brands in a
  category.
• Kraft does better than most. They have the
  products in every category. Kraft has learned
  how to pull things together with Nabisco.
• PG is up to 15 1 billion brands in its
  portfolio. That brings tremendous power and
  leverage.

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Question
How to build consumer brand equity in a
retailer-centric world?
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Consumer Package Goods Marketing Evolution
Pre 1980
1980s
1990s
2000-2005
2005-2010
Marketing-At-Retail Full Shift
Brand Marketing Control
Trade and Consumer Shift
The Power Shift

• Equity building
• National branding

• Trade growth
• Wal-Mart emergence
• Media fragmentation

• Co-marketing
• Retailer consolidation
• Internet boom
• Category management

• Escalation of trade
• Wal-Mart leading the way
• Frequent shopper card programs
• Merchants as marketers

• Marketing-at-retail breakthrough
• Revenue to retail
• Marketing/sales/ logistics integration

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Key trends are at the center of a growing
marketing issue
Key Trend Drivers
The Issue
CONSUMER

• How to effectively and efficiently influence the
  consumer shopper consumer shopper.. to
  purchase products today and tomorrow

BRAND
RETAILER
MEDIA
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A variety of manufacturers and retailers have
been identified as leaders in the field of
Marketing-at-Retail

• The companies that come to mind are in the
  HBA/HBC or the non-food arena. The food
  companies appear to be behind the eight ball.
• PG is by far ahead of the pack. Pepsi is still
  very driven by event marketing and big POS
  programs. Coke has brought some industry programs
  to the industry but most of the big companies
  such as Nestle, Kraft and even General Mills are
  all similar and tied for second.

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The current trend will continue with more dollars
passing through the retailer
1950s 1980s
Periods
1990s
2000 2005
2005 2010
Brand Marketing Control
Theme
Trade and Consumer Shift
Marketing-At-Retail Full Shift
The Power Shift
Consumer
Go-To-Market Focus
Shopper
Consumer
Trade
Customer

• Brand is king
• Emergence of Wal-Mart

• Retailer consolidation
• Brands are challenged
• Category management

• Retailer data insight
• Differentiation is key brand and retailer
• Retailer revenue needs increase

• Consumer marketing and shopper marketing
  re-balance
• Mass/national retailers balance better regionals

Comments
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Power Profile Diagnostic Tool
Manufacturer Power Profile
Growth and Profit
Value
Assets
Sales Functions
Marketing Functions
Consumer Brands
Sales Teams
Capabilities
Cat. Mngmt.
Consumer Insight
Innovation
Strategy
Logistics
Foundation
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Manufacturer Power Profile by Management Level
Senior Managers
Category Managers
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How to Improve

• Establish a clear benchmark and scorecard
  regarding performance among the top retailers.
• Establish a scorecard based on feedback from the
  top 20-25 retailers that can be benchmarked
  annually to identify retailer perceptions
  regarding the industry.
• Determine what is important to customers at a
  strategic level and identify opportunities to
  improve position with retail management.
• Identify the critical elements for retailers in
  making choices overall and those specific to the
  category.
• Gain customer goodwill by working with them to
  grow the business.