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Case Study: Fast feedback

Seafood retailers slow to adopt category management tools

Tracking product beyond the back room can reveal sales
    opportunities. - Photo by Steven Heddericg
By Lisa Duchene
December 01, 2007

A fabulous week of salmon sales for your store may be 10,000 pounds. Then again, if your competitor a half-mile down the road sold 20,000 pounds that same week, it wasn't such a good week after all.

To know the difference between celebrating sales and fixing a big problem, you'd have to know the total amount of salmon sold in a geographic region where your company has stores. Retailers well versed in category management have this kind of information.

Category management helps retailers analyze past sales to improve future performance. Most retailers have plenty of their own sales data, but not sales of an entire category of product sold in a specific region.

"Knowing you're not with everybody else helps to understand why business might be off in that area," says Joe D'Alessandro, senior director of seafood merchandising for The Great Atlantic & Pacific Tea Co., a 400-store Northeast c h ain that utilizes category management.

D'Alessandro's team turned to category management a little more than a year ago to realize seafood sales at the company's Super Fresh stores in Baltimore trailed their competitors. Pricing and quality was an issue, so the store negotiated better cost for better quality product and lowered prices. Those stores now run a high positive sales trend, says D'Alessandro.

"If we're not No. 1, we're trying to find out why," he says. D'Alessandro can't imagine retailing without category management as a tool. Doing so would be like writing a book without use of a dictionary, he says.

"There's so much information in there if you know how to filter it," he says.

Another Northeast retailer that has used category management for about a year says that since retailers sell seafood in different departments - frozen shrimp and fish sticks can often end up in the center of the store instead of the seafood department - the data must be used carefully.

"It is a good tool for benchmarking," he says. "With that tool, combined with other things, we might make all sorts of different decisions," such as changing pricing or increasing the frequency of advertising, says the retailer.

Retailers familiar with category management are likely in the best position to compete in high-stakes perishables categories like seafood.

"Unless you have a category-management business plan laid out, you're not necessarily competing with all of your guns blaring at an important time," says Tom DeMott, COO of Encore Associates, a perishables consulting firm in San Ramon, Calif. Encore sells analytical tools and templates to help retailers analyze category sales data.

In recent years, competition from super centers and specialty retailers has eroded sales at traditional grocers, which had to elevate their perishables status to compete. According to a recent Packaged Facts market report, supermarkets still dominate perishables sales by a comfortable margin. Excluding the frozen foods and floral departments, supermarkets rang up 71 percent of total retail fresh foods sales in 2005, or about $163.8 billion, versus 13 percent, or $29.8 billion, in super centers.

Until recently, the data that allows retailers to use category management in the center store wasn't available for seafood.

Information Resources Inc.(IRI) in Chicago tracks sales data for packaged products, or those bearing a UPC code placed by the manufacturer. But that method leaves out "random weight" products like fish fillets, apples or lettuce that typically aren't coded until they're rung up at the cash register.

DeMott, at Encore, worked with Nielsen 10 years ago to capture some of that data and offer it to retailers and suppliers. Fresh Look Marketing, a firm that spun off from IRI in the last few years, now sells that random-weight data.

The Perishables Group, also in the Chicago area, for the last two years has sold various packages of random-weight data, gathered by A.C. Nielsen, to retailers and suppliers. Prices range from $5,000 to hundreds of thousands of dollars, depending on the data package. Nielsen captures store data from the majority of U.S. grocery retailers, explains Steve Lutz, executive VP of the Perishables Group and author of SeaFood Business ' monthly Retail Report.

"Generally speaking, we're going to capture two-thirds of the seafood dollars generated by grocery stores nationally," says Lutz. "It's higher in some markets and lower in some markets where the reporting is not available."

There is no firm data about what percentage of grocery retailers are using category management techniques for their seafood departments, but DeMott estimates it's fewer than 25 percent.

Jim Wallace, VP of perishables procurement at C&S Wholesale Grocers in South Hatfield, Mass., agrees the number is small. "If they do have that data," says Wallace, "then no one knows about it."

Seafood buyers are much more likely to use category management for their frozen, packaged seafood products like branded fish sticks and seafood meals, says Wallace.

Compared to all the perishables categories, seafood has been the slowest to adopt category management, says DeMott. He suspects in other categories a large supplier or marketing board purchases the data and makes it available to retailers.

Another potential reason the retail seafood department has been slow to adopt category management is the sheer number and complexity of seafood products. But such complexity requires an objective picture of performance, says Lutz.

 

Contributing Editor Lisa Duchene lives in Bellefonte, Pa.

 

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