Cannondale Associates' 2009 Category Management Benchmarking Study

The balance of power between manufacturers and retailers has tipped. That is the consensus of the trading partners in the 2009 Category Management Study released by Cannondale Associates. Both expect the trend to continue.Manufacturers and retailers agree that they held equal shares of power in their partnerships five years ago. Today, however, manufacturers believe that retailers control nearly two-thirds of the overall power and will extend their control to 71% five years from now. Meanwhile, retailers believe they control 60% of the overall power now, and expect to control nearly two-thirds in five years. Manufacturers see retailers asserting their power in insights ownership, marketing expertise and thought leadership, in particular. Retailers agree that they are gaining ground and will dominate these areas in another five years.This power shift can be linked to retailers' heavy investments in intellectual capacity over the past decade. Retailers now have proprietary data and competencies to interpret and act upon it, allowing them to be less dependent on manufacturers' input in crafting their strategies. Several retailers have leveraged their loyalty card data to identify their most valuable shoppers and to tailor programs to retain those shoppers, for example. "Manufacturers have seen this coming for a long time. The good ones have been working to develop some unique capabilities that add value to the retailer and preserve their influence in store," observes Bob Hilarides, Managing Director at Cannondale. "They know that marketing right at the point of purchase is the most impactful means of changing shopper behavior, and they cannot afford to cede it to the retailer completely."With their increased power, retailers are escalating the demands placed on manufacturers. Manufacturers must respond to this challenge by being very selective and carefully identifying opportunities where they can provide the most value. Because manufacturers do not have the resources to provide customized, detailed processes to all trading partners, they are selecting specific retailers and areas of focus in which to invest. "The companies that are best at differentiating themselves today are choosing to truly excel in just two or three areas, based on their trading partners' needs, competitive gaps and their own core competencies. In the other marketing areas they may choose to be just competitive, and not try to stand out." notes Hilarides. Top players have already begun differentiating themselves by focusing their efforts. One top manufacturer, for example, has invested in breakthrough tools for their sales organization such as a total store "front page ad analyzer," a "health and wellness evaluator," the "iCUBE" and the "Product Assortment Optimizer." Another leading company has pursued insights into Mom and a virtual reality capability. Given the shifting balance of power and the ever increasing demands from retailers, the need for discerning investment has never been greater. Those companies that are selective in choosing new strategies to differentiate themselves are likely to maintain their influence and win in the future retail environment.Cannondale Associates is a leading sales and marketing management consulting and software solutions firm with offices in Wilton, CT, and Evanston, IL. It is part of Kantar Retail and WPP. In addition to the Category Management/CMAR study, Cannondale publishes benchmarking studies on trade promotion spending strategies, foodservice and the annual "PoweRanking" report.

Cannondale Associates' 2009 Category Management Benchmarking Study

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