Channel Report: The Supermarket is Still King

Last year, the supermarket celebrated its 75th anniversary, and the channel has become a very different beast since Michael Cullen opened the country's first supermarket in 1930. Technology is refining stores, and channels like club stores and dollar stores are attempting to steer away customers. But with the ever-increasing offerings, coupled with the convenience of national chains, supermarkets persist to be a pit-stop staple for millions of Americans. Although few other retail channels provide a comparable level of exposure, supermarkets are not always an easy home for brands. Increased restrictions on P-O-P are a stumbling block for marketers who, presented with more P-O-P options than ever, face the challenge of catering to the heightened expectations of shoppers who want more product information as well as an enhanced shopping experience. Surveys indicate that P-O-P sells more product, but in-house rules and crowded stores continue to send marketers back to the drawing board. Add relentless competition from private label offerings, and holding your own in supermarkets is a daunting task by anyone's standards.The StatisticsAccording to a 2005 study by Mediaedge:cia, in-store advertisements influence more than 75% of supermarket shoppers to plunk down money for a specific brand. The study revealed that more than a third of consumers say the ads influence them to buy a new product or try a different brand, and that 44% of customers are aware of most in-store ads. The study also found that the physical placement of in-store ads influenced purchases, with shoppers noticing endcaps and store leaflets/magazines the most. Shopping cart ads and in-store television ads, however, failed to catch shoppers' eyes in a significant way, according to the respondents. Because the consumer demographic found in supermarkets is so varied, hitting one target audience may not be the most effective plan. The Mediaedge report indicated that brands using a variety of ad and point-of-purchase displays were more likely to reach a broader band of consumers, as different age groups responded to different types of displays. For example, the study discovered that shoppers between the ages of 55 and 64 responded well to product demonstrations, while 45- to 54-year-old customers preferred leaflets and magazines. Product packaging, checkout counter ads and store entrance/parking lot ads influence 35- to 44-year-old consumers, while shelf signs best target shoppers between the ages of 25 and 44. Clean Floor, Messy DebatePervasive P-O-P is not always an option for brand managers, however. Clean-floor policies instituted by the stores that severely restrict P-O-P are a point of contention between supermarkets and brands. Publix Super Markets Inc. employs a clean-floor policy "to support our direction for an uncluttered look," says Maria Brous, director of media and community relations for the Lakeland, FL-based chain. "We are very strict regarding any shelf-edge materials because we believe it is important to keep this area uncluttered so our customers can easily see our price and on-sale tags," she says, adding that Publix in-store P-O-P includes ceiling signs, speedway signs and occasionally shelf-edge materials.Brand marketers have found that stores will make exceptions to clean-floor guidelines on a case-by-case basis. "With a particular chain in the Southeast, we're looking at some racking," says Jeff Weber, national sales manager of Old Wisconsin Food Products in Sheboygan, WI. "The smart chains don't make [a blanket] policy against it; they judge each P-O-P piece on its individual merits." Old Wisconsin Food Products manufactures beef and sausage products, such as Snack Bites, Snack Sticks, Summer Sausage and the new Snack Stackers."It's inevitable that you have to work within the retailer's guidelines or requirements, but if you show them something that will increase sales for that category -- and that's going to benefit them -- [it's more likely that they will] bend those rules for you," says Aaron Keller, co-founder and managing principal of Minneapolis-based Capsule, whose clients have included Byerly's premium grocery stores."Several of our retail customers practice a clean-floor policy," says Eileen Granata, manager of co-marketing for San Francisco-based Del Monte Foods. "Where this applies, we work on alternative sources for communicating our consumer message. We work with the retailer to develop a customized and compelling offer that appeals to both our consumer and the retailer's customer. By working with our customers, we can develop the appropriate communication vehicle that meets our need to communicate a message while abiding by the retailers' P-O-P guidelines."Sometimes, it's best to have a backup plan in case not all of your P-O-P makes it to the floor. Lee Kum Kee USA Inc., a manufacturer of oyster, soy, chili, convenience and exotic gourmet sauces, designed its New Foil Pack Ready Sauce line with a "great eye-catching package that includes an outer box holding the sauce to draw attention," says Sonia V. Ramirez, assistant marketing manager for the City of Industry, CA-based company. "In some stores, we are not allowed a shipper," she says. "But we still have the excellent packaging to help attract consumer attention to the product."Clean-floor or no, supermarket retailers are flexing more muscle than they have in the past, putting more restrictions on the size and shape of point-of-purchase displays. This can cause a struggle for manufacturers trying to conform to changing requirements while still displaying eye-catching P-O-P.P-O-P size requirements can be a challenge for brands that want to use displays to convey a specific atmosphere for their product. Old Wisconsin's Weber says he has recently encountered a new challenge for supermarket point-of-purchase: a height restriction that limits or eliminates headers."Every place we go now, we see a lot of corrugated displays out there that are minus the header card," he says. "That's my brand message that I can't use. My tiered rack on wheels is now all of a sudden too high for the stores." Another concern he has is getting retailers to properly hang the company's clip strips. "We have a very good product on a very inexpensive clip strip," says Weber. "When we sell through, the clip strip goes into the garbage. We've got to fight constantly to get reorders in and to have the retailer put up the clip strips."Label WarsIn addition to P-O-P restrictions, brands face competition from supermarket private-label products. The value-priced clone products are a boon to supermarkets who want to heighten their own brand equity and stand out among competitive chains. According to Brous, Publix has increased its private-label products in recent years to "offer some differentiation in a CPG environment where almost all products are the same from retailer to retailer."The rising profile of private labels has gotten marketers' attention. "Private-label products have come a long way over the past several years," says Del Monte's Granata. "The quality has improved from a packaging and product point of view."Branded products like Del Monte's offerings, she says, are still perceived by customers as a higher standard of quality. "Private-label products will always be a concern; however, ensuring that Del Monte delivers on our promise of the highest quality for consumers is our priority." Increased private-label offerings mean that name brands have to work harder to capture the consumer dollar. Because many stores position their private labels on the shelf next to the brands they compete with, securing independent space on a display can be a crucial strategy for name brands. For Old Wisconsin Food Products, having a P-O-P display gives brands a leg up toward getting noticed and purchased by shoppers. "It's not about shelf space, it's not about being on a peg -- it's about being in a display, it's about clip strips and graphics on header cards and permanent displays," says Weber. Another way to grab consumers is to out-perform the store's brand in terms of your name brand's product variety. "One advantage manufacturers have is that a retailer can't innovate in every single category -- it's not economically possible for them to do it," says Capsule's Keller. Which Media Sends the Best Message?With Wal-Mart TV claiming more than 100 million viewers each month, in-store media is catching on as a way to quickly reach a large audience who is ready to buy. Some supermarket chains, including Publix and Kroger, have launched their own television networks and will offer ad placements to manufacturers. Brands are still debating the efficiency of this system."I think it's a great idea to do in-store television advertising. Putting the message in front of the consumers while they are thinking of what to prepare for lunch/dinner is a great way to entice the consumer," says Lee Kum Kee's Ramirez.Del Monte uses in-store networks on a case-by-case basis. "In-store networks can aid in driving volume, especially when a cause or health platform is being communicated," says Granata. "However, you need to position your message differently when using in-store networks: The message needs to be meaningful without being considered in-store noise." Many new technologies are surfacing in supermarkets, in many cases attempting to make shopping easier for visitors. Giant Food Stores is one retailer testing new technology in-store. The chain has a store set up with self checkout machines, handheld scanning devices, touchscreen digital produce scales and kiosks. Food Lion's Bloom stores in North Carolina also test similar technologies."A more contemporary under-standing of P-O-P is a much more loose and blurred area," says Christopher Studach, director of design for King Retail Solutions, Eugene, OR. "There are things cropping up in stores that never used to be there before at the product level, such as educational signage that carries some sort of message -- it's not simply just a sign about the product or a sign trying to educate the customer about the product or a sign trying to sell the product, but a sign that furthers the brand.""With the advancement of several new technologies, such as plasma video screens on shopping carts to other forms of electronic in-store communications, supermarket P-O-P will change with the current trends in shopping," says Granata. "Consumers want relevant messaging tailored to their lifestyle with messages that speak directly to them. Supermarket P-O-P will need to keep up with consumer demand for relevant information."P-O-P companies that deliver innovative ways to communicate will assist in this growth. Traditional P-O-P will always be a stable means to communicate a message, but the way in which the message will be delivered will vary as the P-O-P preferences of the retailer change."Research, including the previously mentioned Mediaedge study, also reveals that print ads still reel in consumers. "To be in the retailer's Sunday circular or flyer, to be as closely connected to the retailer as possible in every way is definitely a good thing for the brand," says Capsule's Keller.Two's CompanyOf all the techniques for advertising and using P-O-P in supermarkets, cross-merchandising gives brands the most opportunities. To grab consumer attention, brands should go beyond the traditional "toothbrush and toothpaste" pairing and explore unique match-ups. For example, Paul Kramer, COO of Catapult Marketing, Westport, CT, described a campaign that his company ran called the Lysol Healthy Home program, featuring the tagline, "Trust Your Home to Lysol." The P-O-P display incorporated all Lysol cleaning products, such as toilet-bowl cleaner, disinfectant sprays and kitchen cleaners, in one place. The idea, says Kramer, was to "give consumers the solution to keep their homes healthy -- that's innovation that retailers are looking for today.""We are always looking for new and unique ways to cross-merchandise our products," says Granata. Del Monte has partnered with other CPGs to create pallet displays for StarKist and Del Monte brands business units. "We look internally first for options that make sense for the consumer and our customer. We also look to build upon existing relationships while generating new relations with other CPGs where it makes good business sense for both parties. As a leader in fruit, vegetables, tomato and tuna products, we look for partners that offer great meal solutions for consumers." "Because our product is a food, we strive to have our P-O-P displays placed near foods which call for a particular ingredient, such as the meat aisle or produce department for our New Foil Pack Ready Sauces," says Ramirez. "With food, there are always opportunities for innovative ways to cross-merchandise." Lee Kum Kee is also currently exploring a sponsorship of a new children's cooking show. "Recognizing the changing, highly competitive marketplace and understanding the necessity to develop and implement a merchandising strategy, which includes innovative store displays and well-planned promotions, is the key," she says.Supermarkets and brands alike turn to what Wal-Mart calls "retailtainment" to drive product sales. "Retailtainment, or product demonstrations, are designed to keep consumers in the store just a few minutes longer, because the longer the consumer is in the store, the more he will buy," says Catapult's Kramer, adding that "sampled products have a significant increase in purchases." "In-store product demos are a very important part of pushing product into consumer shopping baskets," says Ramirez. "Sampling food with our gourmet sauce and seeing how easy it really is to cook up a meal will entice the consumer to purchase the product on promotion." Lee Kum Kee pairs coupons and raffles with its in-store product demonstrations to further generate consumer interest. To run a product demo in a Publix store, manufacturers must provide a complete program that has a marketing plan and item availability. The first and fourth quarters represent a heavier volume and seasonal merchandise, says Brous, which means that scheduling a product demonstration is easier during the second and third quarters. Thursdays, Saturdays and Sundays are prime grocery shopping days, and therefore preferred product demonstration days.Super-lifestyleShifts to the channel led by rapidly expanding specialty chains have made supermarkets a destination for much more than conventional meal staples. By introducing the everyday shopper to a more diverse, more gourmet-style array of food and product options, specialty chains have helped raise the expectations of the average consumer.According to Terra Wellington, a syndicated columnist who writes about the wellness lifestyle in Los Angeles, the new consumer demands have opened the door for smaller specialty grocers to grow their chains.She cites for example Gourmet Garage in New York and Sprouts in the Phoenix area. But modern food and product trends guide the way major supermarket managers stock the shelves as well. Organic foods are among the fastest-growing categories within the food industry, and, as a result, more manufacturers are introducing organic foods to the supermarket consumer. Del Monte recently ventured into the organic field with certified organic tomatoes, and plans to launch several more organic products soon, says Granata. "We are communicating this message loud and strong in 2006," she says.In addition to organic products, many grocers now stock a wide variety of ethnic foods and products, such as Mexican and Asian items. "Most supermarkets, small or large, will have an Asian section devoted to just Asian-style foods," says Ramirez. Watch for growth in many supermarkets' other departments, too. "Supermarkets are expanding more aggressively into non-food items," says Reggie Lyon, senior vice president of client services for Mosaic's cosmetics division, based in Dallas. "I attribute that shift to the grocery stores' attempt to differentiate themselves from the big box retailers like Wal-Mart and Target."For many supermarkets, a vibrant cosmetics department can mean big business. Chains like Publix focus on providing consumers with a very unique product offering and service to entice shoppers who are interested in picking up makeup while filling their fridge, says Lyon. Grocery retailers can separate themselves by promoting their cosmetics line, he says. One way supermarkets are making the health and beauty aisles more consumer-friendly is merchandising their cosmetics section with lower gondolas. "The average female consumer is about 5 feet, 4 inches tall, and lower gondolas allow her to see from one aisle to the next," says Lyon. This year, industry leaders Revlon and L'Oreal are debuting new product lines and major initiatives, part of which is an expansion of their supermarket offerings, he says. "This is going to help revitalize the category." Both Revlon and L'Oreal are designing P-O-P that group like products together to help consumers quickly find what they need. "For complex categories like cosmetics, retailers and manufacturers have to rely on point-of-purchase to make the consumer's shopping experience easier," says Lyon. Since most cosmetics lines have more than 600 items on the shelves, P-O-P is necessary to help shoppers sort through the items. "Having graphics and wall-talkers and different merchandising units that make it easy for the consumer to find products increases the probability that she's going to buy the product in the mass market," he says. "I think the key to success with non-food items like cosmetics will be service and convenience. That's going to come with using more signage, differentiating departments and having the product mix tie into the needs of specific consumers in that community," says Lyon.