CO, HMR and ECR

With "life in the fast lane" a daily reality, harried consumers have shifted their supermarket shopping habits to keep pace. Besides a quick and easy shopping experience, they're demanding products that offer extreme convenience and high-level quality at a fair price.Produce, Organics Are HotOne of the hottest trends is produce. Many supermarkets have gone all-out to upgrade their fruit and vegetable sections to offer increased variety, better merchandising and more informative P-O-P displays. The goal is a clean, colorful department that entices consumers and makes shopping faster and easier.According to Kathy Means, vice president of the Newark, Del.-based Produce Marketing Association, a number of factors are driving the push for produce. "People equate fresh produce with a healthful diet," she says. "We've seen that for some time, but it will become even more important as more people try vegetarian dishes."Globalization and today's shrinking world are other factors. Recent and not-so-recent immigrants seek traditional meals -- many of which include vegetables -- to maintain ties to their ethnic heritage. Also, Americans have branched out from the familiar cuisine of Italy and China to try more exotic Caribbean, Korean and other ethnic foods. In addition, global trade has brought new types and varieties of produce to American markets.The other key driver is new technology. "Smart film" for wrapping produce breathes at different rates depending on what's in the package, and new refrigeration equipment and techniques at both the shipper and store levels keeps produce fresher longer."All of these changes are good opportunities for merchandising and P-O-P because produce is such an impulse buy," Means says. "Most people come in with a list that says 'fruit' or 'salad vegetables' and then make product decisions in the store." The key in creating P-O-P, Means explains, is remembering that health messages alone aren't enough -- "you have to use a combination of messages because customers aren't all the same."Means advises marketers to include sampling in their promotions, especially for new products. She also favors cross-merchandising ideas such as combining the floral and produce departments in order to boost impulse sales. Other recommendations include combining ethnic items in mini-sections for easy shopping, making recipes readily available and creating P-O-P that capitalizes on industry and government efforts to educate consumers about "5 A Day" and the revised food pyramid.All these recommendations and more apply to those selling produce that is "CO," or certified organic, and requires concerted education efforts to justify its often higher prices. Once the exclusive preserve of food co-ops, mom-and-pop natural food stores and health food venues, organic fruits and vegetables have gone mainstream in the 1990s. Increased demand by "flavor-hungry foodies" has spawned major specialty chains, such as Whole Foods and Wild Oats, and encouraged several traditional supermarket chains to stock organic items alongside their regular produce.This trend bodes well for consumers as well as for the supermarket industry, says Katherine DiMatteo, executive director of the Organic Trade Association in Greenfield, Mass. "It's a push-pull situation," she says. "Natural food superstores took a lot of ideas from the quality supermarkets, in terms of store layouts and displays, and now we're seeing supermarkets adapt. It's very exciting for retailers. After a stagnant period, all of a sudden there's a renaissance of retail merchandising."DiMatteo credits natural food stores with the now nearly ubiquitous use of vertical stacks to display produce. She also cites floorstands for produce -- particularly movable ones -- as a break-through that has increased ease and flexibility for stores and consumers.For Tonia Pavich, marketing manager of Pavich Family Farms in Terra Bella, Calif., organic produce offers an unparalleled opportunity to open lines of communication with consumers. "Retailers need help educating the public," she says. "Manufacturers can fill that need by providing as much information as possible through P-O-P. We've found our best P-O-P is the stem tag, which goes home with the consumer, teaches them what organic means, and invites them to write to us for more information. We've gotten a lot of letters from that, and now we have a web site where people can get on our mailing list to get two newsletters a year."Pavich also recommends that manufacturers and marketers considering new produce promotional efforts team up with food promotion companies when possible to include recipe cards, tip sheets and other items to build interest and acceptance. "They have an amazing penetration at retail," she says.In addition, marketers need to remember how retailers fit into the promotion equation. "We tried doing a shiny card with our logo and a price point area, but retailers told us they preferred a trifold brochure." Pavich notes. "For signage and other items, it's better to give retailers the tools and let them take ownership -- everything must have their own logos anyway."In scheduling promotions, marketers should keep in mind September, which is Organic Harvest Month, and April, which celebrates Earth Day. DiMatteo adds that it's important to remember to cross-merchandise because "Organic isn't just for produce anymore -- there are products in every category."Home Meal ReplacementSupermarket produce sections are also part of another significant trend: home meal replacement (HMR). Salad bars, cut-up fruit and baby vegetables are good examples of take-out fare that goes from grocery bag to serving dish in seconds. Smart retailers are supplementing these with more substantial dishes that allow shoppers to pick up an entire meal in minutes by stopping in the deli area or even in a separate section specializing in ready-to-eat food."Home meal replacement has the potential to be as big as manufacturers and retailers can make it," says Laura Shapira, senior marketing manager for Sara Lee Bakery in Chicago. "Consumers are telling us that's what they want because they have less and less time to prepare food at home."Already, HMR's slice of the supermarket pie represents anywhere from $6 billion to $100 billion, depending on which expert you talk to and what categories you choose to include. One area that has been neglected, however, is high-quality desserts. Now, however, Sara Lee has capitalized on its brand equity with its biggest launch in ten years: a line of cheesecake that comes in single slices and bites."It's the first indulgent, adult, bite-size dessert," says Shapira. "In the early '90s, people avoided fat, but now they want a smart, portion-controlled way to indulge. They also don't want to sacrifice quality for convenience."P-O-P is playing a major role in the launch because the product is sold out of the freezer rather than in more traditional HMR sections. In addition to packaging announcing that the cheesecake is ready to eat without thawing, for the first time Sara Lee is using significant in-store sampling to drive awareness and trial. The company also has planned a variety of in-store events and a comprehensive ad campaign.Shapira is confident the product will garner prime retail positioning. "Getting a good in-store location takes a smart idea, based on strong, fundamental consumer insights," she says. "We really did our homework on this, and we're finding that retailers want to partner with us and put our product in a good location."Efficient Consumer ResponseWhile HMR and increased emphasis on produce offer opportunities for making money, another trend, efficient consumer response (ECR), may hold the key to saving money. Experts say it could cut out as much as $30 billion in costs throughout the supermarket industry.Launched in 1993 in reaction to Wal-Mart's quick-response initiatives of the late 1980s, ECR is a process that attempts to streamline the supermarket supply chain and remove all possible costs from that chain. The goal is to serve customers better by providing what they want, when they want it."It's complex because ECR has several parts," says Dave Hutchings, director of electronic commerce for Kraft Foods Inc., Glenview, Ill. "Efficient replenishment has to do with getting products from the factory to the warehouse or store. Efficient product introduction concerns the whole process of introducing and managing the introduction of new items, which can be quite disruptive. And efficient promotion is involved with the incredible amount of resources in the grocery industry that are used to stimulate the flow of products through stores."Although major players such as Kraft are highly active in ECR, it has yet to have an impact throughout the industry. There are several reasons it isn't more widespread, according to Bill James, vice president of industry relations for the Grocery Manufacturers of America in Washington, D.C., which participates in the Joint Industry Project on ECR."A lot of the work in ECR is geared toward headquarters, such as category management," James explains. "But manufacturers are starting to shift their focus to the store level, which is what's most important to understand assortment, correct promotion vehicles and what the customer wants. As this happens, there's going to be a groundswell, and in the future ECR will permeate every aspect of business."When that time comes, "P-O-P will play a huge role," James says. "It can be the driver to bring players together for cross-merchandising and new product combinations that improve consumer education and merchandising. As just one example, if you're sick and need cough syrup, what if there wasn't just Kleenex nearby, but orange juice and chicken soup? Suddenly, the merchandising is more solution-oriented."In the meantime, however, ECR has a few high hurdles to overcome. As Hutchings points out, simply acquiring the data to achieve the activity-based costing that's necessary for informed replenishment and promotion decisions is a challenge."EDI [electronic data interchange] has been identified as the key enabler to ECR," he says. "But EDI has not been implemented nearly as quickly as needed, and there are about seven sub-processes in ECR that depend on EDI. Those of us who are heavily involved in this area are focusing on ways to accelerate EDI development."Another stumbling block is the nature of the supermarket environment. "This is a big mind change for any industry, but particularly the grocery industry," says Hutchings. "Historically, companies have not simply held each other at arm's length, but have operated from a perspective of high competition and secrecy. And you can't drive inefficiencies out with a closed-book mentality."Bringing grocery entities together is even more difficult due to antitrust concerns. "It's always an issue," James concedes. "But we [the Joint Industry Project on ECR] have gone to great lengths to get legal guidance every step of the way. We set models for becoming more consumer-oriented, but then competition comes in how those models are implemented -- nothing is mandated."Adds Hutchines, "It's hard to separate discussions of process from negotiation of content -- that is, pricing and terms. But I still see it as the wave of the future."Laws and LiquorFor makers of alcoholic beverages, negotiating thorny legal thickets is nothing new. Laws affecting liquor promotion and display vary not only by state but sometimes by county as well. Social mores also add to the challenge of getting messages and products to consumers."We always try to leverage our category as much as possible by encouraging stores to display it in areas outside the beverage aisle," says John Lofasso, channel development manager for Coors Brewing Co. in Golden, Colo. "But a lot of retailers are not embracing that. Some of it has to do with the need to sell different aisle managers on your product, but a lot is based on perceptions of alcohol, especially in certain areas of the country. So we get a lot of pushback from retailers on displays."In addition, many stores are rejecting temporary displays in an effort to eliminate clutter. Lofasso says some manufacturers are trying to reclaim lost P-O-P opportunities by providing permanent displays such as lighted billboards. Coors has responded by synergizing its promotion efforts: the same halogen effects used on packaging for Coors and Coors Light are being used on secondary wrapping and on P-O-P materials.For some companies, however, new products are the answer to increased exposure. Two years ago, Brown-Forman Beverages Worldwide in Louisville, Ky., makers of Southern Comfort and Jack Daniels, expanded its product line to ready-made cocktails with Tropical Freezes."We wanted to increase our distribution in supermarkets, but most of them won't carry our products, and in the ones that do, it's very hard to get shelf space," says Ken Weber, promotion/production manager for Brown-Forman. "So we branched out with a new category."Recently, the company jumped on the HMR and produce bandwagons when it introduced a display designed to garner off-shelf exposure. Made of corrugated and injection-molded plastic, the display is a mini-pallet on wheels that holds up to six cases of Tropical Freezes."It's been so popular that we've had to reorder it," Weber says. "It's very easy to stock, and retailers can move it wherever they want. The deli section, floral department or produce area is a good place because it really fits with the whole HMR trend. It's high quality and convenient."Future TrendsIn the near future, HMR, an emphasis on fresh produce and a push for organics in mainstream stores are expected to become even more important to the supermarket industry. While there's no crystal ball that can guarantee what new trends will emerge, manufacturers, marketers and P-O-P companies would be wise to watch for these developments and consider how to use them to their best advantage:Improved EDI. Once it's a reality, ECR is poised for take-off.New HMR products and categories that reach into new areas of the store.Breakthrough ideas for cross-merchandising that help break down traditional supermarket industry barriers.Even greater emphasis on health and the notion of food as medicine -- particularly for ailments such as allergies.Newly popular cuisines from around the world.An exploding interest in food safety and information.A surge of interest in organic meat and poultry as soon as the National Organic Standards Board issues labeling requirements.

CO, HMR and ECR

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