Cross-Merchandising Report: Working Side-by-Side

Instead of buying hot dogs on one side of the store and buns on the other -- or beer separate from pretzels, for another example -- time-strapped shoppers may prefer to get everything in one place. Because of this shopper request, more brands and retailers are using cross-merchandising to compete in the increasingly consumer-driven retail landscape. "Five or six years ago, consumers were not in control of the purchase process like they are today," says Mike Bills, former managing partner of the Americas for Fitch Consulting, Columbus, OH (Bills recently left Fitch). "That shift has forced marketers and brands to shift their strategy as they talk to consumers about their products, and cross-promotions are one of those aspects." Keith Levy, vice president of brand management for St. Louis-based Anheuser-Busch Inc., says, "Retailers have stepped up their need to drive market basket, so finding suppliers to bring together with our brand hits the hot button for them. Ultimately, the goal is to create a solution to meet the consumers' needs." Sharing Insights (or Lack of) Information about consumers and their purchasing habits can help shape a cross-merchandising campaign, but retailers are often reluctant to share consumer information with the brand, Bills says. "It is incredibly important, but the reality is that there are significant walls that are up regarding the opacity of that information. That is the most prized, highly confidential information. It is a bit ironic because that is the very information that would drive the right solution," he says. Anheuser-Busch purchases retail data to help target its consumers but highly guards this proprietary consumer data, Levy says. Jeff Ngo, senior marketing manager for Diamond Foods Inc., Stockton, CA, says his company does share consumer insights when developing a promotion and will share specific numbers in terms of how they did during the promotion after it's over. "Initially when we go in, we'll talk about the interaction of the brands and how people view us." Certified Angus Beef, Wooster, OH, and Lea and Perrins Worcestershire Sauce are in their first year of a new promotion. According to Tracey Erickson, vice president of marketing for Certified Angus Beef, it was Lea and Perrins' consumer research that led them to Certified Angus Beef, but neither side had a specific plan in place. Developing the plan took about a year, which was filled with fact-finding meetings, visits to each other's corporate offices and strategic planning sessions, Erickson says. New relationships can begin with either the retailer approaching the brands or the brands approaching each other. Wendy Nyberg, senior director of marketing at St. Helena, CA-based Trinchero Family Estates, says the company typically comes up with a theme and then brings in partners. At Staples, Framingham, MA, the retailer drives the displays. "Our internal teams determine what products to include and how we present them to customers, for everything ranging from endcaps to freestanding displays," says Dan Wegiel, vice president of supplies merchandising. "While our vendor partners may offer suggestions, the Staples team develops the strategies and oversees implementation." When developing its partnerships, Anheuser-Busch starts with consumers to see if there is a program that will resonate with them. They then work with retailers to learn which items they want to promote. "We love to sit down with retailers and try to plan out the whole year. The more lead time they can give us, the better program we can give them," Levy says. Bills says the timeline for that planning is becoming more sophisticated. "It is taking longer to create the online and advertising component, but there is an equal force at work that is relying on just-in-time consumer data," he says. Cross-merchandising by its very nature involves multiple categories, which usually means multiple buyers. Working with multiple buyers and multiple salesforces means a lot of lead time is necessary, Ngo says. For Nyberg, getting the grocery buyers and the liquor buyers married together on one program is her No. 1 challenge. "The ideal situation is to get a joint call where the grocery and liquor buyers are in the room together," she says. "The second big challenge is actually trying to bring the products together on the floor." Who Will Set It Up? Widmer Brothers Brewing has partnered with Sunkist lemons to emphasize its Hefeweizen lemon ritual for years. "We get the beer buyer and produce buyer together," brand manager Trent Tokos says. Widmer and Sunkist have created a small wooden beer rack that slides under the lemon displays in the produce section along with lemon racks that hang in the beer aisle. Tokos adds that the produce buyer's biggest concern always surrounds who is going to keep the lemon display stocked. The partnership with Widmer is one of the few cross-merchandising efforts Sunkist undertakes. Julie DeWolf, director of retail marketing for Sunkist Growers Inc., says the produce industry doesn't generally use third-party brokers, which means they run the risk the display never gets set up, that the product is either not stocked or re-stocked into the secondary display in a timely manner, or that the product stocked into the secondary display is not Sunkist. "We haven't yet found a solution for how to ensure the displays get set up, which is why we don't engage in a lot of promotions of this nature," DeWolf says. "If Widmer doesn't set it up, we have to rely on either the produce manager or the beer manager in the store to set it up, and there is no confidence in either of those options. It's a difficult situation, to say the least." Because produce is only identified by a Product Look Up (PLU) number and not a UPC code, brands are not identified. "This makes our challenge unique in the grocery industry and steers us more toward very targeted promotions where we know we can sell in the concept and program on an individual retailer basis," DeWolf says. Tokos says the success of the Widmer/Sunkist promotions also depends on whether beer or produce are on the store's national planner, which spells out key items the retailers plan to promote in certain months. Creating Collateral To spur purchases, many brands like to utilize dual-purchase coupons as part of their promotions. "That forces the consumer to have to purchase both products at the same time," Levy says. In addition to coupons, Diamond Foods provides take-along recipe brochures, both of which remain staples of cross-merchandising campaigns. Although more digital technology exists, Bills says it hasn't "been cracked as far as the value of opportunity versus cost of implementation. Some of the best systems out there are paper-based." Since multiple brands are involved in the promotions, creating the P-O-P is a back-and-forth process. "We'll look at the concepts and pass them back and forth and get comments and approval from each party," Ngo says. "If your objectives are set in the beginning, it is pretty easy." Even when the process flows smoothly, it can take several months for the P-O-P to be produced. Fifteen years ago, a display could get executed just because it was dynamic and featured bells and whistles. That isn't true anymore, and different retailers are requesting different display components. "Now I have a third of the country saying they want motion and a big display. I have another third saying they don't want motion, but they want lights. Then I have a third who say they need a program, but they have a clean-store policy," Nyberg says. Displays involving liquor can be especially challenging since state laws vary. "We make six or seven different versions of our campaigns because of the legalities state by state. Then in shipping, you have to make sure no one makes any mistakes," according to Nyberg. Tokos says Widmer is trying to simplify its displays. "What we find is that the easier it is to put up, the more likely it is to get up." Widmer has a distribution agreement with Anheuser-Busch, whose wholesalers assemble and put up the displays. Like Trinchero, Widmer's promotions vary by state. Creating multiple displays makes it harder to create programs brands can leverage in as many accounts, states and retail outlets as possible. Those interviewed agree that more isn't always better when it comes to the number of brands involved in a promotion. Levy says limiting cross-merchandising to just a few brands makes it more manageable for retailers. Quality, not quantity, creates a successful pairing. "You have to make sure you have a strong offer for the consumer and that your partner is meaningful to the program," Nyberg says. Trinchero paired with Harper Collins several years ago to start Sutter Home's Book Club, which Nyberg expected to last six months. The program resonated with consumers and is still going strong. "It turned out that the book club became one of the most successful elements of our website and it kept customers coming back. It was a nice marriage, and it was unique," Nyberg says. Creating meaningful partnerships takes time, according to Erickson. "We have learned the value of establishing a long-term partnership versus a one-time promotion," Erickson says. "You put a lot of effort into learning about a brand. You need to have a long-term relationship to maximize that and to make it worth your time." Certified Angus Beef prefers to develop a year-long plan. "We sit down and look at the calendar and how we can tie a partner into the activities we're doing throughout the year and the unique activities we can do," Erickson says. "That way, we're all on board with timelines, dollar amounts and what each person needs to do to meet the timelines." Because partnering with another brand is a time-consuming process, turnover among brand managers creates a challenge. "You're working with someone and the next thing you know, there are changes and you're starting over from scratch," Nyberg says. Erickson has accepted turnover as part of the job. "You'll have to bring new people into the fold and get them up to speed. As long as the company believes it is worthwhile, then we'll continue the partnership," she says. Finding Success With Associations To expand their reach, more and more brands are partnering with associations and not just specific brands. Anheuser-Busch recently partnered with the National Pork Board on a promotion designed to increase the sales of spare ribs and beer. In the past, A-B partnered with Lloyd's Barbeque, which makes prepackaged ribs. "The problem was that not every chain had Lloyd's in distribution, so by doing a more generic pork program, we had more flexibility," Levy says. The Pork Board launched a new partnership with Walmart and Tyson to test recipe labels on certain packages in July and August. Patrick Fleming, the Pork Checkoff's retail marketing manager for the south-central division, says, "We are hoping to see a sales increase of 3% to 8% throughout the 12-week test." Similar programs have proven successful in the past. "A total of 250 million pounds of pork have been sold as a result of Checkoff retail programs during the first and second quarter," says Steve Murphy, chief executive officer for the association. "Of that, 52 million pounds are incremental increases compared to the same time period last year." Nyberg says Trinchero worked with the California Avocado Commission. "It is a strong partnership because avocado is a really generic term. They're selling avocados, and we're selling a brand name. We're able to share the cost of a media spend that neither of us could do on our own." Trinchero has also had successful programs with the National Cattlemen's Beef Association. Randy Irion, director of retail marketing for the National Cattlemen's Beef Association, says cross-merchandising requests have increased as a result of successful promotions they've run in the past. "We bring to the table a tremendous depth of experience promoting beef to consumers. Our vast culinary background, including photography and recipes, are also made available to partners," he says. "Cross-merchandising is an efficient way to market beef that makes sense to the end consumer," he says. "We are promoting products that naturally go together and helping consumers put together meal solutions." Finding the right partnerships that will excite consumers and retailers will remain the core of cross-merchandising, Levy says. "When executed properly, these programs can capture a lot of wins with the retail account."

Cross-Merchandising Report: Working Side-by-Side

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