CHICAGO-Efficient Consumer Response was the hot topic at last week's Food Marketing Institute convention, with marketers and a host of workshops discussing ECR strategies and tools, from category management to continuous replenishment to inventory management-mostly to standing-room-only crowds.
But no one wanted to talk about deals.
And talking about ECR without discussing how to revamp and re-evaluate trade promotion is like trying to reform an addict without cutting off his supply of drugs.
Making promotions more efficient is supposed to account for a third of the supermarket industry's proposed $30 billion in savings through ECR programs, an industrywide initiative set in motion in January 1993 largely as a response to Wal-Mart Stores' incursion into supermarkets' territory. Though FMI has published guidelines for "best practices" in other operational areas included in the ECR initiative, nothing has yet appeared on trade promotion.
"No one is publishing anything about this right now; it's just too volatile," said one marketer CEO. "But of everything, this definitely is the black hole of the business."
At one FMI workshop loftily titled "ECR: The Vision-the Reality," Kroger Co. Senior VP Donald Dufek said FMI is beginning a survey of 125 companies on their deal practices and preferences, and hopes to publish general guidelines this year.
"But it's been tough, legally tough," he said. "ECR will require relationships that heretofore have been unknown in our industry."
The supermarket industry has a long way to go before realizing those kinds of relationships between retailers and manufacturers. Some workshops pointed out retailers don't even want to share with marketers their sales data from scanners, the data that provide the foundation for ECR programs.
Virtually everyone is behind ECR in principle, at least.
"Anything we can do to improve on the efficiency of product flow through the distribution cycle is .*.*. desperately needed to remain competitive and healthy," said speaker Gary Watson, director of logistics for Hannaford Bros., a major retailer based in Scarborough, Maine.
John Boynton, VP-finance and customer service for the U.S. grocery products division of Quaker Oats Co., said his company is spending $10 million to $20 million annually on its multiyear investment in ECR programs, and has suffered a $20 million one-time sales shortfall in the past two years as supermarket inventories have been reduced. That includes business with chains like Wegmans Food Markets, Rochester, N.Y., where President Danny Wegman said half of grocery business is being ordered and stocked through continuous replenishment programs.
But everyone in the industry knows potentially bigger, and more important, savings might be available by cutting out trade promotion tactics like slotting allowances and forward-buy dollars. Trade promotion has grown to swallow half of package-goods companies' marketing budgets.
"This industry needs to move toward an intelligent promotion planning process, and replace forward-buy money with efficiently spent promotion dollars," said the marketer CEO. "As you get more efficient promotions, it will allow manufacturers to invest more in brand equity."
But with so many retailers financially dependent on the "merchandising" dollars provided by marketers, supermarket executives are watching their profit margins.
"It's time to stop worrying about who's going to get that $30 billion," said speaker Pat Quinn, CEO at Spartan Stores, a $2 billion wholesaler based in Grand Rapids, Mich. His store is trying to employ as many ECR tactics as possible.