Planograms are just as important for suppliers as they are for retailers. We see them in almost every department now. Every industry has their own language and it can be a challenge to really understand some of the terms. Google can provide definitions, but it does not always help you understand the importance of the term or perhaps even a specific meaning in our industry. We are going to share some food and beverage industry terms and explain how they can benefit or impact your business.
Planograms- retailers process to determine where each product will be merchandised. Planograms are created in the office and forwarded to stores for execution. The objective of Planograms are to maximize category sales and profit while delivering on other category objectives such as privately label penetration and o&a dollars.
Retailers rely on planograms to merchandise stores
A conventional grocery store has +/- 35,000 stock keeping units (SKUS) and retailers invest a lot of resources to manage that listing base. It can be very costly if items are not in the right place or in some cases have no place, on the shelf. Suppliers are very familiar with all of the work required to get the product developed and ready for sale. The real work for your customers starts when they decide to list it.
When a retailer makes the decision to list a product the next decision is where to put it in the store. When I started working in a Save Easy store in the 80’s we would see new items come in and spend time relining the shelf to work it in. In those days we had to price everything and find a spot on the shelf. A lot has changed!
Now retailers will only consider new items or changes to the listing base during predetermined windows of review. Your customers should share those reviews with me or if you are using RangeMe you can find them listed for select retailers. When they do a category review and decide to list new products they must be incorporated into the planogram.
Purpose of planograms
Two of the most important reasons retailers implement planograms is to drive category sales and margin. We all know certain spots on the shelf are better than others. Most often eye level is best but if your product is a kids cereal you want it at their eye level when sitting in the shopping cart. Retailers will put products with high margin beside lower margin, higher volume items. This is strategic to entice consumers to switch to the higher margin product.
Planograms also are used as a tool to manage the shelf space. Some suppliers enlist the services of retail ‘reps’ who visit stores and try to influence the merchandising of their products. Planograms are the store’s answer to the request for more space. The facings are predetermined in the planogram and they are not allowed to change them. Large consumer packaged goods companies (CPG) pay for the space and retailers need to deliver on the allocations of space.
Planograms are also developed to drive sales on the retailer’s private label products. You will often see the private label beside the leading national brand. The idea is to leverage the traffic of the national brand and get consumers to switch to private label. For example, if consumers go to the cookie aisle looking for Chips Ahoy and President’s Choice Decadent chocolate chip cookies are there and they select them the retailer wins in two ways:
1. Assuming the consumer likes the Decadent they have to go back to the Loblaw owned store to get them. Essentially it is a loyalty program.
2. Retailers usually more margin or cents per unit profit from the private label.
Planograms can be your friend
Getting your product on the shelf, where it is supposed to be and when, can be a big challenge. When your customers agree to list your product you need to get confirmation from them when it will be in the planogram that is sent to the stores. This is your ticket to go into the store and make sure you are on the shelf, in the right spot.
Some stores are better than others at shelf maintenance. Any time you get a new product listed or even after you know the retailer has completed a category review you should visit stores to ensure the changes are implemented. The process is the new planogram is communicated to stores and it is their responsibility to reline the shelf. There are many reasons this might not happen:
1. The new products might not be into the store yet.
2. The new products might be in the store but they can’t find them.
3. The store is busy with other tasks like building theme displays.
4. Labour is a challenge for everyone right now and the store might be just keeping up with incoming inventory. They do not have time to take all the products off and put them all back in a new order.
5. The store is trying to meet their labour targets and they stop doing updates. This is not the right thing, but there is significant pressure on store managers and department managers to deliver their labour targets.
Suppliers do need to visit stores to ensure their products are out where they should be. This is most common in grocery but almost every department now has planograms or merchandising plans.
Some retailers will give you the planogram and others will not. Regardless, if you have confirmation from merchandising that your product should be there you need to confirm with stores. You will be held accountable to deliver sales and it will never happen if your product is not on the shelf.
If you do go to the store and it is not where it is supposed to be start with the department level people. Talk to them about it and try to get an understanding of when this will be completed. Sometimes a friendly reminder, with the understanding you will be back is all that is needed. If you continue to struggle with execution, then a conversation with the store manager or assistant manager is the next logical step. Try to understand why it is not happening. If the inventory really is not in the store, then you will need to follow up with your merchandising contacts. It could be the product is stuck in the warehouse or some other crazy reason. Their systems are complex.
Once you have exhausted your attempts at store level you will need to follow up with the merchandising people at the office. They really have very little say over what the stores do but they do know who to call. You will need their help to get the calls made to influence the behaviour at store level.
It is the planogram that is your friend because when you are in there they really need to execute and make it happen.
If you have any questions or require help with planograms, you can always send me an email peter@skufood.com or call me at (902) 489-2900.
Peter
As we start into the new year we are going to focus on some terms in the food and beverage world for upcoming weeks. I am going to select a different term each week and give you a good definition and also some insights into why it could be important for your business. If there are any terms you would like me to focus on just let me know.
If you see things happening let us know so we can share them with our community. We also want to hear if you find this helpful and benefits your food and beverage business!
Salesforce share consumer insights
Salesforce is a leading customer relationship management platform. They have recently shared some great insights about consumers in 2021. The engagement in loyalty programs is something many people in food and beverage should be aware of. Most retailers have these programs and they can be effective for everyone from regional to international brands.
100th birthday Oreos
I was in our local Sobeys store the other day and I encountered a display of the 110th birthday Oreos we mentioned last week. I had to buy them…
They are good, in my opinion not too far from the traditional Oreo. The sprinkles might be a bit sparse! As usual when I put them in the cupboard the younger people in the house found them quickly. It really is amazing how they continue to create awareness and sales in this brand. You can also see Oreo are capturing Canadian consumers patriotic tendencies with Olympic Oreos. I wonder if Team USA is front and center south of the border?
When is Peter speaking?
Food & Beverage Atlantic Masterclass
Sales & Marketing for your food business Feb 16
A weekly course with Norm Purdy and Al Archibald
Newfoundland and Labrador
Market trends panel Feb 17
Getting more NL products into the shopping cart Feb 24
Food industry opportunities panel Mar 29
Perennia Webinar series
How the pandemic is shaping the future of food Mar 9
Learnsphere Supply chain 1-2-3
Sell successfully to retail Mar-Apr