Walgreens constellation wine category review

Walgreens & the Wine Category

Principles of Category Management Panel Review | March 18th 2013

Karol Buczakowski

Lanita Burton

Megan Caron

AGENDA: • Market Conditions

• Market and Category demographics

• Category Assessment

• GMROII

• Merchandising

• Pricing, Promotion & Assortment

• Planogram Recommendations

1

Walgreens Total Market Share

-0.1

Source: Nielsen Answers 2

Walgreens Total Sales % CHG

-1.7%

AOC : 2.2%


Wine Total Market Share

0.1


Walgreens Wine Total Sales % CHG

10.8% AOC : 5.4%


Walgreens ®/Constellation® Wine Category Panel Review

Executive Summary

- Provide both Walgreens and Constellation recommendations to increase overall growth within the wine category

- Review the wine category and make recommendations on pricing, promotion, assortment, and merchandising

- Improve GMROII throughout the category

- Make recommendations that will improve the overall shopping experience for Walgreens shoppers

6

Walgreens

• 6,612 stores nation wide (600 in Illinois)

• Total ACV- $68,386,084,000

• Top competitors (ACV)

– CVS- $58,765,980,000

– Rite Aid- $24,217,908,000

– WalMart- $292,235,164,000

– Target- $66,443,000,000

Source: Walgreens Account Snapshot and Profile

7

CVS WINE SECTION

8

Walgreens Wine Section

9

Walgreens Demographics

• White- 67.3%

• $50,000-74,999- 19.5%

• 45-54 & 65+ both 20.9%

• No Children Under 18- 64.3%

• 2 Person Household- 31.9%

• Own a house- 63.5%

Source: Walgreens Account Snapshot and Profile 10

Volume

• Affluent Suburban Spreads and Cosmopolitan Centers Clusters represent 38% of the volume for Walgreens in the entire United States and 55% of volume in Illinois

Source: Walgreens Clustering Report All Stores + IL Stores

11

+3.0% Volume and +5.5% Revenue

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

Total Wine DomesticTable

ImportedTable

Sparkling Off Premise On Premise

3.0%

3.7%

1.4%

8.5%

3.1% 2.6%

5.5%

6.4%

2.9%

8.9%

5.9%

4.8%

Volume Revenue

Category Overview

Source: Constellation PowerPoint Presented by David Enderle

12

The Wine Category

• 13th largest dollar category

• 6% growth rate in the next 3 years – Second highest out of all categories, only beaten

by Energy Drinks (14.8% growth)

• $30 billion a year revenue industry

Sources: Constellation PowerPoint, http://www.statisticbrain.com/wine-sales-statistics/

13

Sales By Channel

Source: Nielsen Answers Data

05

101520253035404550

Tota

l Gro

cery

(46

.7%

)

War

eh

ou

se C

lub

(9%

)

Dru

g (3

.2%

)

Mas

s M

erc

h (

1.8

%)

Co

nve

nie

nce

/Gas

(.5

%)

Do

llar

Sto

res

(.2

%)

Pe

rce

nta

ge

Channel

14

Wine Consumer

25%

19% 22%

34%

Core Marginal Non-Adopter Abstainer

All U.S Adults 2012


15

Walgreens Wine Consumer

• Demographics (Index)

– Income- $100,000+ (201)

– House Hold Size - 2 Member House Hold (141)

– Age- 55-64 (119)

– KIDS - NONE Under 18 (114)

Source: Nielsen Answers Home Scan Data

16

Walgreens Wine Consumer Cont.

• Life Style Clusters (Index)

– Affluent Suburban Spread (139)

– Cosmopolitan Centers (139)

• Family Dynamics

– Empty Nest Couples (152)

Source: Nielsen Answers Home Scan Data

17

Consumer Decision Tree

TABLE WINE

VALUE MID-TRIER PREMIUM

COLOR PACKAGE

RED, WHITE, BLUSH

BOX, GLASS


18

Consumer Decision Tree

Source: Constellation PowerPoint

PREMIUM BUDGET CONSUMER

WHITE BLUSH RED

ORIGIN VARIETAL

ITALY, FRACE, U.S.A, HUNGARY, ETC.

CHARDONNAY, PINTO GRIGIO, CABERNET, ETC.

19

GMROII

• GMROII= Gross Margin Percentage X Average Inventory Turn

– GMROII= 25% X 8

•GMROII= 2.00

20

Top GMROII

• Barefoot Pinot Grigio 750ML

– 5.35 GMROI

• Woodbridge Chardonnay 1.5L

– 3.25 GMROI

• Southern Point Chardonnay 750ML

– 2.43 GMROI

21

Lowest GMROII

• Sonnenband Wine Riesling 750ML

– .28 GMROI

• David Stone Moscato 750 ML

– .53 GMROI

• Woodbridge Pinot Noir 1.5L

– .65 GMROI

22

Merchandising Recommendation

• Wine Merchandise Test Market

– Test market 30 stores from the Affluent Suburban Spread cluster

• 10 stores place additional Wine merchandising by the PHARMACY

• 10 stores place additional Wine merchandising in REGISTER vicinity

• 10 stores place Wine merchandising by Greeting CARDS

23

Category Role- Under Fire Strategy Average Sales Dollar Volume/Low Gross Margin

Pricing

• Use EDLP pricing to increase non- promotional volume

• Match competition when necessary by increasing prices

Promotions

• Promote Aggressively but avoid loss-leaders

• Increase Promotion decrease price

Assortment

• Expanded distribution on growing items

Source: “Consumer- Centric Category Management”

24

Pricing Increase Profit

Pricing

Use EDLP pricing to increase non- promotional volume

Match competition when necessary by increasing prices

• Liberty Creek Sweet Red 1500 ML

• Black Box Chardonnay 2003 3000 ML

• Gallo Family Vineyards White Zinfandel Varietal Wine 1500 ML

Increased Revenue of $1,890,475.01


Promotions Increase Market Share

Promote Aggressively but avoid loss-leaders

Increase Promotion decrease price

• Clos Du Bois

• Cooks

• Livingston Cellar

• Santa Margherita

• Cavit

Cost of decreasing price promotion- $1,145,107.92


Assortment Increase Profit

• Expanded distribution on growing items • Woodbridge by Robert Mondavi Sauvignon Blanc Dry Varietal 1500ML

• Opportunity Gap- 242,221

• Oliver Red Softly Dry Wine 750ML

• Opportunity Gap- 305, 676

• Barefoot Pinot Grigio California Wine 1500ML

• Opportunity Gap- 795, 676

Total Revenue- $13,995,412.13


Potential Revenue Increase

Pricing- $1,890,475.01

Promotions- -$1,145,107.92

Assortment- $13,995,412.13

Revenue- $14,740,779.22*

*Does not include cost to implement strategy


Current Planogram

29

Proposed Planogram

30

Questions?

Thank You! Special Thanks to:

Professor Blaine Ross

Professor Strunk

Professor Larson

Acosta

Adcomm

Constellation

Hilshire Farms

Hormel

Nielsen

Regis

Walgreens

Leslie Chamberlain

& our fellow classmates

Appendix

Wine Consumer

Adult

Population

134 147 154 164 173 184 194

211 222 228

Gallons

per Adult 1.05

1.78

2.58

2.29

1.96 2.13

2.46

2.81 2.98 3.08

70 75 80 85 90 95 00 05 10 12

Source: Constellation PowerPoint

*Adult population in millions

Pricing

R ank Sales M arket

Share A OC

Shr Gap

( to

C atego ry)

R etailer A OC % P rice

D if f


D if f


D if f

008500001692 M ADRIA SANGRIA 10 PERCENT WINE

750 M ILLILITER

72 735,722 11.0% 8.9 $5.27 $5.64 -6.9% $4.86 $5.44 -12.0% $5.55 $5.73 -3.3%

008500001802 LIBERTY CREEK SWEET RED 10

PERCENT WINE 1500 M ILLILITER

75 696,049 15.0% 12.9 $5.64 $6.59 -16.9% $5.39 $6.28 -16.6% $6.07 $6.70 -10.5%

008500001849 BAREFOOT SWEET RED CALIFORNIA

10 5 PRCNT WINE 750 M ILLILITER

76 674,639 5.2% 3.1 $5.44 $5.82 -7.1% $5.31 $5.59 -5.3% $5.80 $6.07 -4.6%

008130800267 SOUTHERN POINT PINOT GRIGIO 12.5


81 585,233 100.0% 97.9 $3.32 $3.50 -5.5% $3.18 - - $3.48 $3.50 -0.7%

008500000506 GALLO FM LY VNYRD CHRDNNY CA 13


96 489,262 3.4% 1.3 $7.05 $7.56 -7.2% $6.55 $7.14 -9.0% $7.54 $8.02 -6.3%

008143400004 BLACK BOX CHRDNNY M NTRY CNTY

13 5 PRCNT 2003 WINE 3000 M ILLILITER

99 415,719 2.8% 0.7 $18.06 $19.92 -10.3% $17.02 $19.22 -12.9% $18.65 $20.23 -8.5%

008500000784 GALLO FAM ILY VINEYARDS WHT

ZNFND VRTL WINE 1500 M ILLILITER

106 371,260 3.2% 1.1 $6.35 $7.39 -16.4% $5.97 $6.93 -16.1% $6.84 $7.75 -13.5%

008832034101 CRUZ GARCIA SANGRIA SWEET WINE

1500 M ILLILITER

136 231,741 3.0% 0.9 $9.75 $10.54 -8.1% $8.94 $9.85 -10.2% $10.13 $10.76 -6.2%

008312019201 FRNZ CHRDNNY SOUTH EAST ASTRL

12 PERCENT WINE 3000 M ILLILITER

154 197,718 6.1% 4.0 $11.11 $12.54 -12.9% $10.72 $11.61 -8.3% $12.39 $12.74 -2.8%

008500000516 CARLO ROSSI CHARDONNAY 12


156 195,676 24.5% 22.4 $11.64 $12.27 -5.4% $11.48 $11.99 -4.5% $11.73 $12.50 -6.6%

008500000504 CARLO ROSSI WHITE ZINFANDEL 12


161 185,490 19.0% 16.9 $11.51 $12.19 -5.9% $11.03 $11.99 -8.7% $11.82 $12.31 -4.1%

008312019311 FRANZIA WHITE ZINFANDEL 10


188 135,895 5.0% 2.9 $11.26 $12.15 -7.9% $10.66 $11.61 -9.0% $12.32 $12.24 0.7%

Price comparison details for potential price increase candidates

5% g

*If no items are displayed, none met the report criteria.

Avg. Non-Promo Price

12

Market Share

Volume and Share

f-5%

Avg. Price Avg. Promo Price

vs. Category

Gap

Market Share

Are there any items I should consider for possible price increases?WINE l WALGREENS CORP TOTAL CENSUS TRADING AREA l Dollars l AOC l 52 w /e02-16-13 l Low er Threshold: -5% l Upper Threshold: 5% l % Price Diff is highlighted in yellow if the cell value is less than or equal to Low er Threshold

vs. Category

Price Position vs. AOC

Surplus

For the 52 w /e02-16-13 12 of the top 200 items in the category had a market share surplus to the category, but w ere priced at (-5%) or low er than AOC on average.

Source: Nielsen Answers

Pricing


Promotions

Brand Sales AVG Promo- Retailer

AVG Promo- AOC

Price Decrease

Cost

Clos Du Bois 1,973,046 $9.99 $9.77 $.22 $434,070.12

Cooks 1,300,827 $6.49 $6.13 $.36 $468,297.72

Santa Margherita

674,278 $19.99 $19.63 $.36 $242,740.08

Total $1,145,107.92


Assortment

Brand Retailer % ACV Price Opportunity Gap

Woodbridge by Robert Mondavi Svgnn Blanc 1500ML

3.0% $10.53 242,221 $2,550,587.13

Oliver Red Softly Dry Wine 750ML

3.0% $7.09 305, 676 $2,167,242.84

Barefoot Pinot Grigio California Wine 750ML

3.0% $11.66 795,676 $9,277,582.16

Total $13,995,412.13


Assortment

R etailer R M R ank Sales Sales % % So ld o n A vg. %A C V SP P D Sales Sales % % So ld o n A vg. %A C V SP P D Oppo rtunit

WINE 0 0 190,047,400 10.8% 43.6% $6.89 0.0% - 453,891,872 8.1% 44.2% $6.96 0.0% - 0

R etailer

R ank

R M R ank Sales Sales %

C hg vs.

% So ld o n

P ro mo tio n

A vg.

P rice/ Unit

%A C V SP P D Sales Sales %

C hg vs.

% So ld o n

P ro mo tio n

A vg.

P rice/ Unit

%A C V SP P D Oppo rtunit

y Gap

001258400007 OLIVER RED 10 PERCENT SOFTLY

DRY WINE 750 M ILLILITER

153 59 199,237 52.0% 38.5% $7.09 2.0% 99,619 1,511,564 2.7% 73.8% $6.28 3.0% 503,855 -305,676

008600386386 WDBRD BY RBRT M NDV SVGNN

BLANC DRY VRTL WINE 1500 M ILLILITER

149 78 206,518 19.1% 48.6% $10.53 3.0% 68,839 1,313,950 17.3% 51.1% $10.48 9.0% 145,994 -242,221

008500001443 BAREFOOT PINOT GRIGIO

CALIFORNIA WINE 1500 M ILLILITER

133 10 244,013 11.8% 28.8% $11.66 3.0% 81,338 3,278,772 39.6% 51.1% $10.79 19.0% 172,567 -795,676

Items carried...

39

Are there items that need additional distribution in my stores vs. RM?WALGREENS CORP TOTAL CENSUS TRADING AREA l WINE l Latest 52 Weeks ending 1 w /e02-16-13 l Dollars l RM

Showing growth...

(If no items appear below , none met all 5 conditions above).

Recent ACV less than 50% of WALGREENS CORP TOTAL CENSUS TRADING AREA...

There are 156 items carried in WALGREENS CORP TOTAL CENSUS TRADING AREA. 73 of these items show grow th vs. last year in WALGREENS CORP TOTAL CENSUS TRADING AREA and RM. 39 of these grow ing items have sales per point of distribution (SPPD) in

WALGREENS CORP TOTAL CENSUS TRADING AREA that is higher than the average SPPD across the category. 39 of the grow ing, high SPPD items have recent distribution (average w eekly %ACV over the latest 4 w eeks only ) in less than 50% of WALGREENS CORP

TOTAL CENSUS TRADING AREA. WALGREENS CORP TOTAL CENSUS TRADING AREA should consider expanding the distribution of these 39 items.

RM

High SPPD...

Retailer

Items to consider for expanded distribution - counts

73

156

39

Items to consider for expanded distribution - detailed data


Total Market Share Percent Share vs Walgreens Total Sales Percent Change

Base Sales vs. Incremental Sales

• The Base Market Share Percent Change in the wine category was 2.1% compared to a year ago. The Baseline dollar at Walgreens Corp shows a 13% growth compared to a year ago. The AOC base sales increased by 6.1% compared to a year ago period.

• The Incremental Market Share Percent Change in the wine category shows a decrease of 1.8% compared to a year ago period. The Incremental Sales at Walgreens shows a decline of 3.6%.

Prices & Volume Change

• Walgreens average price decrease was 2.9% while the AOC average price decrease was 0.6% and although there dollar amount increased not as high as the AOC dollar volume.

Share of Promo and Non- Promo Volume Comparison

• Non- promoted dollars share has increased 0.21 Share Points compared to a year ago in the wine category.

• Walgreens Corp captures a larger promoted dollar share in the marketplace than non- promoted dollar, this suggests that they are not taking advantage of the non- promoted dollar trend.

Pricing Trend Over Time

• Market share increased .1 share points even with per unit base prices were down, an increase in prices could increase profit and market share share points.

Top Brands Contribution to Total Category Sales

• High priced brands contribute to total category sales; therefore, price is not a contributing factor in wine purchases. Increasing prices may not affect purchase behavior.

Data & Analytics

Walgreens constellation wine category review