Driving Snack Category Sales & Profits - McLane Company · PDF filesalty, meat snacks, snack nuts, snack mixed, & sweet snacks • Reposition WD Snacks MVE to the front of the store

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DRIVING SNACK CATEGORY SALES & PROFITS

Driving Snack Category Sales & Profits

Presented By:

Kit Dietz - OwnerDietz Consulting LLC

Russ Quick – VP Sales & MarketingFasMart/Shore Stop Convenience Stores

Las Vegas, Convention CenterOctober 11, 2006

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Snack Category Balance Is Important!

• Traffic Driver• Average Margins of

28% to 33%

• Profit Driver• Average Margins of

40% to 50% or more.

Properly Defining The Role Of DSD & WD Snacks Will DriveSignificant Increases In Total Category Sales - At Higher Margins

3


Multi-Vendor WD Solutions• Great brands in optimal

impulse locations• Multi vendor end cap

solutions for snacks, confections and new items.

• An approach for evaluating snack category performance of each of the snacking segments.

• Great variety of warehouse snacks across major segments: cookies, crackers, chips, meat snacks, snack nuts, snack mixed, confections, gum & sweet snacks.

• Major brands participating: Oreo, Cheez It, Pringles, Jack Links, Slim Jims, Combo's, Chex Mix, Planter’s, etc.

• MVE planogram updated regularly for new items.

• Various services available for the retailer.

• Average margin per product is 40-50+% on the Snacks MVE.

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WD Snacks MVE Industry Solution

GREATGREATBRANDSBRANDS

CONSUMERSCONSUMERSLOVELOVE

ONE SHAREDONE SHAREDENDEND--CAPCAP

PRIME FRONTPRIME FRONTOF STOREOF STOREIMPULSE IMPULSE

LOCATIONLOCATION

INCREASEDINCREASEDHIGH MARGINHIGH MARGIN

SNACK SNACK SALESSALES

• The WDSC has developed a solution and approach that drives sales at higher margins and each distributor develops a unique program.

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WD Snack MVE – Early Validation

63%

114%

0%

20%

40%

60%

80%

100%

120%

Total WDSnacks

MVEItems

• Study Group 1 consisted of 7 C- store Chains with a total of 186 stores.

• Comparative sales for WD salty, sweet, alternative snacks and MVE products.

Source: AWMA/WDSC/7 Chain Study/Willard Bishop Consulting Ltd., 2003

SNACK MVE ITEMS RANGE FROM SNACK MVE ITEMS RANGE FROM 40% TO 50% PLUS GROSS MARGIN40% TO 50% PLUS GROSS MARGIN

63%

114%

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WD Snack MVE Retail Placements• Over 22,000 Snacks MVE have been

placed in C-Stores by 70 distributors……………. and the numbers keep growing.

RETAILERS TESTING OR EXPANDINGRETAILERS TESTING OR EXPANDINGWD SNACKS MVE PLACEMENTSWD SNACKS MVE PLACEMENTS

http://www.circlek.com/

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WD Snack MVE Recent Placement ResultsMVE Snack Items• Units +32%• Sales Dollars +36.8%• Gross Margin Dollars +38.9%• Margins were 8% to 15%

higher than comparable DSD products– Implemented in their 145 larger

format c-stores.– Results based on scan data

May 1, – September 20, 2006.– No additional promotions were run

during the time period to measure the lift created by rack placement only.

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3 Years of Explosive Snack Category Growth• Why we were an early adopter of the WD Snacks

MVE?• Our “Year 1, 2004” Snack MVE placement results.• Incremental volume within the major snack segments

of salty, alternative and packaged sweet snacks.• Snack category assessment and planning.• How we redefined the role of WD and DSD snacks

according to the consumer’s preference for brands within the snack segments, sales and gross margin opportunities.

• Executing new category plans.• The results of our category overhaul and emphasis

on WD Snacks in years 2 and 3.• Achieving results and key takeaways.

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Why We Were An Early Adopter Of The WD Snack MVE?

• We identified an opportunity to improve warehouse snack merchandising, but lacked programs/support.

• The WD Snack MVE was the solution we were looking for that enabled us to:– Capitalize on consumer snacking trends.– Address store size and available space issues on an

integrated multi-vendor single merchandising vehicle.– Leverage the brand strengths in each category segment.– Create incremental impulse sales.– Obtain higher gross margins.

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2004 Snack MVE Placement

• The initial study involved 58 stores.

• Measured item and snack category sales & margin for WD & DSD Snacks.

• Comparative sales of salty, sweet and alternative snacks.

• Due to contractual obligations for space in the front of the store, the WD Snacks MVE was sub-optimized, placed in the rear of the store near the cold vault.

2004 POG

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2004 WD Snack MVE Results

68%

0%

10%

20%

30%

40%

50%

60%

70%

MVE Items

Snack MVE Items

• 100% of the sales and gross margin improvement came from WD Snacks.

• DSD snack sales & margin were stable.• WD and MVE sales were all incremental.

SOURCE: AWMA/WDSC/FAS MART/JUN-JUL 2003 VS 2004/DIETZ CONSULTING LLC

19%

22%

0%

5%

10%

15%

20%

25%

Sales GrossMargin

Total Snack Category

22%19%

68%

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2004 WD Snack Segment Improvement

71.9%

42.4%

27.2%

49.9%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

Altern

ativ

e

Salty

Swee

t

Tota

l WDS


71.9%

42.4%

27.2%

49.9%

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2004 Snack Category Conclusions

• Total snack category results were driven by WD Snacks at significantly higher margins than DSD snacks.

• Sales & margin gains were incremental with no cannibalization of DSD products.

• We leveraged this learning to further drive performance in the category and redefined roles in the category.


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Redefining The Role Of WD & DSD Snacks• How can we improve sales and capitalize on the

significantly higher margins of WDS? By:• Conducting detailed sales & margin reviews of all

items and segments in the snack category.• Evaluated unit movement turns per sku.• Focusing on the consumer and determining what

brands have the best consumer recognition.• Emphasizing power brands in each category

segment.• Determining which brands in each segment deserve

high impulse locations in our stores.


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2005 – 2006 Planning ProcessDRIVING CATEGORYDRIVING CATEGORY

SALES & PROFIT GROWTHSALES & PROFIT GROWTH

OPTIMIZEOPTIMIZEPRIME SELLINGPRIME SELLING

LOCATIONSLOCATIONS

REVIEW & REVIEW & ENHANCEENHANCE

CATEGORYCATEGORYPLANSPLANS

FOCUS ONFOCUS ONHIGH MARGINHIGH MARGIN

POWER BRANDSPOWER BRANDS

REVIEW REVIEW DUPLICATE DUPLICATE

LOW MARGINLOW MARGINSKUSSKUS

PROMOTE PROMOTE MVE ITEMSMVE ITEMSONON--GOINGGOING

ASSURE ASSURE ININ--STOCKSTOCKPOSITIONPOSITION

11

22

33

44

55

66

INTEGRATE WITH CATEGORYMANAGEMENT PROCESS

DETERMINECATEGORY &

SEGMENT ROLES

SELECT CATEGORYPARTNERS

ANALYZEPERFORMANCE

DEVELOP PLAN(STRATEGIES

& TACTICS)

REVIEW PERFORMANCE

& EVALUATE

IMPLEMENTPLAN

1

2

3

4

5

6

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Executing New Category Plans• Review & enhance category

planogram on an ongoing basis.• Review scan data by region by

store for actual movement.• Identify bottom 10% skus for

replacement.• Focus on the power brands of WD

Snacks in the these segments:– canister chips, cookies, other

salty, meat snacks, snack nuts, snack mixed, & sweet snacks

• Reposition WD Snacks MVE to the front of the store.

2005 POG Right Wing

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Executing New Category Plans• Quantify item sales based on

shelf placement of MVE.

• Eliminate duplications of lower margin DSD Snacks.

• Operational focus to assure in- stock position. (service program in some locations)– Fixtures properly tagged

– Promotional signage

– Vendor audits

• Promote Snack MVE items monthly.

2005 POG Left Wing

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37.7%

8.7%

42.3%33.0%

29.0%

16.0%

15.6%

17.2%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

Alternative Sweet Salty Total

2005 2006

Total Snack Category Sales Gain Year Over Year YTD September

SOURCE: AWMA/WDSC/FAS MART 2006/DIETZ CONSULTING LLC

66.7%

24.7%

57.9%50.2%

2 Year Total

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2004-2006 Total Snack Category Growth


18.5% 22.3%

33.0%38.2%

17.2%

19.1%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

Sales Gross Margin

2004 2005 2006

68.7%79.6%

3 Year Total

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2006 Snack Category PerformanceSnack Category Adjusted Gross Margin

INCLUDES ALL REBATE, ALLOWANCE & PLACEMENT MONIES

31.7%

44.9%

32.8%29.7%

43.5%

20.9%

32.3%

51.4%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

55.0%

McLane Frito Lay KrispyKreme

Utz Tastykake InterstateBrands

Lance SchmidtBaking

Gross Margin %

-19.1%

-30.5%

-7.9%

-21.7% -18.6%

-6.5%

-19.7%

Gross Margin DSD Margin Gap Versus WD


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2006 Snack Category PerformanceSnack Category Sales & Gross Margin Contribution


0.5%6.7%6.9%9.8%

12.5%14.5%15.2%

33.9%

0.4%7.7%

5.8%7.4%

13.9%

7.7%

12.6%

44.5%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%



Lance SchmidtBaking

Sales Contribution Gross Margin Contribution

WarehouseWarehouse--Delivered SnacksDelivered SnacksContributed 320% MoreContributed 320% More

Gross Margin Dollars ThanGross Margin Dollars ThanThe Top Contributing DSDThe Top Contributing DSD

SupplierSupplier


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Achieving These Results Requires• Retailer commitment to

warehouse-delivered and MVE programs.

• The WD Snacks MVE will deliver more profit dollars for the retailer.

• Retailer must structure DSD contracts to support MVE placement.

• Working with your WD supplier to maximize sku assortment for your region.

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Key Takeaways• Multi-vendor strategies can generate

explosive sales and margin lift.• Commitment to WD Snack Program.• Partnership with manufacturers

and wholesaler.• Don’t negate the impact

or need for DSD.• Balance the programs.• Analyze results.• Keep it fresh.• Promote.

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Why Are WD Snacks So Much More Profitable?

• Retailers And Manufacturers Benefit From The Significant Economies Of Scale, Efficiency And Synergy Created By Warehouse-Delivered Suppliers.

Snack Category Adjusted Gross MarginINCLUDES ALL REBATE, ALLOWANCE & PLACEMENT MONIES

31.7%

44.9%

32.8%29.7%

43.5%

20.9%

32.3%

51.4%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

55.0%



Lance SchmidtBaking

Gross Margin %

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Why Are WD Snacks So Much More Profitable?

• The Value of Thousands of Brands/ProductsThousands of Brands/Products, from Hundreds of ManufacturersHundreds of Manufacturers, , Across Many Across Many CategoriesCategories in the store; Drives Cost DownDrives Cost Down and Retailers Enjoy Higher MarginsRetailers Enjoy Higher Margins.

Place Order

Receive Product Putaway Replenish

Take Order

Select Order

Verify Outbound

Load

Load Truck

Handle Returns

Take Inventory

Process Invoices

Warehouse Space Costs

Inventory Carrying

Costs

Equipment & Service

CostsSG&A

SHARED COSTS OF THE SUPPLY CHAIN TRANSLATES TO LOWER COST FOR RESHARED COSTS OF THE SUPPLY CHAIN TRANSLATES TO LOWER COST FOR RETAILERSTAILERS

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WD Products Are Efficient For The Retailer

• The Value Of One Delivery; Where Are Your Customers Parking?

DSDDSD DSDDSD

DSD

DSD

DSD

WDSnack Category Sales & Gross Margin Contribution


0.5%6.7%6.9%9.8%

12.5%14.5%15.2%

33.9%

0.4%7.7%

5.8%7.4%

13.9%

7.7%

12.6%

44.5%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%



Lance SchmidtBaking

Sales Contribution Gross Margin Contribution

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Key Takeaways

• Sales & margin can improve significantly by:– Balancing WD & DSD Snacks.– Focusing on category segments and the brands

that consumers want; delivering higher margins.– Placing a WD Snack MVE in a prime impulse

location.– Leveraging the scale, efficiency, effectiveness and

the brand strength of WD.– Consider WD multi-vendor strategies in many

categories.

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Driving Snack Category Sales & Profits

Presented By:

Kit Dietz - OwnerDietz Consulting LLC

Russ Quick – VP Sales & MarketingFasMart/Shore Stop Convenience Stores

Las Vegas, Convention CenterOctober 11, 2006

Documents

Driving Snack Category Sales & Profits - McLane Company · PDF filesalty, meat snacks, snack nuts, snack mixed, & sweet snacks • Reposition WD Snacks MVE to the front of the store