The warehouse-delivered (WD) snacks multi-vendor end-cap (MVE) is driving sales and margins to new levels in convenience retail. The number of Snack MVE placements has grown to 24,000 in the past three years. Today, over 70 AWMA member distributors have developed and successfully implemented their own Snacks MVE program and the numbers keep growing.
Why is the WD Snacks MVE gaining so much success? It’s simple and logical. It provides a single end-cap merchandising solution for the best selling brands across the major snacking segments, at significantly higher margins. Distributors measuring the success of the items on their Snack MVE programs are reporting sales increases of 60 to 130 percent.
"It’s the best thing that’s ever happened to me as a sales manager," reports Roger Schulte, vice-president of sales at Brenham Wholesale, Brenham, TX. "We had 96 large Snack MVEs placed at retail in 2006. The items on our planogram enjoyed a 130 percent increase in overall sales, which equates to 36,982 cases or 385 incremental cases per store annually. The Snack MVE woke us up and made us better category managers."
Brenham Wholesale has developed and will be deploying a medium Snacks MVE to accommodate their retail customers who don’t have enough room for the larger version. "We are in the process of rolling out another 50 medium Snacks MVEs. When our sales managers walk into a store, the Snacks MVE is a call priority and it is on their check list. It’s the right thing for our retail customers, its right for the consumer and we all benefit from serving the consumer better," says Schulte.
Fas Mart/Shore Stop 2004-2006 Total Snack Category Growth
Tommy Thomas, director of sales at The H.T. Hackney Company and chairman of the AWMA Warehouse-Delivered Snack (WDS) Committee, says, "The Snacks MVE has been so successful for us that it has changed our thinking and our approach to category management. We think multi-vendor in everything we do and have applied a multi-vendor approach to every category in the store. From snacks to OTP, and everything in between, we are bringing best of class planograms to our retail customers by leveraging our MVE experience and success."
The mantra of the AWMA WDS committee is to grow total snack category sales and gross margins at retail by achieving a better balance between direct store delivered (DSD) and WD Snacks. The Snack MVE has proven to be a great tactic and is considered to be the essential first step for distributors and retailers. Shouldn’t every distributor offer a Snack MVE program and shouldn’t every convenience retailer place one? Yes, and here’s why. Studies that I have conducted on behalf of the AWMA WDS committee have produced outstanding results. By simply placing a WD Snacks MVE, items on the planogram increased by 114 percent and total WD Snacks increased by 63 percent in our seven-chain, 186-store study.
WD snacks deserve a major role in convenience Fas Mart was an early adopter of the WD Snack MVE. The company had long recognized the opportunity to emphasize WD Snacks in its stores, but lacked the programs and support. When Fas Mart supplier The McLane Company offered a Snack MVE program, Fas Mart jumped in with both feet.
"The MVE was the solution we were looking for," says Russ Quick, vice president of marketing at Fas Mart Shore Stops Convenience Stores. "It enabled us to address store size and available space issues on an integrated multi-vendor single merchandising vehicle. We were able to capitalize on consumer snacking trends, leverage the brand strengths in each of the category segments, and create incremental impulse sales, all at higher margins. Our Snack MVE placement for the first year drove total snack category sales (which includes DSD) by 19 percent and gross margin improved by 22 percent, without cannibalizing DSD snack sales," says Quick.
Fas Mart’s impressive first-year results changed their planning process and thinking about the role of DSD and WD snacks in the category, both inline and on the end-caps. Their approach was consumer focused and they wanted to determine which brands have the best consumer recognition, what are the power brands in each of the category segments and which brands deserve high impulse secondary locations in the store? (See snack category assessment grid on page 50.) Quick and his team dug into their point-of-sale data and conducted a detailed SKU level sales and margin review that would guide their focus in each of the snack category segments.
Fas Mart determined that national brand DSD snacks play a major role in corn chips and would have a shared role in the potato chip segment along with a strong regional DSD supplier. In the cracker segment, both DSD and WD snacks would share the role. WD snacks had the brand strength and higher margins in all of the other segments, which include canister chips, cookies, snack nuts, mixed nuts, seeds, meat snacks and packaged sweet snacks.
Not only would WD snacks be the focal point in these category segments, duplications of lower margin DSD SKUs were eliminated from their set completely. This was a bold move that proved to be a great business decision. (See Sales & Margin growth chart, year two, on page 48.) By making WD snacks the focal point of the snacks category, total snack category sales grew by 33.2 percent and gross margin increased by 38.2 percent.
So, the transfer of consumer demand from lower margin DSD snacks to higher margin WD snacks is an opportunity that all distributors and retailers should capitalize on. (See Sales & Margin contribution chart on page 49.) Total snack category sales at Fas Mart improved by 51.5 percent and gross margin climbed by 60.5 percent over the first two years of the study.
I figured that in year three, if Fas Mart could maintain the growth that it had achieved in years one and two, it would have done well. Just when I thought it couldn’t get any better, it did. In year three, total snack category sales improved by 17.2 percent and gross margin increased by 19.1 percent. That means that over a three-year period, Fas Mart grew its snack business by 68.7 percent and snack margin by 79.6 percent. Year three results were driven by the disciplines of category management principles and a constant emphasis on the category.
Snack Category Assessment Grid
Key takeaways (Three-year Fas Mart study) "Multi-vendor strategies can generate explosive sales and margin lift and requires a close working relationship with manufacturer, distributor and retailer. It is important for retailers to get the right category balance by defining the role of WD and DSD snacks in each of the segments, to leverage brand strengths, take advantage of higher margin snacks and eliminate lower margin duplicate skus. Retailers must structure DSD contracts to support WD MVE placements. Don’t get blinded by the upfront check from DSD suppliers and incorporate those monies as part of your overall margin analysis. Be committed to a Snack MVE program, keep the planogram fresh and continuously promote Snack MVE items," proclaims Russ Quick.
Kit Dietz is president of Dietz Consulting LLC based in Huron, OH. Source: Dietz Consulting LLC Snack Category Assessment Grid
For more information on warehouse delivered snacks and the Joint Industry Warehouse-Delivered Snack Committee, contact Bob Pignato at 800-482-2962, ext. 642 or robertp@awmanet.org.
