Wine Out-of-Stocks at Kroger Prevented
By Using Analytics, Collaboration 

By Dale Buss

The rumbling from the earthquake in California’s Napa Valley wine country was felt all the way to Kroger headquarters in Cincinnati. When news footage appeared across the country of thousands of ruined wine casks and broken wine bottles after the temblor that registered 6-plus on the Richter scale in late August, the wine-buying department of the giant supermarket chain quite understandably turned to Treasury Wine Estates to find out from its category manager how store wine supplies would be affected – and when.

Thanks to a cutting-edge system of collaboration among Kroger, Treasury and data specialist Market6, the chain’s wine buyers were clued in quickly to the potential impact on the stock situation of wines supplied by Treasury, which is based in Napa, Calif., as well as by other wineries.

“In a situation like this, there is no forecast model that can be built,” Antony Capobianco, director of strategic accounts, Kroger, for Treasury, told CPGmatters." But by looking at what we have coming up and the volume and demand and price indexing, we could see how it would affect us at Kroger and make decision on that data. Prior to having this system, the level of detail might have been more difficult for us to adjust for Kroger specifically.”

And Treasury didn’t have to go too far back for learnings about how to prevent out-of-stocks in dire situations wrought by acts of God. “We have modeling that we have used in this system when hurricanes or threats of hurricanes have impacted stores recently,” said Jerry Stephens, vice president of Kroger for Market6, a retail-analytic firm based in Deerfield, Ill.

Of course, the system and the parties’ collaboration mainly is meant to help Kroger ensure that the right wines are always available in each of its stores. The program reflects the specific demographics of the surrounding market and other factors, including promotional considerations, seasonality – and acts of God. The key to its success is tight cooperation among the three parties and mutual dedication to the idea of fulfilling Kroger’s “Customer First” mentality when it comes to making sure they can buy the wines they want, when they want them.

Kroger, Treasury Wines and Market6 have been working together on this challenge and opportunity for about a decade, continually refining the business-planning process aimed at producing ever-satisfied wine shoppers. But over the past several months, they have been elevating the process and the system by relying on enhanced analytic capabilities and the ability of the retailer and the wine supplier to harness the resulting data more effectively.

Market6 massages wine-sales data by day and by SKU and by Kroger store, including not only current and recent sales but also historical sales. Demand forecasts also come into play that take into account the many variables that can affect wine purchases and out-of-stock vulnerabilities, including seasonal issues and new products, Capobianco said.

Importantly, Kroger and Treasury managers use the system to look at the exact same data sets each day on a 24x7 basis. They said being confident that they’re looking at the same information helps them make decisions, big and small, quickly and with confidence, compared with how other retailers might approach ensuring adequate stocks in their wine departments.

“Our final platform on this project is a full, 360-degree solution to track results over time and ensures that when the Kroger customer walks in the door looking for something, it’s there,” Capobianco said.

For example, Kroger might want to stage a promotion featuring Beringer Pinot Grigio wines along with cheeses in a cross-merchandising effort. The collaborative process the parties have launched ensures that this variety will be fully available not only for the duration of the promotion, but also that stocks will be back up to par the moment the promotion ends.

“If the customer has been engaged by this promotion, and the groundwork for purchase has been lain, and then they walk to the shelf and for any one of a number of reasons that wine isn’t there – well, we’ve identified why out-of-stocks occur and we’re working with the division, the stores and the distributor to make sure that doesn’t happen,” he said.

In addition to the specific disappointment that a wine shopper feels when an anticipated purchase doesn’t materialize because it is out of stock, there can be damage to the Kroger brand. “Everything about how Kroger makes decisions starts with the customer,” Stephens said. “They want to make sure they’re carrying the right distribution that their loyal shoppers are looking for.”

And when it comes to wine, Kroger’s emphasis on its loyal customers may be even bigger than for other supermarket categories. The chain, for instance won last year’s Retailer of the Year award from Wine Enthusiast magazine.

“We need to help Kroger make sure they’re delivering,” Capobianco said. “Then everything else comes into line. They’re growing both their overall wine sales, and our share of it at Treasury, but only by making sure those measures of customer satisfaction keep growing as well.”

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                                                                            Mid-September 2014