Just Born Grows Up Fast in TPM
By Al Heller
To millions of children, Easter would seem less sweet without the iconic PEEPS marshmallow bunnies and chicks made by Just Born.
But bringing them to market during four intensely promotional holiday periods a year (Valentine’s Day, Halloween and Christmas, too) isn’t kid’s play. The niche confectionery maker has to “have long visibility on demand and project accurately. With that we can price and promote accordingly, plan production, source ingredients and packaging, put labor in place and establish the logistics to distribute on time,” says Ed Broczkowski, director of business advisory services at the privately-owned company in Bethlehem, Pa.
Because Just Born uses 30 different brokers to do most of its selling, it faces more complex challenges than many manufacturers in getting its complete enterprise to embrace ‘one version of the truth’ when planning trade events, analyzing their performance, and projecting for the following year. The company itself does sell directly to certain key accounts.
According to Broczkowski, the marshmallow isn’t the ‘glue’ that aligns sales, marketing, finance and other disciplines. Rather, the trade promotion management (TPM) solution from Synectics Group, Allentown, Pa., which it began using a little over a year ago, “helps bring order to our overall business…It’s great to make sales, but this keeps us from overspending on any account’s TPM budget without knowing, and it reduces the chances of surprise back-end deductions taken by retailers.”
Just Born uses the Synectics program to help manage sales and promotions of all of its everyday brands—Mike & Ike, Zours, Hot Tamales, Peanut Chews, and Teenee Beanee
Jelly Beans—as well as the seasonal PEEPS, which account for less than one-quarter of
its volume.
For example, the company leads in the theater box segment of the candy aisle. “Whenever we take pricing action where we have competitive advantage, we’re mindful we’re doing what’s right for our customers,” explains Broczkowski. “The clear visibility of Synectics allows us to give customers an opportunity to mitigate some, if not all, of the price increases we put forth last year. We call it the Gold-Silver-Bronze program. Depending on how many SKUs you carry, how many times you promote, your cleanliness in terms of markdowns and unsaleables, and your ability to sell through, you’re entitled to a percentage of trade allowance.”
Efforts like these are critical in today’s turbulent pricing environment with commodity volatility and retailers seeking maximally productive trade promotions if they can’t get the permanent price pullbacks they really seek.
“We aim to grow several multiples of the industry average in our segments. We can only sustain that if we are as targeted and effective as possible with our trade spend,” he says. “Since we also want above-average profitability, we can’t just go out and buy sales growth at any cost.”
Since Synectics is a Web-based software-as-a-service tool, all brokers and relevant staffers
at Just Born have near real-time access, and use the technology on calls. As a result, the candy maker is becoming better known for fact-based selling, for telling retailers the precise dollars they earned on previous events, and being in a more credible position to sell in subsequent events.
Just Born is implementing the Synectics tool in three phases:
- First, it automated the manual process of account planning over the course of one year. “We used spreadsheets, which often went missing or lost. We knew it was prone to multiple errors at practically every step, from filling out forms to authorization routing,” recalls Broczkowski. Paper has now been eliminated, and there is one version of truth across the company and its broker network. The company can now mandate a timeline for broker projections to be put into the system, and it can uniformly enforce an authorization process.
Nearly a dozen of its brokers were familiar with Synectics from their work with other
CPG companies; they tended to help other brokers who were less tech-savvy at regional
training sessions run by Just Born and Synectics teams.
- Second, it just began to analyze promotion performance. “We’re connecting the dots on programs to see if actual volumes met expectations, if what we paid retailers was productive for us and them,” he explains. “We’re starting to see patterns based on store locations and consumer bases on how to best tailor promotions going forward, refine performance and maximize our trade promotion dollars.”
- Third, it will automate and analyze future trade promotion plans. “We’ll begin to do true bottoms-up budgets from a customer level and add trade dollars to it. If there’s a discrepancy between the top-down and bottoms-up budgets, our sales, marketing and finance teams will discuss it,” says Broczkowski. “Once we begin to plan our ‘out’ years using the system, our information and analysis will get better at it each year.”)
Though it is too early to quantify gains in forecast accuracy or trade event performance, Broczkowski anticipates payback on the Synectics purchase within two years of using the system. One savings: he says he has already reassigned one full-time employee from the task of managing a master checkbook for broker promotions to “more value-added work.”
Al Heller is co-author, Consumer-Centric Category Management (Nielsen/Wiley, 2006) and president, Distinct Communications, LLC.
JANUARY 2009
TPM Visibility Helps Gorton’s Deal More Efficiently
By James Tenser
Gorton’s promotion deal monitoring solution has helped it slash clerical hours, improve procedural compliance by the sales organization, and reduce deductions by hundreds of thousands of dollars. Now the company is seeing similar advantage at King & Prince Seafood, the food service business it acquired in 2005.
“The improved visibility – I just can’t say enough about how much that has helped us,” said Bruce Amero, customer finance director at Gorton’s, a Gloucester, Mass.-based provider of frozen seafood in the U.S. and Canada. Its line includes 35 products sold in the retail channel and 250 to food service.
“We can scan down very quickly and see the actions. Our past process was reactive, tedious, disconnected. Now it is based on projections, with real accruals connected to the general ledger. We can see the volume increase. We can see better profitability. Our sales people can see it.”
Gorton’s began integrating the King & Prince business in late 2006. As recently as two years ago, its daily, monthly and yearly trade promotion reconciliation processes were being performed manually, using non-integrated subsystems and spreadsheets. These processes soaked up far too many staff hours on manual activities such as obtaining data and entering data into subsystems. The sales organization found it hard using the existing tools and processes, so compliance was uneven.
In addition, there were persistent concerns about:
- Data quality and integrity
- Accessibility by the workforce
- Good and valuable information not being readily available to the enterprise
- Customer and product profitability information not being complete.
These limitations hurt trade spending effectiveness, according to Amero. “We had inherent problems for years, related to over-tapping on stacked deals.”
Applying its TPM system, Gorton’s saw its outstanding deductions balance decline by over 25%, and its aged balance by over 40%, Amero said. “Since the start of 2008, total open deductions are down over 75%. We got hundreds of thousands back just by being able to show the facts.”
Amero said the present tools allow Gorton’s to handle other complexities, like chargebacks due to quality problems. “It’s all in there. You can point back to reason codes, et cetera. The tools let us drill down, and they support the deduction side with all the same mechanisms.”
Amero shared lessons learned at Gorton’s from this experience with attendees at the recent VCF/TPMA Annual Conference in Scottsdale. He was joined at the podium by John Lafata, manager of business systems at Gorton’s and Richard Barnett, founder and chief marketing officer of Kineticsware.
Gorton’s originally implemented Kineticsware Trade Promotion Management solution in 1996. Use of the system helped it gain trade effectiveness from reduced spending on base volume. As a category leader working collaboratively with lead retail customers, it is able to target trade investments and promotions for the best possible results. In addition, communications and pricing errors have been virtually eliminated, while accountability has increased.
On the administrative side, use of the Trade Promotion Management system has allowed Gorton’s to eliminate duplicate updates of disparate systems across the sales and sales support teams and achieve growth objectives without increases in support staff.
An important benefit area is ease of use, Amero said. Within the acquired food service business, prior processes had required manual settlement and reconciliation. Here again, the visibility afforded by the TPM system has made a difference.
“Our sales teams hated doing reconciliation. Now it’s much easier.” he said. “The write offs in food service go down because our guys make deals and also enter them in the system.”
Barnett of Kineticsware said the tool’s execution screen is designed to show a snapshot of actuals to date alongside the plan going forward, while allowing for variations and exceptions.
He said, “If you want the sales teams to use a system, put the actuals in there. Sales teams love to have that information as soon as it is available. They want to get the story all lined up.”
Barnett outlined a five-level journey that many companies follow to improve the effectiveness and efficiency of their trade spend:
- Level 1 – Ad hoc processes, usually reactive and manual.
- Level 2 – Defined processes, targets, and metrics.
- Level 3 – Managed processes and goal alignment across departments using loosely integrated applications.
- Level 4 – Integrated, cross department collaboration. Fully integrated, more flow and exceptions, managed across departments.
- Level 5 – Extended collaboration.
Gorton’s is mastering Level 4, he said, and the benefits to date have justified the effort. “The biggest change [for the food service account teams] was the move away from volume-driven incentives. Now trade percentage is an index Gorton’s can measure them on.”
Gorton’s sales teams are evaluated on three metrics: sales volume, market share, and profit, which is indexed as trade spending as a percentage of sales, he added.
Post-audits are also easier because the data is present and accessible. After retailers discover that Gorton’s is prepared, Amero said, “They don’t come in as often, because they know we have the facts.”
