New Closed-Loop System
Is Natural for Hain Celestial
By Al Heller
An ongoing acquisition strategy that’s already pushed Hain Celestial Foods past the $900 million annual sales mark has made business more complex for the marketer of 34 brands of natural and organic foods, snacks and personal care products.
What’s more, senior management has made more profitable sales a priority. To achieve that goal, it implemented a closed-loop trade promotion management system to provide “one version of the truth” throughout the company.
The system, along with Hain’s refined TPM processes, aims to make sales managers more accountable for improving event profitability, and also to align the sales, marketing, production, logistics, finance and deduction teams on trade planning, execution and clearance. What have been the results so far?
The company’s trade promotion manager, Matt Bennett, outlined the progress in a presentation at the recent Trade Promotion Management Associates Annual Conference in Chicago.
“We have a lot of pre-matching now that we hadn’t had before,” said Bennett, in explaining why a unified view was essential as the backbone of Hain’s trade promotion practice
Distributors such as Haddenhouse and Tree of Life drive nearly half of the company’s volume. They provide their sell-in and scan reports to a Hain team of 13 deduction managers who reconcile and apply deductions properly ($35 million in trade deductions).
For Hain, whose brands include Health Valley, Terra Chips, Celestial Seasonings, Garden of Eatin’, WestSoy and Spectrum Naturals, the closed-loop TPM solution has helped “turn sales managers into retail business managers. I urge them every day to manage their business like they manage their personal checkbook,” said Bennett. “We don’t want to reduce trade spending. We want to take the money we have and be more efficient.”
One way that Hain gained their compliance was to base bonuses on profitable sales rather than on volume.
According to early figures, Hain has made trade spend two to three percentage points more efficient companywide, noted Bennett, who added it is “easy to mainstream newly acquired brands” into the TPM solution. “We want to keep customers happy and exploit opportunities to improve P&Ls, identify and eliminate poor-performing events and replicate high profit-building plans.”
Moreover, Hain has become better able to “change the landscape on forward buying. We let retailers know that we knew what was going
on. We came up with great work here and forced the issue,” said Bennett. “Retailers still want the volume, and we tell distributors they’ll get better commissions. It has become a win-win for everyone. We’ve just had one of the best quarters we’ve ever had, and that profitability
is motivational.”
With sales and spending visibility within the closed-loop TPM system, departmental silos and organizational confusion have been reduced, and workflow and category leadership status have been improved, he added. “‘The system provides one home for all your information, so please use it,’ I tell them….Now we can sit with a sales rep for two to three hours and see what’s ahead for the next nine to 12 months.”
To reach this point, Hain began a process to improve trade promotions in summer of 2005. Back then, the company planned manually and relied on spreadsheet data, which led to fragmented visibility and incomplete communication. Hain hired an outside consultant to assess the company’s business processes, measure against industry best practices, help it adopt process recommendations to close gaps, and prepare a 60-page RFP for TPM vendors that reflected the distinct complexities of Hain.
In Bennett’s presentation, he named neither the consultant nor the TPM solution selected, but spoke of the process of change. He emphasized the importance of:
- Getting managers in place who think the same as you. (“They understand the basics of trade promotion, and question why we’re wasting money on some events and not spending enough on others.”)
- Training. (“It’s critical. Teaching is the hardest part. We’re training 125 people in different sessions. We also continue to train via webcasts brokers, store managers, and anyone internally who wants to get involved. We’re training the trainers. Every day is a challenge. It’s kind of fun to break through barriers and make your own path.”)
- Thinking about business differently to focus on profitable sales.
One sample screen in the presentation gives Hain the ability to compare profit-and-loss performance by customer, with details that include sales, trade promotion discounts, cost of goods, freight and non-promotional expenses such as warehouse and brokerage charges. Another enables the company to view budget vs. projected variance through the end of a quarter, broken out by category and customer.
Al Heller is co-author of Consumer-Centric Category Management (Nielsen/Wiley 2006) and president, Distinct Communications, LLC.
NOVEMBER 2007
Wrigley Empowers Field Teams
To Plan at More Detailed Level
By Al Heller
CPG companies often tap their trade marketing and IT executives to help turn their sales forces into more astute business planners who understand much about their retail customers, and drive brand and category growth with that knowledge. Often the transformation isn’t sealed until companies enforce that sales compensation hinges, at least partly, on measurable gains in trade promotion effectiveness
and efficiency.
This basic explanation belies the challenge of building accountability throughout a company; yet it underlies a common occurrence as CPGs aim to better manage hefty trade promotion expenses and deliver higher returns.
Life was similar at Wm. Wrigley Jr. Company, but for one great advantage: The $4.7 billion seller of Wrigley’s Spearmint, Juicy Fruit, Doublemint, Life Savers, Altoids and other brands in 180 countries had successfully established a powerful centralized technology platform with SAP. It was the result of a multi-year emphasis on Best Practice systems and business processes by executive chairman and chairman of the board Bill Wrigley, Jr.
With the global enterprise having run a single-instance ERP system for two years before Wrigley went live in the U.S. with its trade promotion system (it’s been up for ten months now, and will be rolled out to Europe), “people knew the business metrics that were important to our company and only had to begin using them within TPM,” said Tad Moskwa, business integration lead at Wrigley.
Wrigley went live with Clearview, its global enterprise system, and then added Preview, the TPM system, in 2006. Account managers with laptops had this single point of entry for everything they needed.
“It became their gateway to TPM, account planning, customer management and more,” noted Jonathan Meyers, business system lead in the SAP Center of Excellence at Wrigley. “It built a mindset throughout our business that you’ll plan in the tool and be held accountable for your spend.”
Reports on Clearview’s analytical dashboards (which were country-specific) empowered Wrigley executives to “slice and dice data in many ways. They could see plans and customer hierarchy go down
by individual products and drill into invoices, all at their fingertips,”
he added.
Together, Moskwa and Meyers presented a transformational tale, “Wrigley Gets a Clear View: A Roadmap for Getting Your Field Team to Plan at a More Detailed Level,” at the recent Trade Promotion Management Associates Annual Conference in Chicago.
Today, TPM is the most integrated system at Wrigley, and Preview (on the back of Clearview) brought it to life. The system has four buckets:
1. Enterprise portal or gateway
2. Business Intelligence warehouse where managers plan for
accounts, integrate to the TPM tool, allocate trade dollars by
channel and customer; it also serves as the engine behind
all reporting
3. CRM, where the company creates trade promotions; it is
secure, with account managers able to see only the
accounts on which they plan and report
4. SAP ECC, the back office.
Building the TPM tool, Wrigley followed several lessons learned earlier when it developed Clearview. “When I execute a report in 45 seconds, I think that’s pretty good performance. Business wants data instantaneously,” said Meyers. “A big lesson learned was different expectations about what performance was and should be. So we’re excited about implementing Business Intelligence Accelerator by the end of 2007. It will give us more horsepower.” Also: balance ease of use with functionality, and personalize where possible.
The Preview system “gave us a single source of truth,” stated Moskwa. Its five key components are:
1. Event Management and Analysis
2. Marketing/Trade/Customer Calendar
3. Volume Planning – Baseline and incremental, not just where
we spend money, but where Wrigley can increase sales
4. Pre- and Post-Analysis
5. Target and Budget Allocation
Key for the TPM tool was to have a real-time interface with the SAP ECC back office, with live accruals and off-invoice functionality. Wrigley sought to cut out the middle layers of laborious data entry, and be able to deliver instant reporting on both plans and actual.
“If I have a $100,000 event, I can see right away what that does to my net sales and marketing,” observed Moskwa. Wrigley also aimed to simplify the process of approving promotions.
Perhaps Preview’s biggest benefit is its strength as a continuous planning tool. “We wanted it to be today, not quarterly or any other frequency,” he added. The tool also:
enhances year-on-year planning, using historical volume plans and event details to create new plans; makes event profitability more visible, for both Wrigley and customers; lessens tracking activity and adds accountability by reducing offline TPM; acts as a single planning tool; enhances reporting; integrates actuals with plans; and realigns accounts, which comes into play as people accept new jobs and new accounts. “It beats the old binders,” Moskwa said.
Reviewing the implementation process, he described “change management [as] the toughest challenge” in moving users forward with the TPM system. “We got executive sponsorship from day one. We needed to get more involvement from the middle managers earlier on. Once we tell them their annual review and bonus depends on it, everyone gets pretty good at it.”
Other key steps that he and Meyers related:
- To transform the sales force into business managers, Wrigley stressed business fundamental training four months in advance of going live. (“It wasn’t mandatory, but we didn’t want them struggling with business concepts such as accruals and ROI when they’re running the tool.”)
- They anticipated the time and effort required to support end-users, and urged the audience to not underestimate this.
- They followed the 80/20 rule when deciding which customers to put in the TPM system. (“Start with the biggest-spending customers, give people time to get used to the system. Account managers who like the way it works will talk it up and get others excited to use it.”)
Al Heller is co-author of Consumer-Centric Category Management (Nielsen/Wiley, 2006) and president, Distinct Communications, LLC.
Optimizing Collaboration Drives
Improved Business for All
By Al Heller
Although retailers are more pleased with collaboration than manufacturers are, both trading partners are benefiting from such teamwork, a landmark study presented at the Trade Promotion Management Associates (TPMA) Annual Conference shows. Optimizing collaborative trade promotion drives improved business results for all.
“The survey tells us that manufacturers and retailers who engage more partners in key collaborative activities report significantly higher levels of satisfaction with their promotion efforts,” said Mike Kantor, managing director, TPMA. “For manufacturers, this means more adoption and freedom for the field sales force and new tools to effectively manage and measure promotions. For retailers, this means stronger promotion planning and optimization, and improved interactions between marketing, supply chain and research.”
The survey turned up some differing perceptions. Nearly nine out of 10 of CPG respondents (87%) said they’re “not satisfied” with their return on trade promotion events, compared with just half (50%) of chain respondents who said the same. Further contrasts: CPG felt goal alignment and partner trust were less important, and they were less likely to optimize price or target market, according to findings of the 2007 Promotion Collaboration Survey, conducted by DemandTec and Booz Allen Hamilton in partnership with TPMA.
“Brand-centric manufacturers need to pay more attention to the role that retailers play as the advocate for the consumer,” said Hans Van Delden, vice president at Booz Allen Hamilton, a consulting firm.
“The survey also shows that retailers are interested in the customer and the category, while manufacturers are interested in events and brands. This can cause a disconnect that results in less than
optimal promotions.”
Despite such evidence that collaboration is a work in progress, 100% of the survey’s retailers (92% very important/8% important) affirm the value of the effort, as do 95% of manufacturers (56% very important/ 39% important).
The primary benefits of collaborative promotions, as shown by the study:
- More effective and efficient planning (83% of retailers, 68% of manufacturers)
- Revenue growth (75% of retailers, 53% of manufacturers)
- Share growth (58% of retailers, 37% of manufacturers)
- Reduced out-of-stocks (58% of retailers, 34% of manufacturers)
- More effective promotions (50% of retailers, 50% of manufacturers)
- More efficient new product introductions (50% of retailers, 50% of manufacturers)
“Collaborative planning can deliver significant benefits to both retailers and manufacturers through better strategic pricing, product assortment and promotion optimization decisions,” said Armen Najarian, director of product marketing at DemandTec, a provider of applications that empower trading partners to optimize pricing, promotion and other strategic decisions. “As more embrace collaborative tools and processes, we see a network effect of companies working together to unlock new levels of business value.”
The Web-based survey, conducted this summer by Coogan & Partners, had 54 retailer and CPG respondents, who represented a respective 40% and 55% of U.S. grocery volume.
By classifying chain and CPG respondents into two groups—more and less collaborative—researchers were able to show that 63% of the more collaborative manufacturers report more efficient new product introductions, versus just 9% among the less collaborative.
More collaborative manufacturers also decentralize decision making, and give field teams more latitude to meet retailer program requirements, except for pricing. For example:
- 88% permit sales teams to reschedule events to match customers’ calendars (vs. 67% of less collaborative)
- 64% let them design customized pallets or displays (vs. 42% of less collaborative)
- 60% allow them to manage brand portfolios by shifting funds from one brand to another (vs. 33% of less collaborative)
