MONOGRAPH CHEESE MANAGEMENT

CATEGORY MANAGEMENT FOR CHEESE USDEC Summary: Dairy Case Management Toolkit Developed by David Bishop and Willard Bishop Consulting, Ltd.

As consumers’ purchasing products. Understanding the category UNDERSTANDING gives retailers insights into trends power increases, eating CATEGORY MANAGEMENT that can help increase sales. patterns change and Category management is defined Because shelf space is so precious, demand for cheese rises. as “a joint retailer-supplier process savvy retailers use category Consumers appreciate for evaluating and managing categories management to make decisions cheese because it’s versatile, as separate business units by focusing about products in the context on delivering consumer value and of an overall strategy. For instance, functional, convenient, developing and monitoring targeted if their strategy is to increase traffic, tasty, nutritious and a strategies for profitable growth.” category management can help identify the best way to do so. good value. That presents In short, category management Or, if their strategy is to boost is an evaluation tool that helps an opportunity for all the size of transactions, category retailers understand the relative management can reveal that as well. segments of the supply profitability of current and new chain — manufacturer, distributor, retailer — to work together to expand sales and profits. Through the use of category management, retailers can properly align the cheese case to serve their customers.

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THE CATEGORY UNDERSTANDING THE MANAGEMENT PROCESS CHEESE CASE

Category management comprises an The dairy case is one of the most important eight-step process: sections in the store; more than two-thirds 1. Define the category of U.S. shoppers buy something from the 2. Identify the role of the category dairy aisle when they visit the supermarket. 3. Assess the category 4. Measure and monitor the category Further, the appearance of the dairy case plays a big role in where consumers buy 5. Develop strategies their food. Most consumers will shop at 6. Develop tactics that are consistent with another store if the selection and cleanliness the strategies of the dairy case isn’t satisfactory. That 7. Implement the plan means retailers must demonstrate good 8. Review progress and adjust if necessary. sanitation practices, eliminate out-of-codes Common strategies include building and communicate their quality assurances traffic, increasing the size of transactions, practices to consumers. generating profit, enhancing the store’s Cheese accounts for almost one-quarter image and creating excitement. These of the dollar sales and profits in the strategies can be addressed through dairy department of U.S. supermarkets. different methods of pricing, promotions, Cheese generates gross margins of 35-40%. merchandising and product assortment. Moreover, because it’s relatively inexpensive Category management brings together all to handle, the net margin on cheese the available information on product mix, (gross margin minus costs associated with promotional plans, retail pricing, space stocking and selling product) is the highest management and merchandising to create in the dairy case — as much as 30-35%. a process that can maximize sales and Because of its profitability, retailers continue profitability. With this knowledge, retailers to allocate more shelf space to cheese. A can answer key questions about product few years ago, 1.2-meter sections were the and category performance, competitive norm. Today, many stores have sections analyses, the effectiveness of promotions, of 7 meters or larger. In the United States, the amount of shrink and many other the average supermarket carries 304 SKUs aspects of marketing. (stock-keeping units) of cheese. In the United States, two-thirds of cheese sales are American, cheddar and mozzarella styles. However, the strongest growth in recent years has come from specialty varieties, driven by increased exposure to ethnic and other specialty cheeses in restaurants. By volume, about one-third of retail cheese sales are slices and another third is sold as chunks. However, the fastest-growing form is shreds, which now make up more than 20% of sales. About 80% of cheese sold in the United States is full-fat or regular type. About 16% is lowfat and just 4% is nonfat. Nonfat is declining in popularity, as consumers shun products that don’t measure up to their expectations on taste, texture and functionality.

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UNDERSTANDING THE CHEESE CUSTOMER

It’s critical to understand where the growth in the cheese case is coming from, what the growth potential is and how to capture that growth. Part of this process is knowing who the typical shopper is, understanding current lifestyle trends, and being able to determine how these trends affect the category. U.S. retailers face three major challenges • Consumers are increasingly more willing in cheese marketing: to experiment with different flavors MERCHANDISING 1. Less traditional meal preparation; and textures. New specialty items and CHEESE EFFECTIVELY 2. More competition for the food dollar; varieties with a stronger flavor profile 3. Shifting demographics. are demonstrating strong growth in Effective merchandising can facilitate For instance, in the United States: the cheese case, warranting greater planned cheese purchases, as well • Consumers are pressed for time and shelf space. as encourage impulse buys. There are want to simplify their shopping trips. • The most important cheese purchase six vital components to effective They’re looking for shortcuts. They want factors are freshness and flavor. cheese merchandising. The key is home-cooked meals, but they often Price is secondary if flavor and quality to link merchandising tactics to the don’t have time to make them, so they’re are assured. demographics of the store’s consumers. redefining “home-cooked” by using • More than 80% of cheese purchases are What works in one store or area will components that cut preparation time. planned. However, snack cheeses are not necessarily work in another. This is boosting demand for shreds considerably more likely than other types 1. Space/shelf management: and fresh-grated cheeses. Significantly, to be bought on impulse. Retailers must allocate the right amount consumers are willing to pay a premium • Cheese is consumed both for snacking of shelf space to specific products and for this convenience. This trend is driven and as an ingredient. Therefore, retailers determine the correct positioning of by greater numbers of women working often promote snacking items on impulse products within the category to maximize outside the home, as well as longer displays and use cross-merchandising sales and profits. Basic strategies include commutes and the rise in single- with other foods to promote use of arranging items into family groups; parent families. cheese as an ingredient. positioning stronger products or groups • Busy consumers are making fewer visits • Bulk cheeses are the most price-sensitive at the beginning, center and end of the to the supermarket. And on average, types of cheese, so they will respond best case; mixing fast- and slow-moving items; shoppers spend just 44 seconds to aggressive pricing. and providing variety in the case. With shopping the dairy case. Therefore, Cheese consumers in each market have the proper strategy, retailers can minimize retailers’ in-store merchandising must different characteristics. For instance, in out-of-stocks and out-of-codes and grab shoppers’ attention. Asia, knowledge of cheese is limited to increase sales. Removing slow-turning • Consumers spend less time scanning slices, pizza cheese and cream cheese. items and replacing them with fast newspapers for coupons and circulars. Meanwhile, in Mexico, cheese is consumed movers can boost sales, too. They also are less inclined to stock-up every day in a variety of applications by all on bargains. Instead, they’re looking 2. Displays: age groups. for alternative discounting methods, Cleanliness is essential for the dairy like frequent-shopper programs. Consumers’ lifestyle changes cause changes department, which is cited as the in their shopping behavior. Retailers who number-two department in the store pay attention to these changes can adapt for portraying store image. Therefore, their cheese cases to meet the needs of cheese displays must be clean and their customers. organized. Secondary displays can be placed at the end or middle of an aisle to capture unplanned purchases, a tactic best used for snack and specialty cheeses. Cross-merchandising is another sales-booster; cheese can be paired with wine, crackers, chips, fruit, vegetables or pasta to create “meal solutions” that simplify meal preparation for shoppers.

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Merchandising Checklist

Cases are neat, clean, well-lit Cases are fully stocked Signs are visible, neat and clean All products are properly priced Ad item signs are up Soiled and out-of-code products are removed Products are properly rotated Secondary displays are set up and well- stocked Sales order plans are set for coming weeks

5. Seasonality: Cheese can be merchandised and consumed at a variety of special 3. Point-of-purchase (POP) signage: occasions, such as major holidays, POP materials are like “silent sports events, family gatherings, even salespeople,” working to capture changes of season. All these events shoppers’ attention, educate consumers, provide opportunities to build cheese encourage impulse purchases and marketing programs that draw attention generally add excitement to the to the dairy case. For instance, in the department. Signage is used to United States, retailers promote sliced highlight prices and promotions, cheese at the beginning of barbeque convey preparation ideas and provide season, snack cheese before major nutrition information. The more football games or back-to-school month, information shoppers have about ethnic cheeses during cultural holidays a particular cheese, the more likely and specialty cheeses at Christmas. they are to make a purchase. 6. Sampling: 4. Promotions: Sampling is the best way to introduce With the huge number of products on a new cheese product to consumers, supermarket shelves today, promotions particularly in overseas markets where help make individual products stand the variety or brand of cheese may not be out. Many stores use price promotions, familiar to local shoppers. Consumers are coupons, frequent-shopper discounts, far more likely to purchase a new cheese in-store specials, cross-merchandising variety if they can sample it first. Further, and recipe ideas to draw attention to properly trained demonstrators can cheese. Frequent-shopper discounts, answer consumers’ questions about the or loyalty-marketing programs, are origin of the cheese, its characteristics gaining in popularity because they allow and how it is used. Snack cheeses may retailers to develop customer-specific be served plain, in cubes, or as part of a marketing tactics. Retailers use loyalty cross-promotion, such as with crackers. marketing to identify their “best” or Ingredient cheeses are usually sampled top-spending customers and appeal as part of a cooked dish, so shoppers directly to their shopping habits. It can understand how the cheese is meant rewards customers for desired behaviors to be used. Additional point-of-sale and encourages changes in behavior material, like recipe cards, also play that can benefit underperforming an important role in introducing new products and categories. products in a market.

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