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© 2016 Kantar Retail LLC. All Rights Reserved.Disclaimer: The analyses and conclusions presented herein represent the opinions of Kantar Retail. The views expressed in this publication do not necessarily reflect the views of the companies covered by this publication. This publication is not endorsed, or otherwise supported, by the management of any of the companies covered herein.Copyright Notice: No part of this publication may be reproduced in any form or by any means without the express written permission of the copyright owner.
POWERANKING began when one client wanted to know how it stacked up relative to other manufacturers. So, in 1997, the first POWERANKING study entitled “Setting the Standard” was released. What began as a one-time snapshot of the perceptions of U.S. trading partners has become an annual assessment of which manufacturers and retailers are perceived as "best in class" by one another. Over the past 20 years, POWERANKING has become the go-to assessment for industry executives and analysts who wish not only to understand which US manufacturers and retailers are considered best in class and why, but also to gain deeper insight into the current year as well as a perspective on the year to come. This year we are pleased to announce that we are partnering with Ensemble IQ and a couple of their divisions including the Path to Purchase Institute and Progressive Grocer to help drive further awareness of the insights.
The insights provided through this annual study have driven demand for a more global perspective. As a result, Kantar Retail has expanded POWERANKING to include China and the UK, with further market expansion planned for the future.
We hope that you have benefited from the insights provided over the past 20 years and look forward to sharing more insights over the next 20 years.
POWERANKING® How it all got started!
3Introduction 5
Executive Summary 10
2015 POWERANKING® Revisited 12
2016 Key Findings 16
Manufacturer Rankings 24
Retailer Rankings 40
In This IssuePOWERANKING® How it all got started!
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Introduction
The survey originated from our industry benchmarking studies on category management and trade promotion management, which for the past 20 years have provided insight into industry best practices in these areas. The objective of the POWERANKING® study is to research and benchmark how retailers and manufacturers view each other in the most important areas of the manufacturer-retailer relationship.
The POWERANKING study identifies those retailers and manufacturers who set the standard of performance as ranked by their trading partners. This provides benchmarks for retailers and manufacturers across trade channels.
The specific goals of the research were to:
— Identify the best manufacturers and retailers, as evaluated by their trading partners
— Provide insight into what makes them “the best”
— Define the importance of key metrics between trading partners
— Highlight areas for improvement
6 Customized questionnaires were developed for retailer and wholesaler respondents in food, drug, mass merchandiser, dollar, convenience, and club channels, as well as for manufacturers in food, household products, general merchandise, and health & beauty care categories. These questionnaires were distributed every spring from 1997 to 2016 to personnel at all levels of management, with the assurance of total confidentiality of respondents.
Over 600 manufacturer and retailer respondents participated in this year’s study. The results of the 2016 survey were compared with the results of 2014 and 2015 to determine the causes behind shifts in the rankings.
Retailers were asked to rank manufacturers on criteria that fall into two broad areas:
STRATEGIC METRICS
— Clearest Company Strategy
— Most Important Consumer Brands to Retailers
— Best Combination of Growth & Profitability
BUSINESS FUNDAMENTALS
— Best Sales Forice / Customer Teams
— Most Innovative Marketing Approach
— Best Consumer & Shopper Insights / Category Leadership
— Best Supply Chain Management
— Best Shopper Marketing Programs
— Best Use of Digital Platforms
Manufacturers were asked to rank retailers on similar criteria:
STRATEGIC METRICS
— Clearest Company Strategy
— Best Store Branding to Shoppers
— Projected Power Retailers in 15 Years
BUSINESS FUNDAMENTALS
— Best Retailer to do Business With
— Best Category Management / Buying Teams
— Most Innovative Merchandising Approach
— Best Supply Chain Management
— Best Practice Category Leadership
— Best Use of Digitial Platforms
7Results were tabulated on a two-year rolling basis, reflecting the percentage of respondents ranking each company among the top three. Additionally, follow-up qualitative interviews were conducted among a diverse group of manufacturers and retailers to provide further insight into the data.
The POWERANKING methodology reflects mergers and acquisitions that have occurred in the past. We have consciously rolled up operations into the parent company where appropriate for this year and versus a year ago. At the same time, where retailers and manufacturers are operating largely as independent companies, they are treated as such in the data. As a dynamic monitor, POWERANKING will continue to consolidate or separate companies as retailers perceive them.
POWERANKING® COMPOSITES
The 2016 POWERANKING results include the Overall POWERANKING Composite, created by weighting the three strategic rankings equally with the six business fundamental rankings (see previous page) — thus placing greater importance on the strategic rankings. This reflects the importance of sound strategy as an overall driving force in business performance.
STRATEGIC COMPOSITE
The Strategic Composite combines the three strategic measures into an overall composite to provide better insight into which manufacturers and retailers are most strategically important to their trading partners.
BUSINESS FUNDAMENTALS COMPOSITE
The Business Fundamentals Composite combines the six fundamental areas of
business into a composite, which reflects the retailers’ and manufacturers’ opinions of those trading partners that have the strongest organizations and personnel and provide the best tools for solid business development.
DIGITAL MARKETING
Beginning in 2011, Kantar Retail added a measure for Digital Marketing. Given its increasing influence on retailers, manufacturers and consumers, digital is now a measure to be monitored and as of 2016, is included in the Business Fundamentals Composite.
MULTICULTURAL MARKETING
Given the continued importance of the multicultural shopper, this year we added a question for both manufacturers and retailers. Multicultural Marketing is treated as an ad hoc measure.
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2016 Participating Manufacturers
3MAbbott LaboratoriesAlconBimbo Bakeries USABlue Diamond GrowersBotanical Food CompanyBush Brothers & CompanyCadburyCampbell Soup CompanyCarl Buddig & CompanyChurch & Dwight CompanyThe Clorox C ompanyThe Coca-Cola CompanyColgate-PalmoliveConAgra FoodsCoty, Inc.CrayolaDel Monte Foods, Inc.DiageoDr Pepper Snapple GroupE. & J. Gallo Winery
Edgewell Personal CareEnergizer Holdings, Inc.Flowers FoodsGeneral Mills, Inc.Georgia-PacificGlaxoSmithKlineGood Karma FoodsGorton’s of GloucesterHasbro, Inc.Heineken USAHenkel CorporationThe Hershey CompanyHormel Foods CorporationInventure FoodsThe J.M. Smucker CompanyJarden CorporationJohnson & JohnsonJohnsonville SausageJones Dairy FarmKAO Brands Company Kellogg Company
Keurig Green Mountain, Inc.Kimberly-Clark CorporationThe Kraft Heinz CompanyL’OréalMars, IncorporatedMcKee Foods CorporationMead Johnson NutritionMenasha CorporationMission FoodsMondelēz International, Inc.Nestlé USANewell BrandsNovartisProcter & GamblePactivPepperidge FarmPepsiCoPfizer Inc.Philips Consumer LifestylePinnacle Foods Inc.Post Foods
Red Bull GmbHRich Products CorporationSamsungSargento Foods Inc.S.C. Johnson & SonThe Schwan Food CompanySealed AirSeneca Foods CorporationSociété BICStarKist Co.Sun-Maid Growers of CaliforniaThe T. Marzetti CompanyTom’s of MaineTreasury Wine EstatesTree Top, Inc.Tyson Foods, Inc.UnileverUnited Sugars CorporationWater Pik, Inc.WD-40 CompanyWhiteWave Foods
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2016 Participating Retailers
7-ElevenAAFESAce HardwareAcosta Sales & MarketingAdvantage SolutionsAhold USA, Inc.Albertsons Companies, Inc.Associated Food StoresAssociated Wholesale GrocersBest BuyBig Lots, Inc.BJ’s Wholesale ClubBoscov’sBoyer’s Food Markets, Inc.Bravo SupermarketsC & B Supermarket IncC&S Wholesale GrocersChevron CorporationCircle KCostco WholesaleCrossmark, Inc.
CST Brands, Inc.Cumberland FarmsCVS HealthDash’s MarketDollar General CorporationDollar Tree, Inc.Eco Travel PlazaFamily DollarFood 4 LessFresh & EasyThe Fresh MarketGamestop Corp.Giant EagleGiant Food StoresH-E-B Grocery CompanyHess CorporationHobby LobbyThe Home DepotHomeland StoresHy-VeeIngles Markets, Inc.
K-VA-T Food Stores, Inc.The Kroger CompanyLowes FoodsMacy’sMcCaffrey’s Food MarketsMeijer, Inc.Navy ExchangePathmarkPetSmartPeytonsPublix Super Markets, Inc.Rite AidRoundy’s SupermarketsRoyal Dutch ShellSafeway, Inc.Sam’s ClubSave Mart SupermarketsSchnucksShopRiteSmith’s Food & Drug Centers, Inc.Southeastern Grocers
SpeedwaySprouts Farmers Market, Inc.SunocoSupervalu, Inc.Target CorporationTops Friendly MarketsTotal Wine & MoreTurkey Hill Minit MarketsUnified GrocersValero Energy CorporationWakefern Food CorporationWalgreen CompanyWalmart Stores, Inc.Wawa Inc.Wegmans Food Markets, Inc.Whole Foods MarketWinn-Dixie Stores, Inc.Yankee Spirits
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20 Year Anniversary Issue Who has been perceived as "best in class" and why
In the inaugural issue of “Setting the Standard,” retailers perceived Procter & Gamble as “best in class,” driven by the clarity of its strategy, the power of its brands, the strength of its customer teams, the depth of its insights, and its unwavering commitment to category leadership. Since then, P&G has held the #1 position (with the exception of 2002, when Kraft Foods achieved the #1 ranking). In the same issue, manufacturers identified Walmart as “best in class,” driven by the clarity of its strategy, the best job of branding its stores, the superiority of its supply chain, and manufacturers’ perspective that Walmart would be the power retailer over the next 15 years. Walmart has successfully held the #1 spot since the beginning.
During the last 20 years, we have observed major drivers of change including (but not limited to): shopper empowerment, data ubiquity, total business management, business model evolution, and the mainstreaming
of what were once considered “alternative channels.” Since 1997, trading partners have perceived P&G and Walmart as the two organizations that have consistently risen to the top of who is perceived to be “best in class.” On the supplier side, P&G was a “turnkey” solution for retailers looking for strategic category direction. Other suppliers who have consistently been in the top five include Kraft, General Mills, PepsiCo, and Unilever. On the retailer side, Walmart for years was an “execution machine” that used partnership, data, and focus to drive profitable growth for manufacturers. Other retailers that have routinely been at the top include Target, Kroger, Costco, Publix, and more recently Amazon.
Since the beginning, it has been clear that organizations that focus on continuous improvement and invest in people, tools, processes, and technologies tend to be considered among the best of the best.
While the focus areas have largely remained the same over the past two decades, the amount of change required by organizations has increased as the rate of change has accelerated. Those organizations that not only keep up with the change, but in some cases create the change, have maximized their shareholder value.
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13“Walmart’s acquisition of Jet.com was very bold and potentially brilliant. If they are able to bring the shopper algorithms and innovation culture of Jet.com to Walmart.com, they may be able to crack the code on online basket building, bringing scale that major CPGs desperately need.”
From One to Many to One to One
“Not only was Kroger very smart to fully acquire 84.51, but they have also maximized their ROI by very effectively mining the data and getting one to one with the Kroger shopper, which is resulting in a better shopping experience for their customer as well as being more effective with marketing campaigns.”
“PepsiCo has always been well connected with store managers due to their DSD business model, but I am now getting greater access to senior level executives at PepsiCo.”
2015 POWERANKING® Revisited Pivot Points: Unlocking Growth in Difficult Times
In last year’s edition, we wrote that while change is inevitable, uncertainty and “permanent transition” are the new normal. The CPG industry had seen unprecedented disruption driven by a soft economic recovery, activist investors, change in consumer preferences, the rise of craft or small batch manufacturers, and the continued shift to online shopping. Perhaps the quote that best summarized 2015 was, “Never before has so much change produced so little value for the industry.” As we entered the 2016 calendar year, many of the same trends of 2015 continued, all of which reinforce the idea that that we are in an era of “permanent transition” and change. Nonetheless, we outlined five From-To pivot points companies could take to unlock growth. Some "best in class" pivots that leading organizations have implemented over the past year include:
From Shareholder First to Shopper First
“Several years ago PepsiCo invested in making their products healthier for consumers. In the past year, they have amped up their connection of the consumer message with strong in-store activation programs.”
“General Mills has put their shopper first by making it easier for shoppers to make informed decisions about their purchases at shelf by leading the charge on GMO labeling, reformulating many of their products to remove artificial flavors and colors, and by expanding their portfolio of natural and organic products.”
From Brand Builders to Business Builders
“Unilever’s acquisition of Dollar Shave Club was a bold investment as it expands their expertise beyond traditional brand building / management and into a completely different business model.”
14 From Data Hoarders to Data Sharers
“I have seen many of my retail partners begin to loosen their grip on online data; however, most of them are trying to monetize it which is making it very expensive and unaffordable, as the cost of data gets expensive when you sum all the retailers together. Walmart remains laser-focused on their commitment to EDLP and thus prefers to not charge for the data, but rather have us put the investment towards shopper value.”
“Amazon is recognizing how important retail data is to the CPG industry and has increased awareness of their Amazon Retail Analytics Premium platform with the intent of helping manufacturers better understand the value they bring to attract more advertisers.”
Focus on Talent Development
“PepsiCo continues to recruit, hire, and staff their key accounts with young, talented, data analysts / scientists for the benefit of unlocking insights with my shopper.”
“General Mills has done an excellent job of upgrading their efforts within the digital marketing space by hiring and developing specialist and finding talented external partners.”
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2016 / A Year of Change Return on Change: Making S.M.A.R.T. Decisions
In January of 1972, RCA released “Changes” as a single and David Bowie famously sang “Ch-ch-ch-ch-changes / turn and face the strange” — perhaps suggesting that while we all may know that change is occurring, we may not be able to trace the exact moment of change, may not want to make the changes, or believe it is too difficult to do so. However, it is apparent that we must push on and turn and face it. In January of 2016, over 40 years after the release of the single, the world lost a music icon. It was perhaps this event that set the tone for industry for 2016.
Unlike 2015, in 2016 the industry began to see value creation not from the change itself, but from companies who have “turned and faced the strange” and then made S.M.A.R.T. decisions about action. Perhaps the quote that best summarizes 2016 is, “Organizations that have embraced the change are beginning to see the return not only on their reputation, but also their investments, which over time
will deliver differential results.” We call this Return on Change (R.o.C.) and define it as a measurement of how effective an organization is at not only facing the changing landscape, but capitalizing on it. It is a function of Speed, Magnitude, Amount, Relevance, and Total Cost.
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Companies with the highest R.o.C. are those who take swift action (A^S) against big, relevant opportunities (M*R), where speed is the absolute necessity — you are better off reacting fast to a few opportunities than reacting slowly to all of them.
18KEY TRENDS
The notion that we are in this era of “permanent transition” was further reinforced in the rankings themselves. In 2016 we experienced some significant changes on both the manufacturer and retailer sides.
Discussions with retailers provided insight into the three trends in the manufacturer rankings:
— Beverage and snacking companies moved up in the rankings. This is at least partially driven by their Direct Store Delivery systems. As the importance of getting more “one to one” with retailers continues to increase, companies that operate a DSD system are leveraging their assets more.
— Food manufacturers were largely flat to up in some cases. This was impacted by food manufacturers’ increased focus on center store. Consumer preferences in food have shifted over the past couple of years, which has made it challenging for manufacturers. However, suppliers
have embraced the change and have put significant investments into meeting changing consumer and shopper needs.
— Personal care manufacturers were slightly down in 2016. One key driver is the increased focus with the online business. As the "path to purchase" has led shoppers to more online purchases, suppliers of these categories have increased focus in the eCommerce channel. While increased focus on eCommerce is advised, it has come at a time when food and beverage suppliers have doubled down on stores. Finding the right balance for all trading partners will be critical for 2017.
Similarly, discussions with manufacturers have provided insights into the three trends in the retailer rankings:
— Mass channel retailers continue to see a decline in their rankings. This is largely driven by fragmentation, and manufacturers need to redefine how they achieve scale and retool their
commercial business models for the future.
— National retailers, as well as the power regionals, experienced an increase in rankings. Because they have provided greater strategic clarity and more consistency to how they are responding to the shift in consumer preferences as well as shopper behaviors, manufacturers are in a better position to respond and commit resources to these businesses.
— Pure play eCommerce retailers had another strong year. As this channel continues to grow, these retailers are becoming more experienced in how to better partner with manufacturers. They are continuing to leverage their use of advanced technology in both merchandising and marketing while also embracing proven processes and tools from the offline world.
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Similar to 2015 and 2016, it is probable that we will continue to live in this era of continuous change and “permanent transition." In order to accelerate their R.o.C., companies must be S.M.A.R.T. about how they navigate the future. An example of a S.M.A.R.T. change would be appointing “Chief Change Officers," whose job would be to continue to assess, analyze, and act quickly to implement high impact changes.
Speed
GO FAST
Trading partners must go faster and develop greater operational agility in order to offset the rate of change that is occurring in the industry. While there are a number of legitimate barriers that impede response time, some of the biggest (perhaps self-imposed) challenges are the silos that exist between sales and marketing with manufacturers and the silos between merchandising and marketing with retailers. "Best in class" organizations are working more collaboratively than ever; in fact, some have even collapsed silos and have established a single executive leader to manage both sides of the business. This is enabling a “consumer first and shopper back” model that better connects brand building with conversion at retail.
The S.M.A.R.T. action is to bring brand and customer teams closer together to create stronger linkages that will drive faster decision making and response.
Magnitude
GO BOLD
Companies must go bold and demonstrate strong commercial leadership in responding to and creating disruption. Change avoidance is no longer an option. Companies must self-assess and determine if they are going to be “change leaders” or even be the boldest and become disrupters. Future disruption is likely to continue to come from business model innovation. "Best in class" companies will work to harness the power of big data and will continue to pivot from just brand building to business building.
The S.M.A.R.T. action is to re-invest in analytical resources and tools to drive transformational innovations based on insights.
2017 / Action Plan Accelerating Return on Change by Making S.M.A.R.T. Decisions
21Amount
GO EFFECTIVELY
Go effectively by assessing, analyzing, and acting on only high-impact changes that deliver the greatest amount of growth. The amount of changes companies make must be disproportionally offset by the amount of growth (top and bottom line) the business will generate. The key to unlocking growth is finding growth in difficult places, and the most important question businesses are faced with is how to achieve scale in these difficult places. Alternative channels have taken us down a path toward a more one to one world, but the eCommerce revolution is making the pivot to one to one a reality. "Best in class" companies will unlock growth by achieving scale through realigning their supply chains with sustainable shopper outlets.
The S.M.A.R.T. action is to target channels and customers with high potential growth to achieve scale.
Relevance
GO SELECTIVELY
Go selectively to ensure employees stay focused while preparing them for the future. Because of the amount of change that is occurring, it could be easy to get sidetracked. In order to successfully navigate through this period of low growth and high change, it is imperative to deliver today and prepare for the future simultaneously, which means responding to the changes that are the most relevant to your business. Perhaps the area that requires the greatest attention is multichannel marketing and commerce. While the trade has made progress over the past few years, the reality is that nobody has truly achieved "best in class" status. The barriers to success include the silos that exist between teams, the development of the talent, and the lack of tools necessary to match the sophistication of machines and algorithms.
The S.M.A.R.T. action is to redesign the organization and provide employees with the tools and skills needed by multichannel and other growth customers.
Total Cost
GO EFFICIENTLY
Go efficiently in order to optimize money, time, talent, and investment. To maximize return on change it is important to minimize the cost to act and neutralize the opportunity costs associated with deciding not to act. Generally, companies have access to money, but have issues with running out of time, wanting to pay for the right talent, and prioritizing where to place their investment bets. Companies must consider the fixed and variable cost of execution versus the opportunity cost of not acting. The trade will continue to look for opportunities to reduce cost from the ecosystem, but "best in class" companies will then reinvest in brand building, innovation, and acquisitions to stimulate topline growth. The most expensive decisions executives will be faced with are CapEx decisions around retooling manufacturing and supply chain systems to achieve scale for the future.
The S.M.A.R.T. action is to account for total cost while investing in marketing, innovation, capital, and acquisitions of new businesses and people.
22 S.M.A.R. T. S.M.A.R. T.FUNCTIONS ACTIONS
Speed
Magnitude
Amount
Relevance
Total Cost
GO FAST and develop greater operational agilityBring brand and customer teams closer together to create stronger linkages to drive faster decision making and response
GO BOLD and demonstrate strong commercial leadership in responding / creating disruptionRe-invest in analytical resources and tools to drive transformational innovations based on insights
GO EFFECTIVELY by assessing, analyzing, and acting only on high impact changesTarget channels and customers with high potential growth to achieve scale
GO SELECTIVELY to ensure employees stay focused while preparing them for the futureRedesign the organization and provide employees with the tools and skills needed by multichannel and other growth customers
GO EFFICIENTLY in order to optimize money, time, talent, and investmentAccount for total cost while investing in marketing, innovation, capital, and acquisitions of new businesses and people
The S.M.A.R.T. Chart
23Closing StatementOver the past 20 years we have seen a lot of change in the industry: the shift in power from manufacturers to retailers and now to shoppers, the evolution of commercial marketing to be much more focused on the shopper, the access and application of data, the transformation of business models, and the establishment of new trading channels including eCommerce, mobile, and social.
It is likely that we will continue to live in this era of permanent transition and continuous change. The challenge for the industry is to continue to move from an environment where “never before has so much changed produced so little value for the industry,” to “organizations that have embraced the change are beginning to see the return not only on their reputation, but also their investments,
which over time will deliver differential results." Avoiding change or even accepting change will not be enough to be successful in the future. "Best in class" organizations will achieve greater R.o.C. by being S.M.A.R.T.
We all know that change is not only inevitable, but constant. Those companies that “turn and face the strange” are best positioned to maximize their return on change, corporate reputation, and ultimately shareholder value. Thank you RCA and David Bowie!
24 Accelerate Return on Change — Face the StrangeReach out to Kantar Retail to obtain a full report of the 2016 manufacturer and retailer Rankings.
Learn how YOU can get deeper insights into how you can accelerate your R.o.C. in 2017 and beyond.
For a copy of the full POWERANKING report, contact [email protected]
