Saturday, October 6, 2007

FMCGs, retailers tie up for category management

Mumbai: FMCG companies and retailers in modern trade are coming together for the first time to undertake, what is globally known as category management, for maximising sales and giving consumers a better shopping experience.
Top retailers are entering into exclusive tie-ups with FMCG majors, who are essentially market leaders in their respective categories, to design and merchandise an entire section at the retail store based on the company's expertise in the given category and consumer insights. The company which undertakes the task is termed as the category captain.
Since there is a confidentiality agreement in such tie-ups, it was difficult to ascertain which company was doing category management for which store. However, what is certain is that most of the top retail chains are in the process of implemeting such an exercise. The objective, clearly, is to increase sales of the given category and which will in turn benefit the company and the store. It is learnt that Hindustan Unilever (HUL), which is a market leader in various categories of the FMCG market, has been chosen as the category captain for skincare and laundry by a couple of retail store chains.
Similarly, Marico is prototyping category management for a certain retail store. It is believed that the company will take up category captaincy in either edible oils or hairoils, or both. Johnson & Johnson has been one of the first FMCG companies to start category management work with top retailers. Starting with baby care section, the company has designed and merchandised the entire section for some of the top retailers. The company is also now working with the retailers on the feminine hygiene category as the retailers do not have complete understanding of this highly intimate category. Ever since J&J started this initiative, the impact has been huge. Said J&J MD Narendra Ambwani: "The work done on category management has already started yielding dividends for the company as well as the retailers with the category sales growing by 20%-30% where the plans have been implemented. The consumers and shoppers are also happy because they have a better shopping ambience as well as ease of shopping.''
According to Marico CEO (consumer products division) Saugata Gupta: "These are early days, so we may not be looking at all steps of category management at the moment, but would certainly look at SKU rationalisation, layouting, etc.''
"The idea behind giving the entire responsibility of managing a category at a store to a market leader is to maximise the benefits because only a leader would have the consumer insights and understanding of a particular category,'' said an industry observer. However, all retailers are not biting the bait. Said Subhiksha MD R Subramanian: "We, as a policy, have not handed over complete control to a single FMCG company for category management. We believe that we will do category management on our own and get insights from FMCG companies.''
As compared to the developed world, modern trade in India is still in its nascent stages of growth. In India, modern trade is growing at the rate of 15% CAGR. It accounts for about 3-4% of total FMCG sales.
Category management, said an industry observer, will evolve only after modern trade achieves the critical mass. An official from an FMCG firm pointed out that category management is, in fact, more a need of the hour for mom-and-pop stores, where products are assembled without paying much attention to which of the SKUs are moving fast and which ones are laggards.

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