Fink, Pepsi: help chains leverage brand-power

Drug Store News, Feb 17, 2003 by Anne Fink

Drug Store News: Drug chains feel there is a de facto edge provided to suppliers that structure their deals to favor EDLP retailers like Wal-Mart. How can you help drug chains compete in today's environment?

Fink: We're certainly not predisposed as a supplier to an EDLP program versus a high-low program. It's about customizing the approach to the retailer.

As it relates to a high-low strategy, the key question is how to make that strategy more effective. As a supplier, we can do a really good job within our own categories by giving a retailer advice regarding price optimization. If you're going to be high, how high can you go and still maximize sales? And if you're going to be low, how low do you need to go without going too low and leaving money on the table?

One final point--when it's an off-promotion week and the pricing scheme is high, retailers should work with suppliers to leverage their merchandising efforts to capture that impulse purchase. These less price-sensitive purchases will deliver the margin in incremental sales.

Drug Store News: What is the most important thing that suppliers can do to make a chain's front-end strategy work?

Fink: Getting the right products in the store at the right price and getting them well merchandised.

In terms of the right products, there is an opportunity to take advantage of the resource so many suppliers have around SKU optimization programs. The key with a new product launch is to get in early, make a splash and leverage the noise. It is up to us as suppliers to make sure that we are giving retailers the opportunity to get in early, and that we are consulting them on the best way for them to get behind the program and maximize that opportunity.

As it relates to right price, it is imperative that the supplier understands the margin goals and the role of the product relative to the category it competes in. With that, we can work together to price items accordingly and help the retailer achieve its goals.

As it relates to merchandising, there tends to be a lot of advertising dollars behind many suppliers' brands. It is up to us to plan how stores can best leverage the power of those brands, amplify the noise in the marketplace and make those products stand out in the store and compel the shopper to make that purchase. That is a huge opportunity.

Drug Store News: With the abundance of data that is available today, how is your company using that information to grow the business?

Fink: Concerning retail-based data, there are three key points.

First, it is not really about the data--it's about the business objectives we're looking to address. If we start there, we're going to be a lot more productive with the data.

Second, collaboration between the retailer and the supplier is important. We need to align our objectives and make sure we are looking at the same thing. We need to standardize the information. And we need to make sure the data that we think is compelling, our retail partners also find compelling. That's a critical step.

Then, we need to make the insights that we gather from the data actionable. That's where it all comes together. As a good supplier, if we're not helping you understand what this information means to you, then we are really not doing our job.