Multi-Vendor Snack End Cap A Big Winner

June 1, 2006
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Multi-Vendor Snack End Cap A Big Winner
By James Echeandia
Best-of-the-best warehouse-delivered snacks end cap boosts retailer total snack category sales and margins.

In an era of intense pressure on profits and declining gasoline sales, a study concluded over six years ago is today providing major sales and profit boosts for over 20,000 convenience retailers. And as more retailers see the program, they want to capitalize on the opportunity it represents.  
The attraction is a Snack Multi-Vendor Endcap (MVE for short), which has been shown to add $10,000 a year in sales and more than $4,200 gross profit dollars in an average convenience store. The Snack MVE features fast-selling national brands such as Oreo, Cheez It, Pringles, Jack Links, Slim Jims, Combos, Chex Mix, Hershey’s, Planters, Ritz, Rice Krispies Treats, Gardetto’s and Nature Valley. At the same time Warehouse-Delivered snacks are gaining sales on the MVE, DSD snack sales are not impacted so the warehouse snacks’ growth represents true ‘plus sales.’ In fact, the potential for a 100-store convenience store chain is a sales increase of over $1 million and a gross profit increase of $420,000. Those kinds of numbers garner attention!
Cooperation pays dividends
The MVE is a convenience channel distributor initiative born out of a joint study by the National Association of Convenience Stores (NACS) and the American Wholesale Marketers Association (AWMA). Once the joint NACS/AWMA study highlighted the opportunity, a Warehouse-Delivered Snack Committee — consisting of convenience channel warehouse distributors and leading warehouse-delivered snack manufacturers — was formed by AWMA to develop a model program for use by all distributors, and the results are now on display at 20,000 convenience stores, in racks placed by 70 distributors.  
“We think there is a potential for about 70,000 MVEs out there,” says Kit Dietz, president of Dietz Consulting, consultant to, and member of the WDSC committee and a driving force behind the program. “In fact, as we watched the program evolve, it is clear that the potential is even greater than the early tests indicated. The magic of increasing sales of higher-margin items without any cannibalization adds up to an irresistible business proposition,” Dietz concluded.
Based on a pilot study at FasMart stores, the MVE Warehouse-Delivered snacks program delivers across-the-board — meaning both warehouse-delivered and DSD — snack category sales growth of 18.5% and profit growth of 22.3%. In fact the entire sales and profit growth came from the warehouse-delivered snacks component, including snacks like cookies, crackers, chips, meat snacks, snack nuts and the like. Warehouse-delivered snack sales and profits increased by 50% in the study period. Direct-store-delivered (DSD) snack sales and margins were stable over the test period, so there were obviously true incremental sales of warehouse-delivered snacks and no cannibalization of DSD snack sales. And since warehouse- delivered snacks offer 10% to 20% higher margins than DSD snacks on average, growth in warehouse snacks pulls up profits for the snack category in total.
Focusing on top sellers
There are two key elements in the MVE snack product program. The first is a high-impact multi-vendor end cap display (MVE) designed to offer a “best-of-the-best” top-selling snacks assortment. The specific item assortment is recommended by the distributor based on local market knowledge and preferences as well as profitability. Thus the assortment varies from distributor to distributor, depending on the particulars.
H.T. Hackney Company, for example, has two size racks; a large MVE holding about 90 items, and a “mini” holding about 55 items, according to Tommy Thomas, corporate director of sales and marketing for Hackney. “We monitor turns and profits and planogram the MVE at least twice a year to keep it current and up-to-date with the best-selling items. It’s key to make sure the MVE is updated and has fresh appeal. This is the best thing we have ever done for the salty and sweet categories,” Thomas said. Thomas is chairman of the Warehouse-Delivered Snack Committee. In fact, Thomas mentions that Hackney now patterns every end that they do on the MVE approach — it works so well!
Multi-vendor end caps are “nothing new” to Core-Mark International, according to Greg Kaminski, director of category management at the company. “We started out in the 1990s with an all Nabisco rack, and as the years went by we added manufacturers and added products such as ‘healthy’ bars. Eventually, we made the rack bigger and even more powerful,” Kaminski said. Today, 5,000 of the MVE units are serviced by Core-Mark personnel as part of the ‘Smart Stock’ program. “We update the sets quarterly, and at year end, we’ll have a major reset,” Kaminski said.
The Grocery Supply Company division of GSC Enterprises has about 1,100 MVEs out in its Southwest locations. “It’s a great program — we call the assortment ‘BOBS’ for Best of the Best Sellers,” said Howard Stroud, director of merchandising and purchasing for Grocery Supply. “The racks are mostly with independents, but they are starting to go to retail chains. We ask for an annual reenlistment by our customers, and we get it in most cases. We offer a single size rack, with about 80 items, and about 20% of the racks are on service. If we see that the retailer is not ‘with the program,’ we just don’t reenlist them,’ Stroud said.
It goes without saying that distributors are a key component of the program. “This Snacks MVE concept is showing explosive growth right now,” according to Marty Monserez, convenience channel leader of Procter and Gamble. “For years, the manufacturers unsuccessfully pushed single-vendor end caps, but they lacked the selling scale to warrant such display space. However, distributors have now combined the strength of a variety of fast-selling, high-margin SKUs onto a multi-vendor end cap display, providing outstanding selling power on one display rack.  The key is putting strong items that consumers want to buy where they can find them,” Monserez concluded.
“Wholesalers are our life blood,” said Dave Onorato, vice president of convenience stores for The Hershey Company. “They’re a critical component in the equation, and help do everything ‘in-between’ us and the retailers. The MVE program has been gaining traction for the last 18 months,” Onorato concluded. According to Randy Roche, manager of category development for c-stores, “the MVE is an important vehicle for Hershey to sell its cookies, Really Nuts!, Snack Barz, and granola bar items.”
It’s no surprise that manufacturers were quick to get behind the program, considering the boost in sales the MVE provides. Many of the items in the multi-vendor rack were in-line on shelves in the test stores, but when included in the MVE, previously existing items had a sales growth of 65% in same-store comparisons.
The second key element is that the end cap is located in a high store traffic location where the impulse purchase power of branding can go to work driven by the variety of snack items and sizes designed for wide appeal. “Impulse purchase is crucial to snack sales, and when you take good brands and put them in high traffic locations, they sell even better,” says Tim LeBel, vice president of customer development for Masterfoods USA. LeBel went on to say that: “We’re very pleased with the program … it has helped Masterfoods gain distribution in new areas, allowing us a relatively easy means for expanding Combos to the West Coast.”
It’s obvious that the rack brings together powerful brands and thus exhibits a combined stopping power which exceeds that of any single brand. That’s why leading warehouse-delivered snack manufacturers, accustomed to ‘going it alone’ are happy to cast their lot in with other leaders — everyone sells more product when the placement is multi-vendor.
Kraft has been involved in the program “from the beginning. Our interest is to support the distributors, so we included all of our immediate consumption, on-the-go snacking products,” says Jeff Joynt, customer marketing manager for Kraft Convenience. “There is great enthusiasm from the retailers, and the participating store count to date is impressive, especially what’s happened over the past 12 months,” Joynt added.
Nestlé is on board with the program. “We are enthusiastic about the … initiative. It allows for a better degree of balance between warehouse-delivered snacks and direct-store-delivered snacks. This program … is making a difference in the marketplace,” said Jeff Lozito, divisional vice president, Nestlé Sales Division, Nestlé USA.
But the proof of any program is performance in the real world. Here’s what Rich Rodriguez, director, General Mills Convenient Solutions Team, said: “The story just keeps getting better and better as more retailers put these racks into their stores. There are currently more than 70 distributors that are part of this program, and they are sharing success stories with retailers every day. This is a huge opportunity for retailers to improve their return on investment for display space in their stores.”
The payoff for everyone appears to be sales and profit increases of a serious nature.
John Scardina, vice president of merchandising at the Eby-Brown Company, is high on the MVE program. “The MVE allows us to offer our customers a program that is designed to increase sales and GPM within their stores’ snack category. The program that exists today has a proven track record with supporting data that is compelling to any retailer that reviews it. When the MVE was first brought to market we were presenting a new concept, a new way to look at the snacking opportunities and their associated profits. Today we are no longer presenting a concept. We are, in fact, presenting an established program that delivers positive and profitable results for our retail partners,” Scardina concluded. Eby-Brown was one of the original members of the Warehouse-Delivered Snack Committee of AWMA.
Built to last
So just how good is the MVE program? Does it have staying power? To find out, Confectioner spoke to Russ Quick, vice president of marketing for Virginia-based FasMart Convenience Stores where the MVE concept was initially tested two years ago. According to Quick: “This is a great program, and getting better as we learn and manage it. We have eliminated all DSD items that are ‘duplicates’ of those on the MVE. Every month we monitor every item and eliminate the bottom 10% selling items and replace them. Our average margin on the MVE rack is just shy of double the average margin on DSD snacks.” Quick concluded, “You bet it’s a great program.”
Perhaps Bob Pignato, vice-president marketing, membership & industry affairs at AWMA, put it best when he told Confectioner: “It’s not easy for our members to grow sales and profits in this environment. The best way to do it is to create and test programs which they can enthusiastically recommend to their retailer customers because they are proven to work … to add real sales and real profits. From the NACS’ point of view, their time and energy was well spent on an undertaking which benefited their retail membership where it counts … on the bottom line. This is truly a ‘four wins’ program … for the manufacturer, for the wholesaler, for the convenience retailer and most importantly the consumer because they’re getting the great brands they want in convenient sizes at a convenient place to shop.”
Based on the success of the MVE warehouse snack fixture, there’s a lot of sentiment among the people Confectioner interviewed for a MVE candy rack, especially a new-item rack.  The Hershey Company, Kraft, Masterfoods USA and Nestlé Confections have expressed interest in such a rack. With that kind of start, it shouldn’t be hard to get going!
Warehouse-DeliveredSnack Committee
CONSULTANT
Dietz Consulting
RE-DISTRIBUTOR MEMBER
Dot Foods
DISTRIBUTOR MEMBERS
Core-Mark International
Dearborn Wholesale
Grocers
Eby-Brown Company
Grocery Supply Company
The H.T. Hackney Company
Master Distributors
McLane Company

MANUFACTURER MEMBERS
ConAgra Foods
General Mills
The Hershey Company
Jack Link's Snacks
Kellogg Company
Kraft Foods
Masterfoods USA
Nestlé USA
Procter & Gamble

CONVENIENCE STORE ALLIANCE
National Association of Convenience Stores

For more information on Warehouse-Delivered snacks and the Joint Industry Warehouse-Delivered Snack Committee, contact Bob Pignato at AWMA at 800-482-2962, ext. 642, or robertp@awmanet.org.

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