ECR-RUS ForumJune, 2nd-4th, 2010

Customer & Shopper Focusas the Basis of Cooperation

Aya TonoyanCategory ManagementFerrero-Russia

Kirill Ionov Head of Space management

Мetro Cash&Carry

““FerreroFerrero is a family owned company, based on the is a family owned company, based on the overarching principle of achieving and maintaining overarching principle of achieving and maintaining consumer satisfaction: consumer satisfaction: The Consumer is our king!The Consumer is our king!””

F.P.FulciF.P.Fulci, , FerreroFerrero InternationalInternationalViceVice––President President

Alba, Italy, 1942

FerreroFerrero GroupGroup

Success Story Based on the Principles:Success Story Based on the Principles:qq LoyaltyLoyalty to the company to the company values and principlesvalues and principles at all timesat all times

qq Identifying and anticipatingIdentifying and anticipating ConsumerConsumer’’s tastes taste

qq ConstantConstant Research and InnovationResearch and Innovation

qq Always ensuring Always ensuring freshness of our products in the storesfreshness of our products in the stores

FerreroFerrero: : Quality & Innovation Leader in Confectionery Quality & Innovation Leader in Confectionery

* Incl. Packed Pralines, Chocolate Eggs, Bars, Tablets, Paste, Chilled Snacks, Refresh drops, Flour-based confec.(Ferrero segments)

25%

18%14%

14%

13%3%

14%

Mars (incl Wrigley)

Others

Nestle

Kraft

United Confectioners

Dirol Cadbury

FerreroSource: AC Nielsen, MAT DJ 2010

Russian Confectionery Market, Value shares, 2009*

Best Innovative Best Innovative FerreroFerrero Products in Russia:Products in Russia:

FerreroFerrero -- # 4 on Confectionery market in Russia# 4 on Confectionery market in Russia Bringing UpBringing Up--toto--Date Technologies to Russia:Date Technologies to Russia:

Factory in Vladimir - EUR 200 mln investment

q Confectioner #4 worldwideq 38 countriesq 18 factories; 22 000 employeesq Annual Turnover: > EUR 7 blnq Ferrero the World’s Most Reputable Company in 2009 -Reputation Institute, NY

FerreroFerrero: : Shopper Orientation & Category ManagementShopper Orientation & Category Management

qq Acknowledged Category Management Expert in Western EuropeAcknowledged Category Management Expert in Western Europeqq Category Management projects with major European retailersCategory Management projects with major European retailers

qq Professional Shopper Research & Actionable Insights with leadinProfessional Shopper Research & Actionable Insights with leading research g research agencies: agencies:

•• PralinesPralines•• Impulse confectioneryImpulse confectionery•• Chilled snacksChilled snacks•• Chocolate PasteChocolate Paste

qq Focus on Shopper/Consumer oriented Cooperation with Retailers Focus on Shopper/Consumer oriented Cooperation with Retailers

In Western EuropeIn Western Europe

In RussiaIn Russia

Metro Cash & CarryMetro Cash & CarryMission:METRO Cash & Carry is the

leading internationalplayer in self-servicewholesale: customer-focused, international andinnovative

METRO Cash & Carry, RussiaMETRO Cash & Carry, Russia• Operates 52 outlets in 36 regions.• Sales turnover in 2009 – EUR 2,6 bln• Over 12 000 employees• Cooperating with over 5000 suppliers

Metro Cash & Carry. Metro Cash & Carry. Leader in Modern Trade TechnologiesLeader in Modern Trade Technologies

The range of METRO Cash & Carry services all serve the goal of anticipating what professionals need:

Øfrom recently introduced delivery servicesØto modern Trader Shop concept planningØto up-to-date customer promotion services

via METRO Mail

Customers’ success is the engine of our effort

Metro Cash & Carry: Metro Cash & Carry: Shopper as Focus of TodayShopper as Focus of Today

• Operational Excellence inseparably linkedwith Customer Excellence

• The work of the Space ManagementDepartment is one of the bright examples ofinterrelationshipsinterrelationships ofof differentdifferent processesprocesseson the path toto ExcellenceExcellence

Customers’ success is the engine of our effort

Metro Cash & Carry: Metro Cash & Carry: Cooperation with ManufacturersCooperation with Manufacturers

Introduction of Category Management in a business tends to alter the relationship between

retailer and supplier:• the relationship moves to one of collaboration• exchange of information and data • joint business building

9

B. Quantitativequantification of major patterns in shopping behavior In-home interviews, Moscow, Spb, R-on-Don (N=450)

- Category structure/ consumer understanding of the category- Shopping patterns (overall and relating to category purchase)

- Consumer typology (attitudes)

- Store choice drivers

- Key Retail Accounts profiles

-Basic feedback on POS and promo activities

-POS/promo concept ranking

C. QuantitativeIn-store shopping behavior

In-store verification of category purchase details by channel (N=1600)-Decision tree within each channel

-Shopping missions (purpose/ need)

- Details of shopping situation

- Shoppers behaviour in case if chosen product is out of stock

- Choice drivers

- Shopper profiles by channel- Basic feedback on POS and promo activities (briefly)

- Store and channels evaluation (briefly)

A. Qualitative exploratory stage: revealing major patterns in shopping behavior

- Focus-group discussions (6)

- In-Store Observations

Moscow S-Petersburg Rostov-on-DonStores Interviews Stores Interviews Stores Interviews

Hypermarkets 4 200 4 200 2 100

Supermarkets 4 200 - 2 100

Discounters 4 200 4 200 4 200Food-stores 4 100 - 4 100

Total sample 700 400 500

February 2009

End March-April 2009

End March-April 2009

*Covered both Boxes & Parcels Pralines

PralinesPralines ShopShoppperer ResearchResearch

PralinesPralines ShopShoppperer Research Research FindingsFindingsØ Majority of Choice Decisions

Taken in-Store:

41% planned purchase at general level (pralines as category)

ØØ Purchasing byPurchasing by RRepertoirepertoir offavourite brands:

Purchased in the last 3 months - >5brands

Ø Most Popular:- Raffaello box 150 g & impulse pack- Korkunov box 200g * - 3 parcels (all United Confectioners)

Source: IPSOS, Pralines Shopper Research, February & April 2009

*Korkunov in 2009 had bigger volume share vs. Raffaello

ØØ To go with teaTo go with tea(parcels and boxes ~ 100 RUR) (parcels and boxes ~ 100 RUR)

qq Primary purchase occasionPrimary purchase occasion

41%

qq Festive occasions are still very Festive occasions are still very strongstrong

ØØ Guest & Parties (boxes) Guest & Parties (boxes) --19%19%

ØØ Gifting (boxes) Gifting (boxes) --17%17%

36%

Source: IPSOS, Pralines Shopper Research, February & April 2009, in-store interviews: 1600, Moscow, St. Petersburg, Rostov-on-Don

IN-STOREINTERVIEWS

CategoryCategory ShopperShopper FindingsFindings

CategoryCategory ShopperShopper FindingsFindingsØDecision drivers:

45

33

27

18

12

11

9

5

4

4

62

(%) Total

I have already bought these pralines and I like them

Specifics of taste and formula

Acceptable price

Producer company

Good value for money

Producer country

Brand

Beautiful pack

I wanted to taste novelty

Another person asked me

Different tastes in one pack

Source: IPSOS, Pralines Shopper Research, February & April 2009

PRICE•is also high at 33%.

BRAND• known product (62%), • favourite taste (45%)• manufacturer/brand (27%)

IN-STOREINTERVIEWS

CategoryCategory ShopperShopper FindingsFindingsØØ ShoppersShoppers welcomewelcome in Pralines:in Pralines:

- wide choice- clear shelf structure- with navigation POSM

ØØ Most Most AttractiveAttractive promospromos::- price-promos- increased pack size

ØØ Attractive Pralines presentation:Attractive Pralines presentation:- Teatralisations- Branded shelves, stands, dispensers

Source: IPSOS, Pralines Shopper Research, February & April 2009

14

Stock upFor Several

Days Top up Specific product

for todayGrab &

GoSmthng to

indulgeParties & Special

occasions For a kid

Metro 6.19 -1.90 -3.29 -3.44 -3.35 -0.44 5.78 0.18

Hypermarket 14.87 -1.33 -7.41 -8.38 -8.66 -0.86 11.89 -1.25

/ : Positive/ Negative fit between Mission and Channel

Main Missions in C&C and HypermarketsMain Missions in C&C and Hypermarkets::• Stock-up & For Several Days;• Parties & Special Occasions;• Something to Indulge – is present but not the strongest

IN-HOMEINTERVIEWS

Source: Ipsos Pralines Shopper Research; **Internal Metro Data

58% of Metro Customers are SCO (services, companies, offices & private demand) ;11% - HORECA;31% - Traders**

ShoppShoppinging Missions in the ChannelMissions in the Channel

Knowledge of Shoppers Missions helps to Optimize Knowledge of Shoppers Missions helps to Optimize StoreStore’’s Assortment, Layout and Promotions s Assortment, Layout and Promotions ProgrammesProgrammes

AssortmentAssortment:• Popular brands• Big boxes for the Festive table and for Gifting• Medium and small packs – for tea-drinking and “to indulge oneself”LayoutLayout:: should reflect package design & size;PromotionsPromotions::• “Good deal” purchase for frequent missions;• Striking promo-actions – for seasonal occasions

MORE PLANNED PURCHASE

Оccasion

«Gifting-Guests-Parties»

MORE IMPULSE PURCHASE

Оcсasion «TEA DRINKING»

Categories Location Categories Location based on Shopper Missionsbased on Shopper Missions

Tea & Coffee

Pralines in Boxes

Parcels-Marshmallow-Fruit jellies

Chocolate Tablets & Bars

Biscuits-Waffles-Ginger bread

Pastry & Patisserie

Traf

fic F

low

Biscuits-Waffles-Ginger bread

Category Decision Tree Category Decision Tree

• Category Layout Structured by brands: 1. Brand is a Clear Price indicator for many, hence, display separately

medium and premium brands.2. Within planogram of each brand – a clear structure of SKUs by

weight/size

3. Parcels & Boxes to be laid out in different aisles.Source: IPSOS, Pralines Shopper Research, February & April 2009

Visual Anchor of the CategoryVisual Anchor of the Category

• Brings shoppers in the aisle • Helps to orientate

*Raffaello = 100% brand awareness, >17%* market share“Brand of the Year” in Pralines in 2009

Source: Nielsen Retail Audit, National Urban, Sept-March 2010

Traffic Flow

Visual anchor through the strongest

brand in the categoryq Raffaello as the Boxes Anchor

Shopper Based Concept Accounting for:Shopper Based Concept Accounting for:

q Occasions & Missions

q Shopper Decision factors (Decision tree)

q Brand as recipe and price tier

q Visual Anchor

Shopper Based LayoutShopper Based LayoutVisual AnchorVisual Anchor

Traffic FlowTraffic Flow

Visual AnchorVisual Anchor

PlanogramsPlanograms Based on:Based on:

• Sales in RUR• Sales in MetroUnits• Total Income• Shelf Stock coverage• Professional assortment• Own Brands

New Concept Implementation ResultsNew Concept Implementation Results

Department manager: “It’s excellent”

I asked: “Why?”

Department manager: “Now I know where to put each item and suddenly customers see the products much better ”

New Concept Implementation ResultsNew Concept Implementation Results• Store staff knows exactly where and how many facing to put of each item• No more “guts feeling” but planning

• Increasing Department manager’s productivity:- saving up to 20% of time, previously spent on “shelf-wars” with suppliers

• Planogram effect in Turnover Growth + 3% in this category (implementation case in SPb)*

* Source: Metro Internal data, 1 month past implementation in SPb excluding seasonality

Key Key LearningsLearnings

q Include in the project Market or Shopper based Targets for Shelf Share/Inventory Optimizationq Plan a compact ad-hoc shopper research

for more accurate assessment of project resultsq Navigation brings emotions and clear

structure in shopping

Next StepsNext Steps

q Study more Market & Shopper potential informationq Update and Follow-up for planograms

effectiveness q Consider navigation materials for easy

and pleasant shopping

Thank youThank youСпасибоСпасибо заза вниманиевнимание

Ая ТоноянРуководитель отделаКатегорийного менеджмента «Ferrero-Russia»aya.tonoyan@ferrero.com

Кирилл ИоновРуководитель отдела

Space management «Мetro Cash&Carry»Kirill.Ionov@metro-cc.ru