PLCB Category Management Review

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PLCB Category Management Review October,
2007 James Short Director of Marketing Pennsylvan
ia Liquor Control Board NABCA Best Practices
Summit

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Agenda

• Evolution of PLCB Category Management
• Listing Calendar
• De List / Store Freeze Methodology
• Clustering Solution
• Future Goals

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Timeline

• PLCB Fields Category Management Proposals
  (02/07)
• PLCB Partners with Future Brands / Gallo (03/07)
• Analysis of Current Solutions / Systems (04/07)
• Two year Project Goals Established (04/07)
• Vendor Partners Re-Locate to PA Market (08/07)

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LISTING CALENDAR

• SIX MONTH REPEATING CALENDAR
• Two Listing Periods
• - Similar to National Accounts
• - Conducive to Supplier Planning
• Reduction From Seven Listing Periods
• Shelf Sets Produced Concurrently

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De List / Freeze Methodology
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De-List Filter Methodology
Purpose
Assortment Criteria
Retain
If Segment Share for Sales gt or 5
Retain top 95 of Segment
Yes
No
Retain
If Periods Active lt or 14
Retain New Items
Yes
No
If Segment Growth gt or 5 and Item Growth gt or
75 Segment Growth
Retain Growing Items in Growing Segments
Retain
Yes
No
Retain
If Item Growth gt or 20
Retain Large Growth Items
Yes
No
Retain
If Profit / Store gt or 250
Retain Profitable Items Regardless of Growth
Yes
No
Freeze Analysis
Examine Code for Possible Freeze
Next Page
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Spirits Freeze Methodology

• Codes analyzed at store level to determine
  Profit Delivered
• Code is retained if it meets a Profit threshold
• Profit Threshold for an Account is Determined
  by the TTL Sales of the Store
• 1. Large Stores Avg. Retail 16.15 Avg. Profit
  4.84 1.5 Bottles per wk 7.26 x 52 wks 375
• 2. Med. Stores Avg. Retail 14.98 Avg. Profit
  4.49 1 Bottle per week 4.49 x 52 wks 230
• 3. Small Stores Avg. Retail 14.67 Avg.
  Profit 4.40 ½ Bottle per week 2.20 x 52 wks
  115

Profit Needed to be Retained as Optional
lt 1 Million
gt 3 Million
1 Million 3 Million
115
375
230
TTL Store Sales
TTL Store Sales
TTL Store Sales
Next Page
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Freeze Methodology
Code Meets Established Minimum Profit / Store
Retain
Retain Profitable Codes in Correct Stores
Yes
No
Freeze Code at Store Level
TTL Profit Where Codes are Retained gt 15,000
Retain Listing
Retain Profitable Codes for PLCB as Whole
Yes
No
Final Assortment Decision to Delete
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Clustering
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Former Clusters

• Cluster 1 Wine Enthusiasts
• - 62 stores
• - Warehouses 1 2 only

• Cluster 2 Premium Wine Development
• - 72 stores
• - All Warehouses

• Cluster 3 Popular Wine Development
• - 105 stores
• - All Warehouses

• Cluster 4 Mainstream Spirits Low Tier Wine
• - 38 stores
• - Warehouse 1 only

• Cluster 5 Metro Ethnic
• - 36 stores
• - Warehouse 1 only

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Former Clusters

• Cluster 6 Brown Goods Low Tier Wine
• - 117 stores
• - Warehouses 2 3 only

• Cluster 7 Brown Goods Development
• - 151 stores
• - Warehouses 2 3 only

• Cluster 8 Urban Ethnic
• - 36 stores
• - Warehouses 2 3 only

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Why We Changed?

• Less is more
• Greater store similarity (Demographics)
• Less variance in category performance
• Increased Efficiency
• Core Assortment
• Marketing Plans
• Clusters no longer defined by warehouse
• HH Income / Cost of Living by Region

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Objectives

• Core List
• Marketing Plans
• i.e. Distribute and Promote the Correct Codes
  in the Correct Stores

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Clustering Process

• Demographic Data Pull
• Demographic Analysis
• - Original Cluster Designation

Step 1
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About the Demographic Data

• Store Specific Demographic Data
• Adult Population
• Referenced Against Total Pennsylvania
• Indices Generated For
• Income
• Education
• Lifestyle
• Ethnicity

Primary Indicators of Consumption Patterns
Secondary Indicators of Consumption Patterns
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Process

• Sales Data Pull
• - By Store / Code
• Sales Data Analysis
• - Secondary Cluster Designation

Step 2
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Analysis

• DEVELOPMENT INDICES GENERATED FOR
• Price Segmentation
• Display Category

Hierarchy of Analysis
1. Price Segmentation
2. Category Development
3. Demographic Data
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Process

• PLCB Regional Manager / Broker Validation
• Final Recommendation

Step 3
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5 Clusters Identified

• Cluster 1 Upscale Metro / Suburban (105 Stores
  / 26.5 TTL Sales)
• - Avg. Household Income - 91K
• - Education Level - 41 College Graduation Rate
• - Ethnicity No Statistical Significance
• - Key Price Segmentation Super Premium
• - Display Category Drivers Specialty, US Cab,
  US Chard, Scotch, Tequila

• Cluster 2 Mid-Scale Suburban (122 Stores /
  25.7 TTL Sales)
• - Avg. Household Income - 70K
• - Education Level - 29 College Graduation Rate
• - Ethnicity No Statistical Significance
• - Key Price Segmentation No Discernable Driver
  
• - Display Category Drivers No Discernable Driver

• Cluster 3 Rural / Blue Collar (226 Stores /
  31.0 TTL Sales)
• - Avg. Household Income - 55K
• - Education Level - 21 College Graduation Rate
• - Ethnicity 93 Caucasian
• - Key Price Segmentation Value / Standard
• - Display Category Drivers Economy, Box,
  Beverage, Blended, Canadian

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Cluster Overview

• Cluster 4 Rural / Low Volume (102 Stores /
  5.4 TTL Sales)
• - Avg. Household Income - 49K
• - Education Level 15 College Graduation Rate
• - Ethnicity 97 Caucasian
• - Key Price Segmentation Value
• - Display Category Drivers Blended, Bourbon,
  Canadian, Beverage, Economy, Box

• Cluster 5 Metro / Ethnic ( 66 Stores / 11.5
  TTL Sales)
• - Avg. Household Income - 47K
• - Education Level - 20 College Graduation Rate
• - Ethnicity 38 African-American
• - Key Price Segmentation Value
• - Display Category Drivers Brandy/Cognac, Gin,
  Beverage, Economy, Flavored Wine

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Future Goals

• Modify Core Assortment Methodology

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Future Goals

• Develop Category Adjacency Methodology
• - Vendor Partner Consumer Research Driven

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Future Goals

• Generate Category Specific Shelf Set Template
• Bring in 3rd Party Validators

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Future Goals

• Implement Store Specific Shelf Sets Bi-Annually
• Generate Using Store Level Sales
• Will Allow for right-sizing of Categories

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Ultimate Goal
Become Category Management Self-Sufficient!!
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THANK YOU