What's on Your Endcap?
Multivendor strategy continues to show promise as offer expands.
Four years ago, Mark Schumacher of SUPERVALU Inc. was a tried and true believer in multivendor endcaps (MVEs). After a six-month test of the concept in the company’s Express convenience stores, Schumacher boasted snack and candy unit growth of 27% and gross margins up 34%. “We jumped in with both feet and deployed not only a warehouse snack MVE, but also a candy MVE,” he said in November 2006. Schumacher is corporate director of fuel management and convenience operations for the Eden Prairie, Minn.-based grocery chain, which also operates 133 fuel centers. Today, those racks are gone, but that doesn’t mean Schumacher isn’t still a disciple of the basic strategy.
“Our long-term issue came from the racks just being too large, too wide for our store formats; with our typical Express store averaging just under 2,000 square feet, the racks were difficult to position in-store,” he says. “We did eventually remove the racks after about a year, as we weren’t able to find narrower racks that met our needs. With a larger store footprint and wider gondolas and aisles, the MVEs would definitely have been retained.”
The MVE strategy places best-selling, high-margin, warehouse-delivered SKUs on a single, category-specific endcap for high-profile placement, effectively getting some of the most profitable products right in front of customers to increase sales. After seven years of starts and stops, the concept remains popular and is growing retailers’ sales.
The concept itself also is growing: In 2006, about 20,000 convenience stores were using snack MVEs; today, the number is upwards of 30,000. And wholesalers are driving its acceptance by extending the idea to new categories.
I DID IT MY WAY
The Spinx Co. jumped on the MVE train about the same time SUPERVALU did, bringing a snack rack into about 50 of its 66 Spinx stores with welcome success. But some of the disadvantages of the formal program—developed through an American Wholesale Marketers Association (AWMA) committee— led the chain to abandon its formal MVE program through its supplier and take on the strategy itself, with the hope of retaining the advantages and diminishing the problems.
“The negatives [were that the suppliers] only paid to be on the rack for the first year but required us to keep their products in for four or five [years],” says Bryan Zeiger, category manager for Greenville, S.C.-based Spinx. “They also controlled 70% to 80% of what was on the rack. We didn’t have a lot of say on what was included.”
As a result, Spinx took over the program about a year ago, maintaining the concept but taking the reins on product assortment. Again, space played a role.
“The main reason we looked at providing our own rack is the rack they provided didn’t work for the space we had allocated for them,” Zeiger says. “So we switched to our own endcap about a year ago, and the benefit is we can control everything that’s on the rack, and each year we have our vendors pay for placement.”
Spinx now has companies fighting for that space. “We have multiple vendors asking when those contracts are up because they would like a shot at it,” Zeiger says. But the company also tries to focus on the main thrust of the MVE strategy: putting the best-selling products front and center in the store to drive sales.
And that’s really the key, says Marty Monserez, convenience channel leader for Procter & Gamble, Cincinnati.
“The big idea behind multivendor merchandising is displaying the best of the best items in a prominent way to succeed in a small-footprint outlet,” says Monserez, who was instrumental in developing the strategy with the AWMA Warehouse Delivered Snacks Committee about 10 years ago.
“This is a strategy that is continuing to grow in this industry because it continues to provide benefits throughout the supply chain, i.e. retailers, distributors and manufacturers,” Monserez says. “That’s the strength of the MVE strategy. Often a strategy might help two players, but rarely does it contribute strong results for all trading partners.
“In this case, the retailer is selling a greater variety of snacks at higher margins, the distributor is generating incremental warehouse-delivered snack sales, and the manufacturers are getting permanent displays of great-selling items, thus increasing their sales,” he continues. “Manufacturers tried for 50 years to sell single-vendor endcaps to support only their brands. But without the necessary selling scale, most did not succeed, thus surrendering this display space to DSD (direct-store-delivery) vendors.”
That was exactly the emphasis Tommy Thomas, whom Monserez calls one of the founding fathers of the MVE, had when he envisioned the rack.
“I told [one manufacturer], ‘Look, let’s work on a unit that will house a majority of the best-selling salty and sweet snacks from a lot of different companies, and see if we can’t do something in that regard vs. just doing a fixture for just [a single vendor],” says Thomas, corporate director of sales and marketing for distributor H.T. Hackney, Knoxville, Tenn. “They weren’t really crazy about it at first, but once we started talking to the other manufacturers that deserved an endcap but didn’t have one, then everyone started getting excited.”
Ron Coppel, senior vice president of business development for distributor Eby-Brown, Naperville, Ill., has seen that enthusiasm, too. Eby-Brown offers MVEs for snacks, theater boxes and energy shots.
“Impulse purchasing is always a good thing, for the retail, for the manufacturer, for the distributor, for everybody,” he says. “The multivendor endcap is a great tool to drive that impulse purchase, and the data has proven that out. Where it’s been placed, it has not only improved margins, but it’s given a lift to the entire category within the store.”
In trial after trial, retailers have seen sales-volume lifts of 15% to 30%, with growth occurring across the entire category, Thomas says.
“The MVE is not only raising the bar for that particular unit, but the gondola category as well,” he says. “Typically, the salty-and-sweet fixture is on an endcap with either the salty or sweet snacks right beside it or right behind it [in-line]. So it’s helping the category grow [as a whole] as well, as a result of the consumer coming to that fixture.”
Adds Lance Smith, category manager for Temple, Texas-based McLane Co., “Candy and snack multivendor endcaps allow retailers greater ability to capitalize on high-margin and highimpulse categories such as confections and snacks, improving product placement in-store with multiple locations to best serve consumers’ needs.”
Monserez agrees. “From several studies we know the following: that an MVE will increase the entire snack category sales by 23% and profits by 20%,” he says. “But also, half of that sales growth is coming from items on the MVE rack. The other half of that sales growth is coming from sales growth in-line because … consumers see the MVE and if they don’t see the [package size or flavor] they want, they’ll walk down the neighboring aisle in an effort to find the flavor they’re after.”
The Fas Mart and Shore Stop chains have seen the growth. As one of the pioneers of the MVE, the Richmond, Va.- based sister chains were among the first to test McLane Co.’s snack MVE with strong results.
“We’ve been very, very happy with it,” says Rick Klyczek, vice president of marketing and sales for Fas Mart/Shore Stop, which is owned by GPM Investments, Richmond. Va. “For the items that are on the rack, we see anywhere from a 15% to 30% lift in sales.”
The racks are now in 187 of the company’s 212 company-operated stores. Fas Mart/Shore Stop was also among the first to bring in McLane’s recently updated snack MVE, which rolled out in October 2009, to one of its stores. And this summer, the company brought in its first candy MVEs, again through McLane, with the intention of rolling them out to more stores in 2011.
“They’ve been in place for two weeks,” says Klyczek, “so it’s too early to tell [how they’ll perform], but we’re very pleased with the look. This next generation of MVEs has a lower profile. We believe it has a better design, is sturdier, and we really like the way the rack presents the products to customers.”
McLane introduced its candy MVE in February 2009 after noting that confectionary is among the highestimpulse and highest-margin categories in a c-store, says McLane Co.’s Smith.
“We designed multiple versions of both the candy and snacks MVEs, with the primary focus of having the ability to tailor it for each retailer’s store needs,” he says. Thomas of Hackney says that’s the essence of the MVE. “It’s just category management at its best,” he says, citing that Hackney has since extended that thinking to eight other categories, including candy, other tobacco products (OTP), theater-box candy, meat snacks and pastries.
For Fas Mart/Shore Stop, the MVE also opens a spot for new products to be merchandised. “It is a secondary placement [for most products] at this point, but in many cases we’re getting new items front and center on that rack, where people are going to be able to see them and be introduced to them,” says Klyczek.
Spinx, which stocks about 25 SKUs on its MVE, also has used the rack to introduce new items and has found it an opportunity to merchandise seasonal items as well.
“We actually left one or two shelves un-plan-o-grammed so we can put seasonal items on it,” says Zeiger. “It [also] gives us a dedicated space to put in the newer products instead of trying them out with a cardboard shipper; we’ve got a nicer display to try them out on.”
However an MVE is used or whether a wholesaler-supplied rack is used, Procter & Gamble’s Monserez says the bottom line is improving volume sales and margins.
“I’m really proud of the MVE strategy,” he says. “Consistent with most manufacturers, [P&G’s] Pringles sell two to three times more than normal, depending on the position of the MVE rack in the stores. … So there are wonderful benefits to getting highly desired products in front of consumers that provide good margins for the retailers.”
Assume the Position
Just where should a multivendor endcap go in a convenience store?
“The ideal location for a multivendor endcap is in a high-traffic location,” says Lance Smith, category manager for McLane Co., Temple, Texas, suggesting retailers consider the traffic patterns to the mostfrequently visited areas of a store. “Multiple data sources point to the fact that the beverage area is the No. 1 destination area in a c-store. Therefore, one should strategically merchandise a multivendor endcap in a location that serves the purpose to intercept your customers who are en route to the beverage door or the fountain area.
“Candy is the most impulsive category in the c-store, and snacks is right there with it,” he continues. “There’s a limited time you have a consumer in a c-store so you want to have it in a high-traffic area, and you want to have it try to intercept those customers going to the coffee bar, the cooler door or the fountain machines.”
Adds Rick Klyczek, vice president of marketing and sales for the Fas Mart and Shore Stop chains, Richmond, Va., “If you’re looking to get the best items or the newest items in high-impulse areas on an endcap, [MVE] is absolutely the best way we’ve found to do that.”
MVE Benefits and Suggestions
- Place immediate-consumption sizes and best-selling flavors on the MVE rack.
- Studies show snack-category sales have grown by 23% and profits by 20%.
- An MVE helps keep core brands in stock.
- An MVE allows for easier pack-out of the product.
- MVEs benefit in-line sales as well as secondary placement.