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SHELF READY PACKAGING (SRP)SHELF READY PACKAGING (SRP) – – THE FUTURE OF RUSSIAN RETAILTHE FUTURE OF RUSSIAN RETAIL

Galant AlexanderMerchandising head of discounter format

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Transport package that

1.Meets ergonomic requirements of the retailer;

2.Easy to open;3.Customer friendly design;4.Easy to ID;5.Easy to dispose;

SRP. WHAT IS IT?

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p. 4SCA Packaging St. Petersburg4

p. 5SCA Packaging St. Petersburg5

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EVOLUTION IN SHELF READY PACKAGING

Non SRPCases (0201)Wraps (0406)

1st gen. SRP Cases with

perforation Wraps with

perforation

2nd gen. SRP Two piece

boxes Tray & lid

Dynamic SRP Product in front Gravity Always visible No re-work

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SRP DEVELOPMENT IN FMCG SECTOR IN EUROPE

2005 2010% annual growth

mln, m2 % mln, m2 %

SRP 7 064 40,5 9 670 47,6 6,2

Conventional packaging 10 379 59,5 10 645 52,4 0,2

Total 17 443 100 20 315 100 2,9

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RETAIL COSTS

Stock keeping15%

Receiving15%

Shelf service30%

Service5%

Cashier25%

OH 10%

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OUR OUR TARGETTARGET

THE TARGET

OPEX reduction in terms of payroll

Out of stock reduction

Feeling of wide choice despite limited assortment

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MODERN GROCERY DISTRIBUTION

The discount channel is set for the strongest growth.

2009 saw strong discount store growth in the key markets of Europe and North America.

Hypermarkets will see relatively low growth due to saturated markets, the high cost of investment per store and growing pressure on non-food sales.

The discount channel to benefit from the focus on value/price

Global: Store Number Growth by Channel, 2009-2011

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EUROPEAN DISCOUNTERS PRACTICE

80% SKU in SRP →

• Feeling of wide choice despite limited assortment (1,5-2 th. SKU);

• Store looks colorful

• Minimal staff needed for shelving

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TOP10 RETAIL CHAINS IN RUSSIA

NameSales

mln. RUR Growth 09 / 08,

%Market share,

%Stores

quantity

X5 366,777 +21.6 5.0 1,923

Magnit 165,999 +24.5 2.3 3,197

Auchan 109,573 +25.1 1.5 64

Kopeyka 65,762 +25.8 0.9 659

Dixy 60,685 +27.1 0.8 638

Lenta 55,600 +9.4 0.8 35

Victoriya 50,111 +22.1 0.7 254

7 Kontinent 40,281 +20.9 0.5 143

Okey 40,171 +37.0 0.5 47

Real (Metro Group) 15,036 -2.6 0.2 15

Joint projects with SCA Packaging Russia

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LACK OF INTERACTION BETWEEN MANUFACTURERS AND RETAILERS IN TERMS OF TRANSPORT PACKAGING

MANUFACTURER - RETAILER. PROBLEMS

Large one-off investments needed to implement SRP

Lack of SRP manufacturers on the market

Not all manufacturers realize advantages of SRP

Lack of experience

Retailers are not consolidated

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MANUFACTURER - RETAILER. PROBLEMS

14,6%

7,6%

20,1%

29,2%

52,1%

58,3%

48,6%

67,4%

62,5%

15,2%

12,4%

20,0%

25,7%

36,2%

45,7%

46,7%

63,8%

64,8%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Other

Shopper disapproval

Reluctance to particpate

Packaging redesign

Equipment costs

Different shelf sizez

Implementation costs

Supply chain costs(including production)

Lack of commonstandards

2007

2006

What are the Key Barriers in Adopting RRP Across the Industry?

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PACKAGING PROBLEMS IN RETAIL

SRP imitated by merchandisers

Other supplier's/producer’s packaging is used

Product damage when opening package

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RUSSIAN MADE -

• Package is brown and faceless. Hard to find the product in DC;• No design, no color;• Package is fragile and jammed;• Hard to open;• Doesn’t fit the shelf;

PACKAGE COMPARISON

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Easy to IDEasy to ID

RETAILERS ADVANTAGES

OOS andOOS and OOD reductionOOD reduction

Easy shelvingEasy shelving

Feeling of abundance Feeling of abundance

OPEX REDUCTIONOPEX REDUCTION

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Wider assortment on the Wider assortment on the same spacesame space

All tastes are All tastes are blocked blocked togethertogether

Easier goods receivingEasier goods receiving, , stock stock takingtaking, , product IDproduct ID

RETAILERS ADVANTAGES. MIX BOX

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Guaranteed facingGuaranteed facing

Brand promotionBrand promotion

Brand-block creationBrand-block creation

Face to customersFace to customers

MANUFACTURER’S ADVANTAGE

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MANUFACTURER’S ADVANTAGE

Advertising space ~18 м2~30 000 RUR/ monthTotal: ~ 1670 RUR/m2

Advertising space ~0,5 м2~134 RUR/monthTotal: ~268 RUR/m2

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Merchandisers costs reduction

OOS reduction

Easy to ID

Shrinkage reduction

Easy to make a display

MANUFACTURER’S ADVANTAGE

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PRIVATE LABEL

PRIVATE LABEL –is the best example of SRP implementation

SRP usage achieves 80-100% for goods under PL among West European retailers (Carrefour, TESCO, Aldi and others).

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PRIVATE LABEL

• X5: Plans to increase PL share up to 30-50% in the medium term.

• METRO GROUP: Plans to increase PL share from 8% up to 10-11% by 2012 year.

• MAGNIT: Plans to increase PL share up to 20% by 2015 year.

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SHELF READY PACKAGING

SCA Packaging together with retailers and suppliers launched a project to implement SRP

ConsumerProducer Retailer

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SHELF READY PACKAGING

PROBLEM SOLVING

RETAILER

SCA PACKAGING

SUPPLIER SUPPLIER

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PROJECT TEAM

Sales manager

Designer

Supplier

Merchandising manager

Category manager

Key account manager

Logistics manager and/or purchasing manager

Brand manager

Retailer

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PARTICIPANTS AND THEIR INPUT TO PROCESS

Retailer Producer

CostsResponsibility for implementation

Quantity of products in a box Product

information

SCA

SRP proven designs

SCA tools

Customized shapes and graphics

Prob

lem

sol

ving

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TOOLS

Во время проведения совместных с клиентами семинаров мы используем логистический подход и собственные средства проектирования

Оптимальное размещение продукции

• Cape

Дизайнерские программы

• Artios CAD

• Adobe CS

Библиотека готовых решений• Midas

Программа расчета прочности коробки

• SAM

3-D визуализация

• ImagineПлоттер

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STREAMLINING THE DECISION PROCESS

SHOPPER

MANUFACTURERRETAILER

SPEEDSPEED

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Costs after…

0

2000

4000

6000

8000

10000

12000

14000

Price persecondary

pack

Packagingprocess at

customer site

Primarydistribution

Storage andhandling at DC

RetailerDistribution

Store logistics Total cost0

2000

4000

6000

8000

10000

12000

14000

Price persecondary

pack

Packagingprocess at

customer site

Primarydistribution

Storage andhandling at DC

RetailerDistribution

Store logistics Total cost

Costs before…

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SRP IMPLEMENTATION

While cost for packaging increased by 76 000 RUR, return losses decreased by 1 500 000 RUR per month.

Before… …after

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FIRST RESULTS

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SUMMARY

2. SRP projects with category leaders, holders of world’s best practice-

3. Package requirements are listed in PL tendering terms and conditions

1. Mutual advantages for retailers and manufacturers. SRP provides instant result;

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THANK YOU!

LET’S DO IT!

DEPTH max 40 CMWIDTH max 30 CMHEIGHT max 30 CM

Our ergonomic requirements