jointly agreed growth (jag) new ways of working together a pragmatic approach for developing and...

Jointly Agreed Growth (JAG) New Ways of Working Together

A Pragmatic Approach for Developing and Implementing Jointly Agreed Growth Plans

TOOLKIT

Jointly Agreed Growth

2 - Version June 2008 - 22

This toolkit is developed with input from the following companies


3 - Version June 2008 -

This document is a summary for general information only and does not constitute legal advice.

• Any examples provided are hypothetical and do not refer to any specific company

• Each company is responsible for defining its own policy with each of its trading partners

• Please refer to the appendix for general competition law guidelines. Advice of appropriate legal counsel must be sought prior to any consideration of the issues raised herein



AGENDA

• Case for change

• JAG objective and principles

• Process to develop & implement the JAG plan

• Conditions for success

• Appendix: competition guidelines

Jointly Agreed Growth (JAG)



0

2

4

6

8

10

12

14

2001 2002 2003 2004 2005 2006

EU 27

USA

Japan

France

Germany

0

2

4

6

8

10

12

14

2001 2002 2003 2004 2005 2006

Inflation rate

Householdconsumptiongrowth

Householddisposableincome growth

Household

savings ratio

Percent Percent – EU 27

"We need find a better balance between the reforms which stimulate offer and the ones which

stimulate demand" – OECD

"Let’s give the desire to buy" –

ECR Conference

ECR identified a 70 billion EUR annual growth potential in Europe in 2005

Source:OECD; Eurostat; European central Bank; ECR Europe

THERE ARE STILL SIGNIFICANT GROWTH OPPORTUNITIES IN EUROPE

Household savings ratio in Europe is much higher than in USA and Japan

In Europe, we can increase consumption by driving demand, reducing household high savings



Source:ECR Europe Conference

How focused on the consumer and shopper, on driving demand and generating growth, is the current negotiation model in Europe?

“We need to create and develop economic activity by blending risk taking, creativity and/or innovation with sound

management“ – EU Commission “Action Plan for

Entrepreneurship”, 2004

0

10

20

30

40

50

60

Not at all focused

Not really focused

Focused Relatively focused

Very focused

“We have become risk averse: rather than Play to Win, we

would rather Play Not To Lose -ECR Co-chair Demand

Entrepreneurship is one of the 7 indicators of innovation tracked by the European Commission in its European Innovation Scoreboard

THERE IS A LACK OF ENTREPRENEURSHIP, HENCE INNOVATION



Almost 80% of the market is ours to fight for

Source:ECR Europe Conference

"It is well known that each component of consumption expenditure has a different

elasticity in relation to household income. In general,

the expenditure on items linked to the satisfaction of basic needs (food) is more inelastic that expenditure

linked to other consumption components" – The European

Consumer in the Enlarged Union, Statistics in focus,

Population and social conditions, February 2005

"We taught the shoppers to be price focused …" – ECR Conference

WE NEED TO MOVE FROM A PRICE TO A VALUE FOCUS…



• Jointly develop clear , fact based, understanding of market context and trends

• Jointly develop growth strategies

• Sign a business plan focused on growth and not sharing of the pie

• …

• Offers a framework for negotiation

Jointly Agreed Growth (JAG)Current approach…

Less time to buildstrong fact base

Growth actions less effective

Less growth

More % marginneeded to finance

More time spent negotiating

Less time to agree on growth actions

JAG

"It is not the last penny you leave on the table that determines whether or not the retail company is going to be successful. It is whether or not you work together to best satisfy that customer … that allows you to sell more" – ECR Conference

… AND OFFER A MORE RATIONAL FRAMEWORK FOR NEGOTIATION, WHICH WILL ALLOW MORE INNOVATION TO COME ON THE MARKET



“Innovation is also about the service and the environment we provide for the shoppers in store. Sometimes just a re-organisation of categories or display generates more growth than additional products“ ECR Conference, Demand Side Plenary

The Levers of Growth

Service Offerings Product Offerings

Shopping Environment

Communications• Advertisement• Promotion Events• Loyalty Programmes

• Assortment Range (current &.NPI)

• Product Presentation• Price

• Employee Skills / Attitude• Shopper Services• Convenience Areas

• Store Location• Appeal / Layout of Stores• Quality of Facilities

ECR Europe , Consumer Value Measurement,1999

“We need to focus on fewer, better and faster innovations” CEO Forum 2006

Optimisation

Foundation

Identify Target ShoppersAssess Current Business Situation

Assortment / New Items / Availability / Pricing / Promotions

Fixture Enhancement

Information, Education, Communication

Category Adjacencies

Services

At all levels of shopperinteraction in the store…

… let’s give the desire to buy !

GROWTH WILL COME FROM BEING INNOVATIVE ALONG ALL LEVERS



The European Commission Innovation Scoreboard covers• Product or Service

Innovation • Process Innovation• Organizational Innovation • Marketing Innovation

"The different aspects of organizational innovation should be better explored as they play an increasingly crucial role"

– European Innovation Scoreboard 2006

"In the EU-27, the share of new or significantly improved products in total turnover of enterprises stood at 8.7%"

– Eurostat, May 15, 2007

"On average, 90% of retailer’s yearly sales are from the current range"

"The most innovative companies in Europe are characterized by a close cooperation with other businesses"

– CORDIS, European Commission, 2006

"Many enterprises innovate through non-technical forms of innovation• Knowledge: better use or

exchange of information• Organization or Management,

integrating different activities• Change in relationship with

other firms or institutions"

– European Innovation Scoreboard, Eurostat, October 2007

GROWTH WILL COME FROM BEING INNOVATIVE ALONG ALL LEVERS



AGENDA

• Case for change








• Grow the grocery market in a sustainable, profitable and competitive way to ensure the highest shopper and consumer satisfaction

• Deliver commercial benefits for each party

• Be open to every company bringing in knowledge and capabilities, regardless of its category

• Establish a fact-based joint process in which data and insights are shared

• Be committed to a clear execution plan

• Allocate the required resources for the execution of the plan within the agreed time frame

• Review the JAG process on a regular basis

• Respect the Confidentiality Agreement

• Comply with all laws: competition, health, environment, and intellectual property

• Involve senior commitment to ensure the 3-year time frame engagement required by the JAG

WHAT ARE THE JOINTLY AGREED GROWTH (JAG) PRINCIPLES?



Jointly Agreed Growth (JAG)Trade barriers

Lack of strategic alignment

Lack of long-term visibility / focus

Fear of private label match impeding product introduction

Slow distribution of new products / general availability issues

Lack of KPIs to measure effective return

A Jointly Agreed Growth strategy

A three-year framework plan

An agreed category strategy and set of principles

Long-term integrated process avoiding supply chain disruption

A set of agreed pre-defined growth criteria, balancing financial, marketing and operational KPIs

Source:ECR Europe Conference May 2007

PARTNERS NEED TO OVERCOME SOME BARRIERS TO GROWTH



CurrentYTD (n) Year n n+1 n+2 n+3

SHOPPER METRICSPenetrationFrequencyLoyalty

Plan

Currentn-2 n-1 YTD (n) Year n n+1 n+2 n+3

SALES TURNOVER FOR SUPPLIER BRANDS IN CATEGORY (sell-out from retailer)Current Assortment

- Without initiatives- Initiatives impact

Assortment Extension- Existing products not previously listed in the store (listed elswhere)- New products (to be launched)

Total (Current Assortment + Assortment Extension)

Achieved Plan

Currentn-2 n-1 YTD (n) Year n n+1 n+2 n+3

INCOME LEVELLowMiddleHigh

Achieved Plan

… a Jointly Agreed Growth strategy in a 3-year time frame…

Starting with a shopper / consumer centric approach,…

… leading to higher shopper and consumer satisfaction…

… brings incremental sales …

… through current range activation, e.g., innovation in store,

… and through new products introduction

Flexible toolkit can be adaptedto your specific needs. These are

recommendations – it is up to both parties to define level of detail and to adjust

process/templates accordingly

WHAT IS A JOINTLY AGREED GROWTH (JAG) PLAN?



WHAT IS THE ADDED VALUE OF THE JAG ?

Commercial discussion starting with a shopper and consumer-centric approach for stimulating demand

More focus on business development – "Anything about accelerating the business"

A longer time horizon – "Working earlier together, more strategically"

Openness to multiple players in the category

A fact-based framework for negotiation



WHAT WILL A JOINTLY AGREED GROWTH (JAG) PLAN ALLOW?

To monitor and work more closely on new trends development

To address the imperatives of sustainability

To build strategic vision and assess more effectively strategy’s returns

To offer a framework to improve the current commercial mindset

To build business continuity

It allows more innovation to come into the market

And consequently,



AGENDA

• Case for change








• Five step process building a three-year rolling JAG plan

• Annual milestones to be set• Program reviewed

throughout the year• Buyer-Seller accountable for

functional liaison, planning coordination, agreement and execution follow-up

• Cross-functional teams drive analysis and planning to support Buyer-Seller

JAG process

• Help trade partners build rationale for their growth strategy

• Demonstrate the objective selection of relevant growth levers

• Allow reliable quantification of the opportunities and expected ROI

Fact based

Step 5Monitor &

adapt

Step 1Review the economic and shopper environment

Conditions for success

Step 2Review

sales and agree on

prioritized growth levers

Step 3Define

and agree on 3-year JAG plan

Step 4Execute the

JAG plan

PROCESS STEPS FOR SUCCESSFUL JAG COLLABORATION



• Review economic and shopper context and trends at market level

Key activities End products

11

1. Market and shopper dynamics

Why?

• Get common fact base on market evolution

• Share starting point to estimate category baseline growth

STEP : REVIEW THE ECONOMIC AND SHOPPER ENVIRONMENT

• Develop common understanding on overall context for growth

• Build rationale to justify growth targets

Objectives



Agreement on market dynamics and first growth assessment: (e.g., market, consumption)

Data source: Eurostat, EIU, all research services providers

Few extracts for illustrative purpose

Who? Marketing teams provide analysis to support

Buyer- Seller discussion

Growth (%) n-4 n-3 n-2 n-1 n n+1 n+2 n+3GDPPrivate Consumption - Food - Beverages - Personal care - HouseholdOut of home food and beveragesHousehold disposable incomePopulationInflationHousehold savings ratioValue growth (%) n-4 n-3 n-2 n-1 n n+1 n+2 n+3HypermarketsSupermarketsConvenienceDiscountDrugstoresTotalRegion value share (%) n-4 n-3 n-2 n-1 n n+1 n+2 n+3Region 1Region 2Region 3Region 4Region 5Population segmentation (No. Of households)

n-4 n-3 n-2 n-1 n n+1 n+2 n+3

1 member household2 members household3 members household4 or more members householdGrocery shopping behavior n-4 n-3 n-2 n-1 n n+1 n+2 n+3Average No. of facia visited/yearOnly shop at one retailer (%)Shop at 2 fasciaShop at 3 fasciaShop at 4 fasciaShop at 5+ fascia

ForecastAchieved "Consumption growing yearly at 2%, ..what about our sales

growth?

"Convenience channel growing at the expense of

…"

"1-member households growing, what does it mean

for our offer?"

"Shoppers splitting purchases over 5 fascia"

“Do households have money? Are they using it?”

11STEP : REVIEW THE ECONOMIC AND SHOPPER ENVIRONMENT

• Share understanding of market context and economic trends, using forecasts of external agencies• Share grocery market understanding and consumers/shoppers insights from external

agencies/providers and internal sources• Ideally, drill down one level deeper to ensure real visibility of trends (e.g., by format, region,

segment…)

Approach



EXAMPLE

Supplier Objective & Opportunity Review"Putting

The Partner’s Shoes on"

In what way could brand X support my more general portfolio development plans?

How can my brand growth objectives be aligned to help deliver a retailer’s portfolio plans?

Drive Meal Solutions to defend against out of home alternatives

Drive penetration of premium pasta products (pasta, sauces, ready pasta dishes, dry and frozen)

Meal Offerings ensure the solution is genuinely motivating

to the shopper

Collaboration builds greater knowledge of the shopper needs

Collaboration builds increased focus and resources to reach the shoppers

Solutions• New Products (ready meals)• Categories Adjacencies (all in one)• Communication/Education (ATL, POS)

Retailer Objective & Opportunity Review

Agreement on market dynamics and first growth strategy assessment

11STEP : REVIEW THE ECONOMIC AND SHOPPER ENVIRONMENT

• 1995: Retail: 70% of Food Consumption vs. 30% Out of Home• 2005: Retail: 66% of Food Consumption vs. 34% Out of Home

Start from data

• Growing Out Of Home Food Consumption at Retail Purchase Expense

Interpret data

• "Rise of indulgence, a desire and pleasure society"• "Time pressure”: working parents, single households

Complement with shopper and consumer surveys






Fact based

Step 5Monitor &

adapt



Step 4Execute the

JAG plan

Step 2Review

sales and agree on







JAG process

Step 3Define





Share shopper and category strategy, including consumer value perception

Analyze past and current sales growth in the category

Prioritize future growth levers based on:

– Shopper Strategy– Estimated incremental

sales– Level of

investment/ROI– Ease of

implementationAssess interrelationships between growth levers

Summarize and draft action plan for priority growth levers


1. Agreement on strategy

2. Performance review and joint SWOT analysis of trade partners

3. Growth levers and incrementals

4. Action plan

Why?

• Ensure JAG initiatives are fulfilling shopper needs and are aligned with agreed strategy

• Help to understand where sales growth came from

• Understand which growth lever is performing well / not well and why

• Understand through which shopper variable incremental sales are generated

• Focus on highest impact levers

• Factualize ROI discussion

• Plan activities for priority levers to include in JAG plan

2.12.1

2.22.2

2.32.3

2.42.4

22STEP : REVIEW PERFORMANCE AND AGREE ON PRIORITIZED GROWTH LEVERS

• Diagnose category dynamics

• Understand where incremental growth comes from

• Select, estimate potential financial impact and prioritize growth levers for the category

• Draft action plan for priority levers

Objectives



CATEGORY ROLE:

• …

• …

SHOPPER STRATEGY:

• Identify, attract and retain shoppers (new or from competitors)

• Benchmark and differentiate value proposition for these consumers

• Start by discussing corporate strategy • Agree on category role & shopper strategy (profile target)

Approach

•stock

•rate

•

•Days of

Variable

Total number of shopping

trips

Percentage of shop

trips that contain the

category

Value transaction

size (basket)

Retailer sales value

Percentage of gross margin

Actual profit

Operational expenses

3 generic totalopportunities

Traffic (increase the total

number of shoppers/

freq)

Basket size /transactionBuild)

Basket/Categoryprofit

Out of

Service

Inventory

stock

Range

Conversion (Convert

more shoppers

to the category or more often)

Build forLargerSize orImpulsefamilies

Convenience,loyalty;Low pricesensitivity

Skus withHighPenetration,High frequency

Skus with Low volumeLowerfrequency

Effectiveness Efficiencies

SHOPPER PROFILECurrent

SHOPPER METRICS Year n-2 Year n-1 Year n-YTD Year n Year n+1 Year n+2 Year n+3PenetrationFrequencyLoyalty

INCOME LEVELLowMiddleHigh

HOUSEHOLD SIZE1 member3 members4 or more

NUMBER OF CHILDREN1 child2 children3 or more

Achieved Plan

Source: ECR - The essential guide to day-to-day category management

2.12.1STEP : SHARE SHOPPER AND CATEGORY STRATEGY



Performance review and joint SWOT analysis of trade partners

Good on-shelf availability for

shoppers? How many sales missed?

Who?Marketing teams drive analysis to

support Buyer-Sellerreview

• Recommended level of analysis:

– Total category at market level– Total category at retailer– Supplier performance in category in

market– Supplier performance in category at

retailer

• Ideally, drill down to level of:

– Formats– Shopper segments– Regions

2.22.2STEP : ANALYZE PAST AND CURRENT SALES GROWTH

What brought more sales uplift in last

year? 3-year trends?

Growing at the rate of the

market?

How is shopper

behaving in the category?

At retailer? With supplier

brands?

• Analyze the drivers of growth for the category• Jointly review category performance at retailer and on market (SWOT) • Develop joint perspective on the development of the category, ideally benchmarking

and drilling down to level of: format, shopper segments and regions

Approach



Agree on growth impact assessment per lever as a basis for future growth forecast

• Review of tactics used to incentive shoppers purchase in-store (e.g., Secondary placement through displays – permanent or promotional), in store media,…

• Assessment of promotional activities (amount, frequency, types), their impact on shopper and sales and their ROI

• Evaluation of the average ROI and incremental volume from a sample of promotions

• Define Skus/segments growing and those losing sales • Review planogram

• Define NPI need and inclusion into assortment, their contribution to sales and ROI

• Assessment of missed sales and opportunities

Review

In-store activation/ Promotions

Assortment

Product innovation

On-shelf availability

Growth lever

Data source: EPOS, panels as well as shopper research (e.g., behaviors in store, in front of shelf, media exposure)

Who? Cross functional teams provide analysis to support

Buyer- Seller discussion

• Type, frequency, duration, timing, location within store, space location, cross merchandising…

• By store, shopper segment, format, region, competition…

• By store, shopper segment, format, region, competition…

• Levels based on competitive and shopper positioning

Check Metrics

2.22.2STEP : ANALYZE PAST/CURRENT SALES GROWTH AND FUTURE GROWTH LEVERS



EXAMPLEWho?

Cross functional teams provide analysis to support

Buyer- Sellerdiscussion

Agree on improvement areas for collaboration to support growth strategies

2.22.2STEP : ANALYZE PAST AND CURRENT SALES GROWTH Collaboration assessment

Approach: Review collaboration process and its possible impact on sales results(e.g., failure in communication led to supply problem impacting NPI)

Approach



• Assess incremental sales for every growth lever based on– Impact on each component of demand– Top-down estimates– Pilot results

Approach

Current year

Year +1 Year +3

Incremental sales for retailer (volume + value)No. of units and EUR Millions

First estimation of incremental sales

Year -1Year -3

Three approaches to estimate incremental sales

Increased penetration / traffic (Y+3)

Increased frequency of purchase (Y+3)

Increased transaction size (Y+3)

Current sales (Y0)

Top-down estimates from benchmarks or past experience (e.g., similar initiative in another country,initiative with a similar retailer/ supplier)

Run a pilot with limited scope and timeframe (e.g., a few stores, a limited number of products) and extrapolate results

Assess impact on the components of demand*

Who? Cross-functional teams provide analysis to support

Buyer-Seller discussion

*For supplier: number of shoppers buying my product at this retailer x Frequency of purchase of my product per shopper x Average transaction size on my products – Current sales

2.32.3STEP : ESTIMATE INCREMENTAL SALES



• Summarize previous year’s investments and ROI per growth lever, including both level of investment as well as frequency/ number of investments per activity

• Agree on investments required to support various JAG Plan activities

Approach

Also qualitative investment assessment:

Number and frequency of promotions, GRPs for media plan, etc…

Year n Year n+1 Year n+2 Year n+3

2.32.3STEP : AGREE ON TOTAL INVESTMENT





• Define actions to take for each growth lever• Refine incremental sales estimation• Estimate investments needed for each action• Prioritize growth levers based on incremental sales, sales ROI, shopper relevance and ease of

implementation taking into account the long-term effect (e.g., model shapes for new launch types)• Take into account time sequence (e.g., some activities need to be organized prior to others)

Approach

Sales ROI* and/or shopper benefit

Assortment

On-shelfavailability

Product innovation

High

Low

Medium

Low HighMedium

Ease of implementation




*Calculated on multiple-year basis

2.32.3STEP : PRIORITIZE GROWTH LEVERS BASED ON SALES ROI AND EASE OF IMPLEMENTATION



• Assess correlation of activities between growth levers• Define their subsequent time sequence (e.g., in-store activation when new

product introduction)

Approach

In-store activation/ Promotion• Feature/displays (2nd

placement• In-store communication • Additional activities (e.g.,

services, product testing)

Product innovation• Is NPI a lever?• Are other NPI

projects anticipated?

• Joint innovation projects?

On-shelf availability• Distribution

build-up?• Discontinuatio

n of delisted SKUs?

Assortment • Review

planogram (primary placement)

• Which/per channel/cluster of stores

• Delisting implications for other products in the category?

On-shelf availability• Distribution

build-up?• Discontinuatio

n of delisted SKUs?

In-store activation/ Promotion• Feature/displays (2nd

placement• In-store communication • Additional activities (e.g.,

services, product testing)

AssortmentProduct

innovation

Launch new product Activate current range

TWO EXAMPLES

2.32.3STEP : ASSESS CORRELATION OF GROWTH LEVERS

Detailed information on growth levers can be found in ECR Blue Books* *http://www.ecrnet.org/04-publications/blue_books/pub_2000_essential_guide_daytoday_catman.pdf



Activities to support growth

Actions 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12

Assortment/ Planogram

Action 1

Action 2

Action 3

Product innovation

Action 1

Action 2

Action 3


Action 1

Action 2

Action 3


Action 1

Action 2

Action 3

Year n+3Responsible

Year n+1 Year n+2

• Agree on actions per growth lever and their estimated sales uplift• Assess overlap between different activities for total incremental impact• Define their subsequent time sequence (e.g., in-store activation when new

product introduction, synchronization of above-the-line and in-store media)

Approach



Core JAG template

2.42.4STEP : DETAIL JAG PLAN ACTIVITIES






Fact based

Step 5Monitor &

adapt



Step 4Execute the

JAG plan






JAG process

Step 3Define


Step 2Review

sales and agree on





• Discuss investment allocation and ROI

• Agree on JAG plan and have it approved by senior management– Sales Target– Activities to Support the

Targets– Force Majeure and

Contingency Plan– KPI targets and report

frequency– Human resource

allocation and motivation (e.g., incentives)


1. Agreement

2. JAG plan for signature

Why?

• Possibly modify JAG plan based on discussions

• Get support for sales target, as well as allocation of resources

• Define actions to take when events jeopardize the JAG plan

• Monitor JAG implementation and results

Finalise JAG plan• Agree on sales uplift• Agree on

investments allocation

• Agree on activities• Agree on KPI & JAG

plan monitoring

Objectives

3.13.1

3.23.2

33STEP : DEFINE AND AGREE ON 3-YEAR JAG PLAN



• Discuss investment allocation between trade partners

Approach

Investments in scope: • Marketing expenses (e.g., above-the-line: carried individually by trade partners to support growth activities)• Trade investments (e.g., below-the-line: shared or not – element of discussion) • Indirect investments that support the growth initiatives: e.g., shelf-ready packaging, cross-docking

Year n Year n+1 Year n+2 Year n+3

3.13.1STEP : DISCUSS INVESTMENT ALLOCATION



n-2 n-1 n, YTD Year n n+1 n+2 n+3

SALES TURNOVER FOR SUPPLIER BRANDS IN CATEGORY (sell-out from retailer)Current Assortment (Total all growth activities to support sales)Linear growth (market/consumption growth rate), no specific initiativesIn-store activities (displays, features, in store media…)Price/ discountsAssortment Extension

- Existing products not previously listed at retailer (listed on market) - New products (to be launched)

Total (Current Assortment + Assortment Extension)

GROWTH RATE (%)Sales of Supplier brands in Category at retailerRetailer Category Sales nationwide

INVESTMENTS (Marketing, Trade, etc…) in VALUEManufacturerRetailer

LOGISTICSInventory Turnover Annual TurnsInventory Level (N° of Days)Service level

DISTRIBUTION Number of ChannelsNumber of StoresSales Weighted Distribution

SHOPPER METRICSPenetrationFrequencyLoyalty

RetailerAccount Manager Buyer Director DirectorVP VP

Manufacturer

Achieved

Agreement on Growth Strategy and its relevant targets

Current Plan

Signature levels vary by company and level of JAG Plan

Core JAG template

3.23.2STEP : HAVE JAG PLAN APPROVED BY SENIOR MANAGEMENT



Activities to support growth

Actions 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12

Assortment/ Planogram

Action 1

Action 2

Action 3

Product innovation

Action 1

Action 2

Action 3


Action 1

Action 2

Action 3


Action 1

Action 2

Action 3

Year n+3Responsible

Year n+1 Year n+2

• Confirm activities to support JAG Targets (initial plan may have followed financial agreement and final ROI estimates)

Approach

3.23.2STEP : INCLUDE THE FINAL LIST OF ACTIVITIES

Core JAG template

Account Manager BuyerDirector DirectorVP VP

RetailerManufacturer



Approach:

Incremental sales or other targets of JAG plan are not being achieved …

Market reactions

Supplier issues

Retailer issues

Due to …

• …

Examples

• …

• …

Both parties need also to agree upfront on how to solve potential issues and possibly review the JAG plan and agreement

• …

Suggested actions

• …

• …

• On top of list of activities to deliver on the JAG plan and its shopper strategy, list events that could jeopardize incremental sales and overall JAG Plan

• Define resolution process into the JAG execution and monitoring plan• Insert conditions into JAG plan (including confidentiality agreement)

Force Majeure: “an event beyond the control of either trade partner, not foreseeable, not involving anyone’s fault or negligence “

3.23.2STEP : AGREE UPFRONT ON FORCE MAJEURE CONDITIONS



KPI Unit Year n-1 Year n Year n Year n+1 Year n+2 Year n+3 Do we use this KPI? (Yes/No)

Report frequency Source

Financial KPIs YTD Target Target Target Target

Category sales - Volume units Category sales - Value Euro

Category Growth - Volume % Category Growth - Value % Sales per store Units

Sales per sqm Euro Incremental supplier sales EUR

Consumer / Shopper KPIs

Penetration % New category shoppers % Purchase frequency define time

Repeat Purchase % Loyalty % Shopper Satisfation (activity) % Shopper Awareness (activity) % Average transaction size Euro

Operational KPIs

The ECR Europe Essential Guide to Day to Day Category Management (Appendix 5) lists a set of consumer, market, financial and productivity measures with the data source origin and the recommended report frequency

http://www.ecrnet.org/04-publications/blue_books/pub_2000_essential_guide_daytoday_catman.pdf


Assortment / Planogram

Product innovation


Financial KPIs


• On top of the metrics and targets agreed in JAG plan (e.g., incremental sales, shopper metrics …), select relevant KPIs

• Possibly add specific KPIs for categories/growth levers • Agree on target level and define frequency of KPI reporting, e.g., monthly, quarterly, yearly (balance usefulness

vs. cost / time of collection)• Agree on source, hence reliability, for KPI collection (retailer, supplier or external agency)

Approach

Core JAG template

Account Manager BuyerDirector DirectorVP VP

RetailerManufacturer

For a full list of KPIs, please refer to ECR Blue Books

3.23.2STEP : AGREE ON KPI TARGETS AND REPORT FREQUENCY

Another option is to define and measure KPIs split per growth lever






Fact based

Step 5Monitor &

adapt



Step 4Execute the

JAG plan






JAG process

Step 3Define


Step 2Review

sales and agree on





• Communicate JAG plan within both organizations

• Set up and execute implementation plan - milestones per growth lever


1. Communication plan

2. Implementation plan

Why?

• Align on what should be communicated and to whom, defining responsibilities

• Ensure successful execution through clear detailed planning

• Ensure alignment on JAG plan

• Develop clear implementation plan that ensures a fluent progress of execution

Objectives4.14.1

4.24.2

44STEP : EXECUTE THE JAG PLAN



EXAMPLE

Who do we need to talk to?

What do we need to communicate?

What result do we want from them?

What is the benefit to them?

How? When do we need to do it?

Source:ECR Europe Collaborative CRM workshop, 2005

4.14.1STEP : COMMUNICATE JAG PLAN IN BOTH ORGANIZATIONS



STEP : EXECUTE JAG PLAN – IN-STORE ACTIVATION4.24.2

Displays and featuresEXAMPLE

Year n+1 Year n+2



Product introduction launch plan preparation

Draft templates

Discontinuation Plan for SKU to be deleted Stock

Extracts of step process for illustrative purpose

4.24.2STEP : EXECUTE JAG PLAN – PRODUCT INTRODUCTION

EXAMPLE






Fact based

Step 5Monitor &

adapt



Step 4Execute the

JAG plan






JAG process

Step 3Define


Step 2Review

sales and agree on





• Monitor business

• Review KPIs and implementation, overall and per growth lever

• Set up regular status meetings

Key activities End products Why?

• Allow quick reaction by buyer-seller through monthly tracking of sales

• Spot issues quickly and address them

• Ensure involvement of key stakeholders

JAG plan sales follow-up

• JAG Scorecard• Performance

assessment• Monitoring per

growth lever

Meeting plan

1.

2.

3.

5.15.1

5.25.2

5.35.3

55STEP : MONITOR THE JAG PLAN AND ITS EXECUTION

Ensure realization of targets of JAG collaboration• Review project

plans to monitor progress on key initiatives

• Evaluate overall collaboration

Objectives



Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecMarket

Grocery Sales (total)vs LYvs Planvs 3 year average (trend setting)

CategoryRetail Sales (EUR)vs LYvs Planvs 3 year average (trend setting)Manufacturer Sales (EUR)vs LYvs Planvs 3 year average (trend setting)New Product Sales at retailer (EUR)vs LYvs Planvs 3 year average (trend setting)Penetrationvs LYvs Planvs 3 year average (trend setting)Frequencyvs LYvs Planvs 3 year average (trend setting)Loyaltyvs LYvs Planvs 3 year average (trend setting)

YTD Market Category ActivitiesNew Product LaunchPromotionsAdvertising

• Monitor sales development and market activities • Store reporting helps to spot issues and quickly address them

Approach

Track market development (benchmark)• above: conquest• below: capabilities issues? Shopper proposition?

Market Activities monthly : unplanned events/competitor activities which can affect sales results and growth activities

•Trends on 3 years allow to check NPI « take off » vs seasonality effect (what is take off and what is increase due to seasonality)

Track and identify shoppers behavior

Such data exchange systems are already made available

by several retailers to their trade partners

(daily, weekly Epos sales tracking)

5.15.1STEP : MONITOR BUSINESS



KPI Unit Year n-1 Year n Year n

Financial KPIs YTD Target

Category sales - Volume units Category sales - Value Euro

Category Growth - Volume % Category Growth - Value % Sales per store Units

Sales per sqm Euro Incremental supplier sales EUR


Penetration % New category shoppers % Purchase frequency define time

Repeat Purchase % Loyalty % Shopper Satisfation (activity) % Shopper Awareness (activity) % Average transaction size Euro

Operational KPIs


Financial KPIs

Updated KPIs

Updated collaboration assessment

Additionally, discuss key progress and obstacles, progress planned and concerns. Also discuss whether interventions by management are needed

5.25.2STEP : REVIEW KPIs AND OVERALL IMPLEMENTATION



• Review KPI• Review execution (assessment of collaboration) • Define required actions

Approach

5.35.3STEP : REVIEW MEETING



AGENDA

• Case for change








Trust between collaboration partners

Jointly Agreed Growth Agreement

Information sharing

Sufficient and quality resources

People performance review

WHAT ARE THE CONDITIONS FOR SUCCESS?



Goals Roles

Procedures

• Set common goals and align strategy

• Define criteria for success

• Agree on working mode of organizations, e.g.,– How frequently do we meet?– What is the process for sharing information?– Do we have a joint terminology?

• Sign of JAG Plan as well as confidentiality agreement

• Agree on lead in each organization

• Assign team members • Define team roles ("Who

does what and when?")

• Develop team charter stating goals, roles, and procedures of collaboration• Translate JAG principles in concrete agreements including confidentiality

agreement• Ensure collaboration charter and JAG plan are both signed by senior management

Approach

JOINTLY AGREED GROWTH (JAG) AGREEMENT



• 5-10 people in each organization fill out assessment (e.g., twice a year)• Share results between organizations• Define actions based on evaluation

Approach

ADDRESS LEVEL OF TRUST BETWEEN PARTNERS



Growth lever 3 team

• …

Growth lever 2 team

• …

Growth lever 1 team

• …

Core team

• Buyer-seller

Ad-hoc support

• …

Steering Committee (top-to-top)

• …

Minimal setup

Extended setup

PROVIDE SUFFICIENT AND QUALITY RESOURCES

Size of team will vary by company

organization size and geographic

scope



• Global data standards allow companies to be more efficient

• ECR Europe has promoted the exchange of information using global standards in a set of publications (e.g., CRM, Collaborative POS Data Management, Guide to CPFR …)

• Yet, the Case for ECR (2006) still defines the inability to have the right data and information at the right time as an important roadblock on the path to growth. Issues that appear are– Accessibility of data– Supporting data exchange– Data Quality

• Without the appropriate access to data and data standards, buyers and sellers won’t be able to engage into Jointly Agreed Growth plans

Context

• Sales data (e.g., EPOS)

• Shopper data (e.g., ClubCard)

• Shopper segmentation approach

• Planogram process

Retailer data examples

• Market data (e.g., Nielsen)

• Consumer research (e.g., focus group, brand funnel performances)

• Promotion effectiveness tool

Supplier data examples

•Data source f or the industry measure of New Product eff ectiveness : the barcode (new barcode= new product)

What we learned…

•Any modifi cation of packaging (size, count, price) leads to new barcode/ SKU for same product (Global Data Standardization allocation rules)

our I ndustry reports on innovation across categories include promotional activities, explaining thereby the relative low rate of new product success (demand take off )

Source: ECR Conference, Demand Side Plenary, 2007

AGREE ON INFORMATION SHARING



Adopt review assessment and reward systems which will better support the implementation of the Jointly Agreed Growth Process by commercial teams

Approach

Note:GCI New Ways of Working Together Project Group is established to tackle this issue

DEVELOP PEOPLE PERFORMANCE REVIEW



AGENDA

• Case for change








ECR EUROPE: DEMAND SIDE PROJECTSEU COMPETITION LAW GUIDELINES

These guidelines offer only general guidance and are not a substitute for legal advice on specific situations. Companies are individually responsible for their compliance with the law and are therefore urged to obtain legal advice of their own before committing themselves to any demand side or other ECR project. For the avoidance of doubt, no liability can be accepted in connection with the use of these guidelines.

In demand side projects such as Consumer Value Management, Category Management, Efficient Product Introduction, JAG, etc, close co-operation and confidence between retailer and manufacturer is key to the project's success. However, it is also essential that all ECR projects are planned and implemented without violating EU competition rules. The European competition rules apply to all businesses in all circumstances, inside or outside the ECR context. Below, we wish to explain the most important application of these rules to ECR demand side projects. The competition rules are however also applicable to supply side projects.

The following basic rules should always be applied. Failure to do so would mean running a serious risk of violating the law. In order to avoid any misunderstandings in their day-to-day practice, trading partners could adopt point 1 of these rules as part of their agreement to co-operate in ECR demand side projects.




1. The respective role of manufacturer and retailer

According to the established practice of the European Commission, any agreements or understandings between a supplier and a retailer restricting the retailer's freedom to determine his resale prices are a violation of Article 81 EC-Treaty (resale price maintenance is prohibited). A supplier may only give non-binding "recommendations" on resale prices – without any contractual commitment on the part of the retailer to implement such recommendations (and without any pressure or economic incentive by the supplier on the retailer to implement the recommended prices).

Similarly, a retailer must not enter into any agreement or understanding with a manufacturer on what products (notably of competitors) should be present on the shelf or what the terms and conditions for stocking any products should be. The manufacturer can of course agree with the retailer which of that manufacturer's own products are to be listed.

Therefore, it is essential that the manufacturer only gives non-binding recommendations to the retailer on how to target specific consumer groups, how to improve the category, what products should be included (removed, retained or added) in the category, what recommended retail price ranges to apply (for example "premium", "discount" range), or how to make a newly launched product more successful on the shelf.




1. The respective role of manufacturer and retailer (continued)

The retailer remains free to follow or not to follow the manufacturer's recommendation. The retailer should not enter into any agreement or understanding with the manufacturer concerning the setting of retail prices in the category, the selection of products for a category, or stocking/listing terms and conditions.

A category adviser may not seek to further its own interest by attempting to persuade the retailer to exclude or apply less favourable treatment to competing products.

Nor should there be any agreement to boycott any third party.




2. No agreements or exchanges of confidential information between competitors

It is a fundamental rule of competition law that there must be no exchange between competitors of commercially sensitive information, such as prices, sales volumes, terms of supply, etc and certainly no agreement or understanding on these issues. This is not just limited to direct exchange between competitors but also exchanges facilitated by third parties (for example manufacturers must not pass any retailer confidential information, including information on pricing, to another retailer and retailers must not pass any manufacturer confidential information to another manufacturer).

There must therefore be no discussion, agreement or understanding between competitors on their shares in the product assortment, composition of the assortment, prices or promotions. A manufacturer may, to the extent necessary for his category management mission, receive information from the retailer on a competitor, but limited to product sales volumes and current retail prices of specific brands. The category management team at the manufacturer must keep all such information confidential and must ensure that the information goes no wider than the specific category management team concerned (i.e. the information is not passed to other teams within the manufacturer, whether dealing with the retailer on other projects or not). A manufacturer must never exchange information with a competitor on his prices, promotions, or other sensitive business information.




2. No agreements or exchanges of confidential information between competitors (continued)Competitors must not jointly develop a methodology with the intention to give them access

to sensitive information on their competitors, which they would not have had without the jointly developed methodology, or to collude with competitors. For example, competing retailers should not use a common category adviser to exchange sensitive information with other retailers or to receive co-ordinated pricing or listing recommendations. Also, manufacturers should not use their category adviser position with a view to co-ordinating their conduct with their competitors, for example by conferring or agreeing on category shares, promotions or prices.

Category management should always be a relationship between only one retailer and one manufacturer. The decision to appoint or become a category adviser must be taken on a one-to-one basis (one manufacturer and one retailer) and there must be no communication between competitors on this matter.

jointly agreed growth (jag) new ways of working together a pragmatic approach for developing and...

Documents

growth jag slide

growth eu

growth source

ecr europe conference

growth plans toolkit

ecr conference ecr

innovation slide

europe household savings