Market View: Food and Beverage Processors Must Stop Enabling Bad Retailers

June 5, 2017
Slotting fees, like a drug, keep some grocers from effective target marketing.

In just about every food and beverage sector, you hear executives talking about target marketing. Some companies call it precision target marketing, niche marketing or micro marketing, but in every case the objective is the same: trying to define the consumer very carefully so that the food company can create a product that really meets the consumer group’s needs better than any other product in the market.

As Peter Drucker said, “The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself.” Many companies are now targeting millennials; others target Hispanics. One coffee company I am familiar with had a target market of people who are in upscale households, travel internationally, reside in urban areas and are in one or two person households. Most processors recognize there are “riches in niches.”

The problem is, many retailers still are not practicing target marketing. For years, their only target was a consumer "with a pulse and a penny.” Processors target their products in every way possible -- everywhere except where the products were actually sold.

But the retail environment is changing and has created a number of retailers with clear target markets. Wegman’s in the east is targeting foodies. Aldi is targeting the low-cost shopper who isn’t brand-conscious. Whole Foods is targeting nutrition- and health-conscious consumers who are willing to pay more. Publix is targeting consumers with a demand for high-quality customer service Sedano’s targets Hispanics. Etc.

Despite these examples, the vast majority of retailers still “Mass market”-- i.e., go to Mass on Sunday and pray someone shops in their store. Food processors have to be more aggressive in getting the retailers to see the benefits of selling products and not renting them “real-estate.” It is not by chance that the most successful retailers appear to be the most targeted retailers.

Food processors must stop paying retailers just to stock their products. No wonder retailers have lost interest in marketing and paying attention to the consumer; they can make an acceptable living without it.

In our seminars at the university, we often hear food processors complain about the “despicable” behavior of retailers who demand so much money just to put products on the shelves. I ask them, what do they do about it? It’s always the same answer. They pay it. Let me see: If I was to ask you for money and each time you complained but still paid me, don't you think I would continue to ask for money?

I see retailers like drug addicts who have for whatever reason started taking this drug called slotting. The retailers know this drug, slotting, is prohibiting them from acting in a normal way, but they just can’t stop. And the food processors are the “enablers” that make excuses but help the addict by providing them with slotting.

Manufacturers complain about how anti-marketing the retailers are, but all the while they are the key contributor to the problem. Until the manufacturer “bites the bullet” and stops this enabling, the drug use will continue.

My advice to food processors is to find a "drug counselor" and bring him/her into your company to determine how this behavior can be stopped. Obviously, you will need to translate the human aspects of this behavior into organizational behavior.

Most importantly, food processors must support the efforts of retailers that are targeting a market segment. Money should be spent on retailers that have plans and objectives consistent with yours. I am familiar with food processors that want to be fair and equitable with their trade and promotional dollars. To hell with fair -- spend where you are working in concert with a retailer.

Make sure you are playing in all the new channels of food distribution. In the past, we had almost no choice but to capitulate to food retailers, as they were the only channel, aside from foodservice. Today food processors have so many choices to get their products to consumers.

You may lose sales and space in traditional supermarkets if you don’t keep up the payments, but you will likely lose those sales in the future anyway. You should be investing in future channels and not the decaying channels.

There are riches in niches for everyone, but to get rich everyone must be on the same page. The market battles between worthy competitors already are fierce; why make matters worse by wasting the scarce resources you have?

Let’s make our battles for the consumer, and her loyalty, and let’s stop the battles within the marketing channel. Or we all will lose.

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