Shelf Ready Packaging Who benefits?

Session co-chairs: Joe Dybell, Tesco Jonathan Pearce, Nestl

Shelf Ready Packaging Who benefits?

1. Welcome by ECR Europe Executive Board members 2. Introduction by Session co-chairs 3. Benefits of SRP for the consumer/shopper 4. Retailer perspective 5. Manufacturer perspective 6. Panel Debate 7. Conclusions 5 5 15 15 20 25 5

Shelf Ready Packaging Who benefits?

Philip Clarke International and IT Director

ECR Europe Executive Board member

Shelf Ready Packaging Who benefits?

Jacques Vincent Vice-Chairman & COO

ECR Europe Executive Board member

Shelf Ready Packaging Who benefits?

Introduction
SRP is a reality today Multiple solutions multiple points of view ECR Europe is mobilising the industry around collaboration on this important topic Principles Functional requirements Business case Todays session - Need for clarity on who benefits

SRP at the Moment of Truth

A Shoppers Perspective

Tarun Patel Head of Supply Chain & ECR tarun.patel@igd.com

An Introduction to IGD
International organisation specialising in retailing, supply chain, category management, and shopper research

Over 600 members spanning the demand and supply chain Manage ECR UK and are involved in ECR Europe A team of 30 analysts, all with industry experience Focus on the major international developments:

Detailed insight on 100 international retailers and 39 markets Discounters, Emerging Markets, Global Retailing, Private Label SRP, Category Management, Availability, Logistics, Demand Forecasting

www.igd.com

Agenda

Understanding the shopper issues France UK Germany Spain Views and feedback on SRP Is the Shopper Ready for SRP?

Effects of the SRP on the shopper

Has the industry assessed the effects of SRP on the shopper?

Yes, 22%

No, 78%

Source: IGDs International SRP Report, www.igd.com/srp

IGDs SRP Shopper Research

Capturing insights directly from shoppers:

Quantitative Analysis Spain Germany UK France Qualitative Insight Focus Groups Accompanied Shopping Trips

Source: IGDs International SRP Report, www.igd.com/srp

I cant find the product I want in the store

France UK Germany Spain

Not at all frustrating Not very frustrating A little frustrating

10

16

13

37

50

51

51

Very frustrating

52

41

28

33

0%

20%

40%

60%

80%

100%

% Main Shoppers

It is easy to find the ham aisle but not easy to find which ham you want
Source: IGDs International SRP Report, www.igd.com/srp

The product I want is often out of stock

France Not at all frustrating Not very frustrating UK Germany Spain

13

A little frustrating

29

33

37

35

Very frustrating

62

59

51

43

0%

20%

40%

60%
% Main Shoppers

80%

100%

Im going to change the shop I use because the one I go to now never has everything in stock that I want

Source: IGDs International SRP Report, www.igd.com/srp

Reaction to out of stocks

9

Do not buy product at all

5

5 10 9 6 8 5 11 18 17 14 29 18 28 26 42 53 37 50

Buy a different size of the product Wait until next time to buy the product Buy a different brand of the product Buy the product from another store 0

Spain Germany UK France

10

20

30

40

50

60

% Main Shoppers

Source: IGDs International SRP Report, www.igd.com/srp

Top 5 out of stocks categories

Spain
Frozen foods Hair and Beauty Household cleaning Bakery Dairy
19 21 23 24 31

Germany
Chilled Meals Fresh meat and fish Frozen foods Dairy Fresh fruit and vegetables
15 15 18 22 26

10

20

30

40

10

20

30

40

UK
Fresh meat and fish Frozen foods Dairy Fresh fruit and vegetables Bakery
16 19 20 26 27

France
Fresh meat and fish Frozen foods Dairy Household cleaning Hair and Beauty
18 20 23 24 28

10

20

30

40

10

20

30

40

Source: IGDs International SRP Report, www.igd.com/srp

Views on Shelf Ready Packaging

Too much packaging on supermarket shelves

Negative

Makes it harder to take the products from the shelf There is often empty packs on the shelf Makes the shelves look more appealing Makes supermarket shelves look clean and tidy

Spain Germany UK France

Positive

Stops the product getting damaged Helps draw attention to new products Makes it easier to find products 0 10 20 30 40 50 60 70

% Main Shoppers
Source: IGDs International SRP Report, www.igd.com/srp

How does SRP make it easier to find products?

You can see what they are. If information is on the lid it is good to display them face out

Makes it easier to find products

80

71
70 60

62%
62 60

68

50%

50%

38%

% Main Shoppers

50
50 40 30 20 10 0

52 46

54 44 35 46 41 39

Morrisons

Sainsbury

Aldi

Lidl

Leclerc

intermarche

Plus

Carrefour

Source: IGDs International SRP Report, www.igd.com/srp

Mercadona

Carrefour

Auchan

Tesco

Asda

Makes the shelves look more appealing

40 35 30 25 20 15 10 5 0

30%
33 30 29 33 30

30%
33 30 25 18

27%
34 32

29%
30 23

% Main Shoppers

intermarche

Aldi

Auchan

Leclerc

Lidl

Asda

Sainsbury

Morrisons

Plus

Mercadona

Carrefour

Source: IGDs International SRP Report, www.igd.com/srp

Carrefour

Tesco

Makes the shelves look clean and tidy

60 50

30%

25%

33%

47%
56

% Main Shoppers

43
40 30 20 10 0

36

39 34 29 25 24 21 32 27

36

37

Aldi

Morrisons

Sainsbury

Lidl

intermarche

Carrefour

Leclerc

Plus

Source: IGDs International SRP Report, www.igd.com/srp

Mercadona

Carrefour

Auchan

Tesco

Asda

Packaging on the shelves is often empty

30 25

8%

17%
26

9%

18%
25 20

% Main Shoppers

20 15 10

18 16 12 6 13 11 5 6 13 13

5 0

Aldi

Morrisons

Sainsbury

Lidl

intermarche

Carrefour

Leclerc

Plus

Source: IGDs International SRP Report, www.igd.com/srp

Mercadona

Carrefour

Auchan

Tesco

Asda

Makes it harder to take products from the shelves

10%
25

13%

9%

17%
21

% Main Shoppers

20

18 14 13 13 11 11 8 8 13

15

12

10

8 4

Aldi

intermarche

Morrisons

Sainsbury

Leclerc

Lidl

Carrefour

Plus

Source: IGDs International SRP Report, www.igd.com/srp

Mercadona

Carrefour

Auchan

Tesco

Asda

Accessibility

I dont think I could get that out without wrecking my nails.

If theyre packed in threes across then you can get the middle one. If you can get the middle one then you are fine.

I don't like the plastic ones with cream in them because they hold them in place and sometimes its hard to get them out.
Source: IGDs International SRP Report, www.igd.com/srp

Safety

Additional comments
Its good in the box once they have enough staff to remove the empties

It doesnt offend me as long as its not all battered and there is somebody coming around to take the empties away and that you have not got to struggle to get what you want

The only problem I have got with it is the fact that the manufacturers are going to charge the supermarkets more to make their job easier for them but that price is then passed on
Source: IGDs International SRP Report, www.igd.com/srp

Is the shopper ready for SRP?

Shelf ready solutions are on show It affects the shopper! Out of stocks and finding products are key issues Get this wrong and the shopper will walk One third of shoppers think there is too much packaging already Shoppers do think packaging can make it easier to find product But shoppers want reassurances that SRP wont cost them extra Is shopper ready for SRP?

Thank you and please visit the IGD stand at D1 for further information

www.igd.com/srp

Direction Gnrale

Shelf Ready Packaging Carrefour

ECR Europe Conference Stockholm, 30th May Xavier Hua Carrefour

Direction Organisation Systme et Supply chain

May 30, 2006

XH - SRP Implementation Page 27

Direction Gnrale

Agenda Objectives and guidelines Deployment plan Key learnings and recommendations

Direction Organisation Systme et Supply chain

May 30 , 2006

XH - SRP Implementation Page 28

Direction Gnrale

Initial objectives for SRP implementation

SRP project started in Carrefour end of 2004, being an element of our strategy
1- Improve the price image of Carrefour stores 5- Decrease Supply Chain costs

50%
4- Facilitate promotion display and maintenance of the permanent range

2- Clarify the legibility of the shelves and improve the merchandising structure

3- Improve the store operating processes (out of date, shrinkage, out of stocks )

Direction Organisation Systme et Supply chain

May 30 , 2006

XH - SRP Implementation Page 29

Direction Gnrale

General Guidelines
Criteria for implementation of Ready-to-sell in store

100% easy shelf filling

100% service for the customers

1 2 3

Easy identification

4 5 6
May 30 , 2006

Immediate spotting

Easy opening

Easy access to the product

Shelf filling in one go *

Commercial aspect

Direction Organisation Systme et Supply chain

XH - SRP Implementation Page 30

Direction Gnrale

Deployment plan SRP is part of our global strategy and will be deployed across all countries
France has been the first country where we started SRP implementation end of 2004 Other European countries have come into the scope during 2005 We are now starting the project in Asia and Latin America

SRP will be applied to all categories where it provides benefits

Food categories have been prioritized in order to get optimal benefits, combining sales volume and shelf refilling complexity Non Food categories are currently being analyzed in more details The target is to integrate more than 50% of the volume in SRP (PAV), with a nearly full coverage for Private Label Products

Direction Organisation Systme et Supply chain

May 30 , 2006

XH - SRP Implementation Page 31

Direction Gnrale

Shelf Ready Packaging : key elements SRP can take various forms
SRP tray for the shelf Pallet, pallet, pallet Specifications have been written and shared with the manufacturers, as well as preferred SRP by category Concerning promotions, the use of SRP trays inside a TG enable to optimize the building, maintenance and shelf refilling operations

The SRP Innovation Days held last December have been the starting point of a large scale deployment of SRP across all countries

Direction Organisation Systme et Supply chain

May 30 , 2006

XH - SRP Implementation Page 32

SRP international roll out

Supply Chain Groupe
Direction Gnrale

Direction Gnrale

Supply Chain Groupe

Dploiement PAV fvrier 2006

PAV colis Fevrier 2006 Groupe
30,00% 24,33% 25,00% 16,47% 20,00% 14,72% 15,00% 9,96% 11,03% 10,73% 9,94% 9,40% 9,80% 6,92% 10,00% 5,00% 1,03% 0,00% % PAV colis Pays % moy Groupe

Direction Gnrale

1,70%

2,58%

2,74%

30,00% 25,00% 20,00% 15,00% 10,00% 5,00% 0,00%

160 140 120 100 80 60 40 20 0

Fr an c Fr e H an yp Be ce er lg Su iq p Be ue er lg Hy iq p Es ue er pa Su p g Es ne er pa Hy gn pe r e S Ita up lie er H Ita yp lie er Su p Po er lo gn Su e iss e G r c e P Tu ort u rq ui gal Tu e H y rq ui per e Su Co pe lo r m bi e Br Ar si ge l nt in e Co r e Ch in Ta e i Th wan ai la Si n d ng e ap o M ur al a In isie do n sie

PAV pal Fevrier 2006 Groupe

nb PAV pal 137 0,34% 0,25% 98 0,85% 0,40% 109 0,56% 103 0,58% 2,67% 0,24% 71 0,55% 51 0,32% 84 0,08% 0,41% 0,04% % PAV Pal Pays 3,00% 2,50% 2,00% 1,50% 1,00% 0,50% 0,00%

45

45

40

20

12

Direction Organisation Systme et Supply chain

Fr an ce H Fr an ype c r e Be lg Sup iq ue er Be lg Hyp iq e Es ue S r pa u gn pe Es e H r pa y gn per e Su Ita p lie er H y Ita p lie er Su pe Po r lo gn e Su iss e G r ce P Tu ortu ga rq ui l Tu e H y rq p er ui e Su Co per lo m bi e Br s Ar i ge l nt in e Co r e Ch in e Ta iw Th an ai la Si nde ng ap o M ur al ai In sie do n sie

May 30 , 2006

XH - SRP Implementation Page 33

Direction Gnrale

Key figures achieved France : 12% of skus, representing 20% in value for Grocery Poland : 50% deployment in value Time savings average 25% for shelf refilling of individual products Turnover increase in pilot store : 5 to 10% turnover uplift No OSA measure so far

Direction Organisation Systme et Supply chain

May 30 , 2006

XH - SRP Implementation Page 34

Direction Gnrale

Key learnings and recommendations

SRP implementation requires a cross-functional approach : Merchandise, Supply Chain, Operations Multi-national approach enables consistency in SRP requirements within Carrefour ECR Europe activity will enable greater consistency in SRP approach between retailers and manufacturers SRP is not a goal in itself :
Direction Organisation Systme et Supply chain May 30 , 2006 XH - SRP Implementation Page 35

Direction Gnrale

Thank You

Direction Organisation Systme et Supply chain

May 30 , 2006

XH - SRP Implementation Page 36

Shelf ready packaging

Graeme Carter, Procter & Gamble ECR Europe Conference and Marketplace Stockholm May 30, 2006

The What

Retail Ready Packaging is not a 100 % solution: Often it is a win for the Retailer (NOT ALWAYS) Sometimes it is a win for the Retailer and Supplier Its best when its a win for the Retailer, Supplier, AND the Shopper

Principle 1

Retail Ready Packaging should only be delivered where it adds value for the consumer

Shelf Ready Packaging - A challenge

VALUE CREATION FOR RETAILER LOSS FOR RETAILER

Advantage

Test

Challenge

Productivity + Sales Growth >> cost upcharge

Prod + Sales Growth could be > cost upcharge

Productivity << cost upcharge despite growth

VALUE CREATION FOR CONSUMER

LOSS FOR CONSUMER

Already being delivered or planned

Use Business Case Drivers to determine if it is a Win for the Consumer. Test/trial the benefits

Challenge whether Out of scope heavy, bulky, cases <4, shrink etc

Principle 2

Standardization will drive costs down

The impact of standardization

VALUE CREATION FOR RETAILER LOSS FOR RETAILER

Advantage
Productivity + Sales Growth >> cost upcharge

Test
Productivity + Sales Growth could be > cost upcharge

Challenge
Productivity << cost upcharge despite growth

Lower supplier costs

VALUE CREATION FOR CONSUMER

LOSS FOR CONSUMER

Principle 3

When you decide to deliver Retail Ready Packaging, make it a joint winner

How to win with Retail Ready Packaging

Deliver the basics:
Easy to find Easy to open Easy to shelve Easy to dispose Easy to shop

Avoid Industrial packaging or brown corrugate Present the right Brand image No longer a differentiation now a cost of entry

Where to Win
Examples

Out of Scope
Examples

Industrial Packaging
An Example

Easy-to-Find
Examples

In summary

Retail Ready Packaging should only be delivered where it adds value for the consumer Standardization will drive costs down When you decide to deliver Retail Ready Packaging, make it a win/win/win solution

The How

Colgate-Palmolive Company
Shelf-Ready Packaging

The How

Pelin Karakas ECR Europe Conference, May 29-31, Stockholm

Oral Care Personal Care Home Care Pet Nutrition

2006: Our bicentennial anniversary 30,000 employees worldwide Markets in over 200 countries Worldwide sales of $ 11.4 billion

Using SRP to create value for the shopper

Understand where SRP can improve efficiency / shelf availability Leveraging the global expertise Ensure a consistent implementation With no cost to consumer

Colgates Response to SRP

A long-term project Centrally driven With a cross-function approach

The Roadmap
Define good SRP for COLGATE Evaluate portfolio, identify gaps Leverage existing SRP Implement quick wins Build the business case for high investment projects Think SRP in new project design

THE SCORECARD

The Scorecard
Promotes optimum flow:
Correct case count Optimum facings

Easy to identify in DC, truck, store:

Product type Brand Variant Size

Easy to open:
Quickly Neatly Without tool

Easy to fill the shelf:

One-step replenishment Building block for endaisle displays

Shopper-Friendly:
Maintains brand image Easy to pick up Easy to put back

Easy to dispose off:

Collapsible / stackable Reusable / recyclable

Manufacturer-Friendly: - Minimizes damage in transit - Can be produced on-line

PRODUCT DESCRIPTION: PO Bath Foam 500ml, 12 units/case, corrugated case with tear tape Does outer package include any shelf-ready packaging components (tray, perforation, tear tape, etc.)? CRITERIA SCORE Y 4 Y 2 N 0 Weight of this group of criteria:

Promotes optimum inventory flow

1.1 Does case count meet 90% of market requirements based on sales? 1.2 Is the secondary package's number of facings adapted to trade requirements? 1.3 Does the secondary package provide more than one option on number of facings?

17%

2 Easy to identify in the DC / truck / store backroom 2.1 Is it easy to identify product category? 2.2 Is it easy to identify brand? 2.3 Is it easy to identify variant? 2.4 Is it easy to identify size?

Y 1 Y 1 Y 1 Y 1 Weight of this group of criteria:

9%

3 Easy to open 3.1 Number of seconds to open case and place on shelf: Number of Consumer Units/Case: It takes less than 1 sec / consumer unit to open and place case on shelf? 3.2 Can the outer package be opened without a utility knife? 3.3 Does it open neatly and reliably (without damaging the package)? 3.4 Are there clear guidelines for case orientation and opening?

8 12 Y 3 Y 2 Y 2 N 0 Weight of this group of criteria:

17%

4 Easy to fill the shelf 4.1 Is the product correctly oriented within the secondary packaging? 4.2 Does secondary packaging allow one-step replenishment to shelf? 4.3 Does secondary packaging fit the shelf in majority of markets? 4.4 Is it easy to stack for end-aisle displays without a shelf?

Y 2 Y 2 Y 2 Y 2 Weight of this group of criteria:

17%

5 Shopper friendly 5.1 Does secondary packaging block product or brand when opened? 5.2 Does secondary packaging still look good when half emptied (vs category)? 5.3 Can shopper easily pick up the product? 5.4 Can shopper easily put back a product unwanted after pick up? 5.5 Is product stable at any stage of shelf emptiness? 5.6 Does secondary packaging enhance branding / category image?

The Scorecard

Y 0 N 0 Y 1 Y 1 Y 1 Y 1 Weight of this group of criteria:

13%

6 Easy to dispose off 6.1 Is empty secondary packaging collapsable or easy to dispose off? 6.2 Is empty tertiary packaging collapsable or stackable? 6.3 Is remaining waste reusable or recyclable? 6.4 Is remaining waste easily separable to different materials?

7 Manufacturing and Distribution 7.1 Is outer packaging filled on the production line? 7.2 Does outer packaging minimize damage to product in transit until shelf? 7.3 Does outer packaging allow for 90% or better fit for the most representative pallet size?

www.igd.com/ecr/
Maximum score: 46

Y 1 Y 1 Y 1 Y 1 Weight of this group of criteria:

9%

Y 3 Y 3 Y 2 Weight of this group of criteria: % Adherence to SRP: 89%

17%

Total score received: 41

The Scorecard: What is already there

Toothbrush SRP systems

The Scorecard: Looks may be deceiving

Dental Cream Stand-up Tubes
One-step replenishment Opening is difficult: not quicker to shelf Meets all other requirements Action: solve opening issue

The Scorecard: Looks may be deceiving

Fabric Softener 3Lx6
Does not provide one-step replenishment Overall time to shelf is still good Meets all other requirements Action: artwork improvement for better identification

What The Scorecard showed:

Focus on the functional requirements Every product needs to be evaluated individually SRP is not black/white; its continuous improvement

In Summary - SRP for Colgate:

Understand the functional needs Ask the question at new product design Multi-national, cross-functional approach Implement where it adds value for the consumer

Shelf Ready Packaging Who benefits?

Panel debate, Q&A from audience

Graeme Carter / Procter & Gamble Joe Dybell / Tesco Xavier Hua / Carrefour Pelin Karakas / Colgate-Palmolive Tarun Patel / IGD-ECR UK Chris Lewis / Smurfit Kappa Group Moderated by: Jonathan Pearce / Nestl

25

Shelf Ready Packaging Who benefits?

Conclusions

Shelf Ready Packaging Who benefits? Proposed ECR Europe Principles for SRP:
Always of value to the consumer/shopper, retailer and manufacturer In line with total supply chain efficiency principles Compliance with environmental legislation & public policy concerns Avoid fragmentation & complexity Maintain brand identity Measure implementation Need for long-term commitment