How the test has become a project!

In January 2009 Danone and Lenta finished test in 14 stores and started Category Management project in all stores!

Frames of the category are defined as all modern dairy products excluding UHT: • cheese • spoonable yoghurts• drinkable yoghurts• desserts • kids products

For Health For Pleasure

BeautyCholesterol

DigestionDefense Yoghurts Drinkable Yoghurts

Cheese Desserts

Kids products

Role: Destination

Data sources:

Data used in the project:

• market data

• sales share of segments inside category, dynamics, trends

• research on household consumption

• sales data of Lenta

At the process of analyses it was defined that share of Modern category in Lenta is lower than on the market and there is high potential for growth!

-13%

We found out that following segments are underperforming comparing to the market:•Digestion•Kids products• CheeseWe focused our efforts on these segments

GFK Household panels proved once again that following segments have high potential: Kids products, Cheese and Defense

Lenta All Shoppers StP,MATMar08 Relbase:Dairy Total

Source: GFK MAT March 08

Lenta All Shoppers StP,MATMar08 Relbase:Dairy Total

STARS

POTENTIAL

Source: GFK MAT March 08

Segments which belong to Stars quadrant are crucial to retailer.

Decrease in these segments will have negative impact on

customer loyalty to the category and, probably, to retailer in

whole.

These segments may have low turnover at the moment, but they

have high potential. These means that customers choose this

particular retailer and are intensive consumers of following

segments. That’s why it will be easy to make them purchase these

segments.

POOR

Net Gain GFK MAT

Cheese “Pyaterochka”

Karusel

0-5000000-10000000-15000000 5000000

Dixi

Perekrestok Total

Metro

Semiya

Aushan

Pyaterochka

Okey Total

-10645294

-6627039,5

-816782

-492293

230354,9

820063,3

955773,1

2245219

Kids products“Pyaterochka” and “Dixi”

Karusel

0-5000000-15000000 5000000

Dixi

Perekrestok Total

Metro

Semiya

Aushan

Pyaterochka

Okey Total

-29496648-11162638

-682798,1

126015,4

201216,2

1084408,4

12503996,4

3284513,5

-30000000

Digestion“Pyaterochka”

Karusel

0 2000000

Dixi

Perekrestok Total

MetroSemiya

Aushan

Pyaterochka

Okey Total

-72383808

2577667

5689777799635

10484146

410660125645168457372840

-80000000 -200000006000000

4000000

Defense “Karusel” and “Okey”

Karusel

0-5000000-10000000-15000000 5000000

Dixi

Perekrestok Total

Metro

Semiya

Aushan

Pyaterochka

Okey Total

-10886030

-2432758

-2143641

-415492

0

0

0

282352,9

Who are the main competitors in these segments?

We chose priority segments

Made detailed analyses of competitors by priority segments

How the space is allocated in competitors’ stores? How much space is given to the category,

to segments??

What is the difference in price between retailer

and competitors? What is the gap in price for top 10

positions in each segment?

Do competitors have much promo? In which segments, brands? What mechanics

do they use, are they efficient?

Which products compound retailer’s assortment, what

do competitors have in assortment? Does the retailer have top 10

positions of competitors? Does retailer have

innovations in assortment?

Assortment Shelf Price Promo

Based on analyses of competitors we made following recommendations:

Digestion - increase lay-out, make more promo Defense – extend assortment (launch innovations) and increase lay-out Cheese– increase lay-out, make more promo Kids products – carry out separate block, inside kids block place cheese on bottom shelves, launch innovations

Goal: increase sales of modern dairy category by 10% in units compared to period before project

Strategic goal: increase of category penetration

Assortment analyses showed that 36% of products give only 5% in sales

For assortment optimization AssortDan soft was used

1. All stores were categorized depending on size of milk section2. For each format optimal quantity of SKU in category and in segment were calculated3. Following factors were taken into account: average facing per segment and days of

stock. It enabled us to define number of SKUs more precisely. 4. IN and OUT recommendations were made for each format

Assortment optimization process included following steps:

Recommendations on additional listing, that were made based on analyses of competitors sales, were accepted in underperforming segments. As well as were accepted recommendations to list innovations of dairy market.

For example: Defense segment There were no Immunele Cherry, Actimel Orange, innovation Actimel Sea Buckthorn – Peach and 2 SKU of multipacks in assortment

Whereas these positions had good share of sales in other retailers

Innovations

100 г. х4 напиток Актимель натуральный 15 %

100 г. х4 Актимель Черника-Ежевика 12 %

100 г. х4 Актимель Гранат 11 %

100 г. х4 Актимель Персик-Облепиха 10 %

100 г. х6 Актимель Черника-Ежевика 9 %

100 г. х4 напиток Актимель Мультифрукт 9 %

100 г. х4 напиток Актимель Клубника 8 %

100 г. х6 Актимель Клубника 6 %

100 г. х4 Актимель Малина-Клюква 6 %

100 г. х4 напиток Актимель Апельсин 4 %

100 г. Кисломол.+Сок Иммунеле Мультифрукт 2 %

100 г. Кисломол.+Сок Иммунеле Ассорти 2 %

93.7 кефир 0% Актимель 2 %

93.7 кефир 0% Актимель Клубника 2 %

93.7 х6 Актимель 0% с лесными ягодами 1 %

100 г. Кисломол.+Сок Иммунеле Ассорти 1 %

100 г. Кисломол. напиток Иммунеле 9% натуральный 2 %

100 г. Кисломол.+Сок Иммунеле Ассорти 0 %

Launch

Category was placed on the shelf according to consumers’ expectations

1. We applied new segmentation

2. We took into account purchase decision-making tree

Developing new Lay outNe w lay -out was de ve lope d for e ach hype rmarke t taking into account its configuration and curre nt lay -out of fridge s

Space for each segment is corrected depending on average sales per day of this segment and necessary stock on the shelf

We allocate space between segments of modern dairy category depending on their share of sales and market data. This is made in order to give chance to develop to underperforming segments and at the same time to take into account peculiarity of retailer.

Neighborhood of segments, based on consumers perception, is also taken into account when developing new Lay-Out

Custome r flow

New segmentation with separate Health Block is now used in all stores and is positively perceived by consumers

Before

Custome r flow

After

Health

Pleasure

Before

After

Design of decoration was created jointly, each segment received unique color code. It helps customers orient in the section, quickly find needed products and as result saves their time.

Apart from usual toppers and stoppers, colored shelf carpets and nets on the back wall of the fridge were used in order to help customers differentiate concrete bounds of the segments.

14 3 , Project was implemented in firs t s tores in nights 2009. furthermore we implemented city afte r city during

Before

After

The results exceeded expectations – modern dairy category increased by 17%, while traditional category, that were not included in project, grew only by 5%

+13%+19%

+11%+17%

+13%+8%+24%

+12% +25%

+18%+17% +21%

+16%

15 17

+19%

Highest growth!

Modern category grew in all stores!

Growth by segments

Based on analyses of sales additional opportunities for growth were defined – in some stores Lay-out was corrected, vertical blocks were implemented and innovations, that were not presented in assortment on implementation date, were listed

Segment Growth Comments Recommendations

Defense +27,5% ² {block}м ↑ Health block: Functional products place in DefenseDigestion +20,5% {block}

Deinkable Yoghurts +20% ² {block}м ↓ Make vertical blocks

Desserts +13% ² SKU м ↓ ↑Optimize assortment

Yoghurts +7%² , Gaps in brand м ↓shares remained

Improve planogramm, controle OOSKids products +6% OOS

Cheese +2% ² м ↓ Vertical blocks were not implemented

Project is going on!!