2017 Category Management & Shopper Insights Conference

Dr Pepper Snapple’s Category Captainship at Target

“Optimizing Assortment and Flavor Variety in the Aisle”

Barrie Berquist – Category ManagerDerrek Schulte – Senior Buyer

Presenter ProfilesBarrie BerquistCategory Manager 7 years Category Management experience; 4 years at DPSG

Category Captain: Carbonated Soft Drinks (CSDs)

Derrek SchulteSenior Buyer – Beverages

4 years of Merchandising experience at Target7 years CPG experience with Procter & Gamble

Agenda

▪Introduction to Target and Dr Pepper Snapple Group

▪Methodology and Process Overview

▪Adjusting for Units Sold Off Display

▪Plan-o-gramming Endcaps

▪Next Steps

• 1,795 stores in the United States• 38 distribution centers in the United States• 341,000 team members worldwide• Online business at target.com

• Median age of 40• Median household income of approximately $64K• Approximately 43% have children at home• About 57% have completed college

Target quick factsTarget has: Our Guests:

Mixers Energy

Juices/Drinks RTD Tea

Premium CSD

WaterSoft Drinks

Dr Pepper Snapple Group

Great brands across a diverse portfolio…

Snacking and Other

Partner

Brands

Dr Pepper Distribution Systems

Coke Aligned Sales Organization (CASO)

Pepsi Aligned Sales Organization (PASO)

Packaged Beverages (PB)

Independent Sales Organization (ISO)

40% 44% 15% 1%

Dr Pepper Distribution Map

CASO System PASO System PB System ISO System

Brand Flows and Pepper PlacementPepsi Led Sets Coke Led Sets

Coke Distributed

DPSG Distributed

Pepsi Distributed Pepsi Distributed

DPSG Distributed

Coke Distributed

Methodology and Process Overview

Complexities of Building POGS at Target

Coke led vs. Pepsi led sets

Shopper DemographicsStore Volume Carbonated Soft Drink Volume

Fixtures Profiles Set SizeStore Format

Distribution of Pepper

Market

VS

Presence of Premium Set

Objective #1: Shift the mix toward smaller packages

Source: Nielsen, Target FYTD thru 8.13.16

2 Liters

6 Pack .5 Liter 8 Pack 12oz

7.5-8oz Mini Cans Other

12 Packs

Objective #2: Capitalize on Flavor Growth

Source: Nielsen, Target FYTD thru 8.13.16

Examples of Colas Examples of Flavors

Template Planogram

Planogram Generator

Final Planograms

Data & Rule Sets

Build & Test Template POGs

Define & Prepare POGs

Review POGs

Store Equipment (Target Planograms)

Generate POGs

15

•Allocates space based on an item’s strength – analyzing by SKU not Manufacturer

•No interpretation – decisions are fact based… learn from scanning history!

•Calculates minimum levels of inventory needed between distributor visits.

•Accounts for the different package dimensions

•More efficient use of inventory, frees up space for more variety and new items on shelf

•Reduces Out of Stocks

•Increase Category Turns

•Satisfies Consumer Demand

Days of Supply Methodology

Days of Supply =

Shelf Capacity (# Facings x Depth) /

Daily Unit Sales

Calculation:

▪Pull 52wk Data

▪Calculate Deletes

▪Calculate New Items

▪Adjust for SKU Changes

▪Adjust for Anomaly Weeks

▪Adjust for Units Sold Off Display

Prepping the Reset Data(All Manufacturers and Packages)

Adjusting for Units Sold Off Display

Situation

What percent of units are actually sold off display during promotion?

The shelf needs to support the inventory that consumers are buying in the aisle. Displays offer additional inventory during promotions.

VS.

Our Previous Method

SKU #1 SKU #1 SKU #1

SKU #2 SKU #2 SKU #2

SKU #3 SKU #3 SKU #3

SKU #4 SKU #4 SKU #4

SKU #5 SKU #5 SKU #5

SKU #6 SKU #6 SKU #6

SKU #7 SKU #7 SKU #7

SKU #8 SKU #8 SKU #8

SKU #9 SKU #9 SKU #9

Coke Pepsi DPSG

For 12 packs, remove 50% of promoted unit sales from the top 9 SKUs by store for each manufacturer

Previous Method Assumptions:1) An endcap usually displays

about 9 SKUs2) An equal amount of display

volume is coming from each of the top 9 SKUs

3) Each manufacturer has an equal number of features and displays

20

Determine volume generated from the

shelf to determine true holding power.

Days of Supply Methodology

Total Units = Base Units + Incremental Units

Nielsen breaks out Incremental Units into four

buckets (in blue box).

Our DOS methodology extracts Units best

represented by temporary displays (in red box)

from Total Units which equals Units Sold From

Shelf.

*BASE VOLUME is volume generated in the absence of

any promotion (displays, features, price reductions).

Determining Units Sold from the Shelf

Total

Units

50

Base

Units

18

Increm’l

Units

32= +

Inc Unit Tmp

Display

only

9

Increm’l

Units

32= +

Inc Unit

Feat &

Tmp Disp

15+

Inc Unit

Feat

only

5+

Inc Unit

TPR

only

3

Inc Units Tmp

Display

only

9

Increm’l

Units from

Tmp Display

24= +

Inc Units

Feat &

Tmp Disp

15

Total

Units

50

Increm’l

Units from

Tmp Display

24- =

Units Sold

From

Shelf

26

12 Pack Display Sales by Brand

Source: Nielsen Scantrack ; 52WE 7.18.15

2 Liter Display Sales by Brand

Source: Nielsen Scantrack ; 52WE 7.18.15

Our New Method

12 Packs 2 Liters All Other Packages

Tier 1 Remove X% of unit sales

from top 10 SKUs

Tier 2 Remove Y% of unit sales from next largest SKUs

Tier 3 Did not remove any sales from the rest of the SKUs

Did not remove any sales

Remove Z% of unit sales from top 10

SKUs

Example of 2 LTR Change Before vs. After

Before

After

5 Incremental 2-liter SKUs added to assortment

Example of 12 Pack Change Before vs. After Before

After

7 Incremental 12-pk SKUs added to assortment

Results of Methodology Change▪ CSD category +1.2 pts post transition

▪Flavors +1.5 pts

▪Colas +0.9 pts

▪ Flavored CSD percent of mix = +1 point

▪ Reduced Cola 2 liter facings allowed for expansion of 6pk .5L package which is +28%

▪ Increased assortment despite shrinking set sizes▪2 Liters gained 4,504 or +5.3% points of distribution

▪12pks gained 7,587 or +6% points of distribution

▪ Increased flavor variety

2 Liters Facings Gained

Schweppes Ginger Ale 1223

Cherry Coke Zero 762

Barq's Root Beer 721

Fanta Strawberry 617

Mello Yello 610

Diet Cherry Dr Pepper 589

Cherry Dr Pepper 586

Fanta Grape 553

Mountain Dew Voltage 528

Crush Grape 520

12 Pk 12oz Can Facings Gained

CF Diet Coke 1869

Diet A&W Root Beer 1347

Diet Canada Dry 1305

Sunkist Orange 1147

Canada Dry 966

Fanta Strawberry 894

Vanila Coke 859

Fanta Grape 838

Diet 7up 783

Squirt 774

Plan-o-grammingEndcaps

Bi- and Tri- Manufacturer Shared Ads

Tri Manufacturer Ad

Bulk Endcap VersionsEndcap Variations # of Stores

3x64 (33/33) 1

3x84 (18/18) 51

3x84 (18/22) 9

3x84 (18/33) 20

3x84 (22/22) 72

3x84 (28/22) 2

3x84 (28/28) 161

3x84 (28/33) 1

3x84 (33/22) 11

4x64 (22/22) 7

4x64 (28/22) 44

4x64 (28/28) 4

4x64 (28/33) 5

4x64 (33/22) 2

4x64 (33/33) 1

4x84 (18/18) 55

4x84 (18/22) 100

4x84 (18/33) 63

4x84 (22/22) 547

4x84 (28/22) 1

4x84 (28/28) 336

4x84 (28/33) 4

4x84 (33/22) 87

4x84 (33/33) 2

5x64 (28/22) 4

5x64 (28/28) 4

5x84 (28/22) 4

5x84 (28/28) 22

6x64 (28/33) 5

6x64 (33/33) 143

6x84 (33/33) 1

7x84 (18/33) 1

Grand Total 1770

• 32 different Endcap variations-5 different widths-2 different heights-10 different shelf depth combinations

• Most common version is 4x84 (22/22) – 547 stores

30

Coke/DPSG Shared Bulk (Coke Bottles Pepper)Version B1 – 4ft, Even Shelf Depths

2 Liters

8pk 12oz

12pk 12oz

Green: 7UP Brands Maroon: Dr Pepper Red: Coke Brands

31

Coke/DPSG Shared Bulk (Pepsi Bottles Pepper)Version B2 – 4ft, Even Shelf Depths

2 Liters

8pk 12oz

12pk 12oz

Green: 7UP Brands Red: Coke Brands

32

Pepsi/DPSG Shared Bulk (Pepsi Bottles Pepper)Version B1 – 4ft, Even Shelf Depths

Green: 7UP Brands Maroon: Dr Pepper Blue: Pepsi Brands

33

Pepsi/DPSG Shared Bulk (Coke Bottles Pepper)Version B2 – 4ft, Even Shelf Depths

Green: 7UP Brands Blue: Pepsi Brands

2 Liters

8pk 12oz

12pk 12oz

Issues Yet to Resolve

▪Communication Challenges with Internal Systems

▪Field execution of POG’d Bulk displays

▪Inventory due to limited back room capacities

Questions?

Appendix

Space & Assortment ProcessPhase 1

Discovery Phase

Phase 2Assortment Process

Phase 3Data Process

Phase 4 Planogram

Development Process

Phase 5 Merchandising

Process

Phase 6Planogram Execution

Process

Phase 7Communication

Process