Demand-Driven Trade Promotions Management

Beech-Nut Nutrition Company is the fastest-growing nation's No. 2 baby-food maker, behind Gerber. Even with this impressive advantage, Beech-Nut is a small company with a big brand name and therefore has to work twice as hard when it comes to playing with the giants of the baby food industry. Gaining leverage at retail, as it relates to trade spend, quickly rose to the top of the to-do list for Beech-Nut as the company didn't have a formal strategy.

"We had virtually no process, however, it was our second biggest line item in our P&L statement," says Tim McCreery, director of International Sales, Sales Planning & Category Management, Beech-Nut Nutrition. "We felt it was a pretty important area to bring visibility to, so that we could understand how we were spending our money in order to determine if the investment was a good spend or a bad spend in the post-evaluation process."

Establishing a Formal Process

Beech-Nut knew its spending continued to increase, yet it couldn't figure out the root cause. And since the company's lean IT staff wasn't conducive to a lengthy in-house software implementation, it had to pay close attention to companies that offered hosted, web-based applications. "We had the need for speed because we didn't have the organizational support to host an in-house effort," says McCreery, who ultimately selected Gelco.

During the selection process, Beech-Nut engaged a handful of different vendors that offered the services it was looking for. At that time, McCreery says there were very few players in the hosted applications market. "It was virtually all software and we weren't interested in buying software," says McCreery. "While there were several vendors that understood Beech-Nut's business needs, it ultimately came down to who could get it up and running to the company's spec requirements as fast as possible on both the deduction and planning side. Gelco had everything on the outside and were able to paratroop their team in to get it up and running for us."

Paying For Performance

For McCreery, the shining qualities of Gelco's offerings boil down to paying for performance with retailers. In the past, McCreery says Beech-Nut basically forwarded money to its brokers, who in turn, set up trade promotion programs. Today, Beech-Nut is giving its brokers budgets to develop programs around. Beech-Nut was very OI driven in the past on all of its programs with both distributors and retailers and therefore shifted strategies into scan-based performance programs where possible. Scan-based means Beech-Nut pays when the consumer buys, OI means Beech-Nut pays when the shipment is made to the account.

"Once those are separated, it's possible to achieve immediate, tangible payback from a spend standpoint," says McCreery. "It removes the risk associated with shipping additional product to retailers for volume reasons. When you are on the scan side of that you are shipping what the consumer is demanding, not what we would like to put in the retailers back room."

Broker accountability plays into the success of this demand-driven environment as Beech-Nut is now able to collectively put spend where the company feels it can drive the most value. "What we are able to do now versus our prior process is document the specific programs that our brokers are contracting with retailers from an execution standpoint and aggregate funds," says McCreery. "Before, we were giving them money but we weren't able to manage that money. With a commitment ID from them we are setting up a specific program in our system and they are executing it. We are able to extract and define the results from that."

The Results Speak

What Gelco brings to Beech-Nut is "a planning tool that we never had before", according to McCreery and one the company uses to replicate planning activity for all accounts. The result of replication speaks volumes: Case sales share has grown by six share points. During this time trade spend has been reduced as a percent of sales. Spend rate per case has declined. Outstanding deductions have hit an all time low. It is easy to see and easy to clear all deductions.

"Before, if we were audited, we had little leverage," says McCreery. "Now all of our programs are documented and kept on file so if we are ever audited we can connect the dots to the specific ID for that event. We had above industry metric standards without any tool, now we're trending and & in some measures below industry standards thanks to Gelco."