RETAIL - Out Front Marketing

.....
RETAIL
Sales and marketing
agencies expand their
offerings as outsourcing
gains traction
By MARK HAMSTRA
Jobs are being created, companies are expanding with new products and services
to meet growing demand, and the outlook has never been better.
No, this is not the State of the Union, but instead the state of the nation's sales
and marketing agencies that serve the retail and consumer products industries.
"We are very, very bullish on our industry and the
future of our industry," said
John Saidnawey, president
and chief operating officer
at JOH, based in Billerica,
Mass. "Outsourcing is definitely in. We've had three
consecutive record-breaking
years, and we don't believe
there is an end in sight."
His
sentiments
are
matched by others in the
industry, and backed by research in the last few years
indicating that product sup-
pliers can benefit by focusing
on their core competencies
and outsourcing some functions to the agencies.
At the same time, the
agencies have been augmenting their arsenals with
new capabilities - many
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10 SN August 22, 2011
supermarketnews.com
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gained through acquisition
and expanding their
reach through alliances.
In the past year, for example, JOH and SellEthics have combined to form
JOH-SellEthics LLC, formalizing a working relationship the companies already
had established to cover the
East Coast, and in another
mega-alliance, eight regional
agencies combined to form
Beacon United and provide
national reach to clients.
And among the national
agencies, acquisitions have
created new lines of business and strengthened their
presence in alternative
channels, among other benefits.
A report last month
from Andrew Lazar, a New
York-based consumer goods
analyst at Barclays Capital,
provided more fuel for the
positive outlook on this segment of the industry.
"We believe that for
some [CPO firms], brokerbased selling may be an
elegant solution for several
reasons, and that the benefits involved are not merely
financial but also strategic
in nature," he concluded.
"Potential benefits include
not only associated cost savings, in our view, but also
enhanced sales flexibility,
increased depth of coverage,
increased service frequency,
among others."
While some manufacturers retain a purely directselling approach, keeping all
of their sales and marketing
functions in-house, "there
clearly seems to be movement along the spectrum
towards hybrid and agency
models alike," Lazar said.
In a hybrid model, a
manufacturer might retain
some product lines or accounts to service in-house,
and delegate the lower-tier
product lines or accounts to
sales agencies, or they might
Crossmark and Advantage have
expanded their food-demo business
from Wai-Mart, left, to Sam's
Club, below, and other retailers. At
bottom, Crossmark's new Out Front
Marketing joint venture is expanding
at Wai-Mart locations.
supermarketnews.com
retain some of the functions, such as headquarters
selling, and delegate store
servic , category management or other functions co
the agencies. ln many ca es,
the ale agencies can handle some of these ta ks more
efficiently.
"Essentially, brokers can
leverage scale across multiple products and categories,
pending more time in-store
while minimizing drive
time," Lazar explained.
The sales agencies themselves agreed.
"We are seeing encouraging trends in the outourci ng
environment,"
said Robert Hill, president
and chief executive officer,
Acosta ale & Marketing,
Jacksonville, Fla. 'Folks
who maybe traditionally
had n t outsourced at all,
or haven t outsourced a I t
of services, tend to be outourcing m re."
Acosta has increased its
employment by about 20%,
to ab ut 20,000 workers
in the last 12 m nths, he
said, as the company has
expanded its ervice with
companie like Campbell
Soup Co. and others.
Likewise, Joe Crafton,
president and CEO of Cros,s,
mark, Plano, Texas, told SN
that outsourced sales and
marketing "is a good space
ro be in right now."
''Although it's not counter-cyclical, it has some real
pluses when people get into
hard economic times,' he
said. "It's been hown countless times that a combination of direct and outsourced
sales forces is the most efficient route to market.
"We have relation hips
and proximity and expertise, and we are less expensive than the alternative,
which is a di~;eCt sales force.
We create economic value,"
he said, citing a 2007 rudy
from Grocery Manufacturers
Association indicating that
agencies provide $4.8 billion
in value ro the industry.
Crossmark has been seeing an increase in outsourcing by CPO firms he noted.
"When suppliers do their
customer
segmentation,
there are some customers
that they con ider to manage vertically themselves
in-house and others that
they choose to outsource,
and the list of those that
they choose to outsource is
growing," he said.
Crafton cited a GMA
and McKinsey study that
suggested
manufacturers keep a limited number
(about 13) of strategic customers in-house and outsourcing the rest to sales
agencies. "That's very positive," he said.
Saidnawey of JOH said
as his company sees some
clients go to a direct sales
model with the larger retailers, "we are being a ked
more and more to provide
resource to support the direct team' in a "broker assist" or hybrid modeL
'They might need everything from category
management upport pace
management support certainly store operations support, enior mana!rement
upport
headquarter
relationships. We have certainly seen that pick up.
'The
ther area we
would ee picking up is the
selling of products to alternate trade channels or nontraditional outlets, whether
it's mass merchandisers or
dub stores. We are seeing
more and more of that being outsourced as well.
"Those are an the types
of area that have really
picked up for u ."
Sonny King, chairman
and CEO Advantage Sales
& Marketing, Los Angele
aid CPO companies are
"looking for efficiencies."
"l~ a tough market out
there, and all of them are under cost pressures, so they're
looking for ways to go to
market more efficiently and
get at least some results."
Hill of Acosta said his
company ha been in esting
more in training and education in the weak economy.
"The reality is that it's
Continued on Page 12
August 22, 2011 SN 11
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Continued from Page 13
a tough operating environment," he said. "The shopper is as conservative as
they have ever been, they
are preparing for their trips,
they are spending less, they
are belt-tightening, and robust organic growth is hard
to come by, whether you are
talking about the retailer or
the CPG company.
"What we have tried to
do during these times is invest in our people, through
trammg and education,
through Acosta University,
or by hiring the right folks."
Adding New
Businesses
Acosta and others also have
been able to grow through
acquisitions and through the
addition of new businesses,
such as the expansion of
product-sampling services by
Crossmark and Advantage.
'~cquisitions have been
very beneficial to us from
a strategic perspective, and
have enabled us to grow our
clients' sales and offer new
lacked sufficient resources,
technology and capabilities,
because there were a lot of
small agencies who didn't
have the scale to make
those kinds of investments,"
Hill said.
"We have doubled our
military business by bringing in new capabilities, new
He said the military business is also a "very clean adjacency" with Acosta's other
businesses.
"The client portfolio is
very similar, and there's a
high need for category management, shopper insight,
and retail execution and
selling solutions," Hill said.
''We are seeing encouraging
trends in the outsourcing
environment.''
ROBERT HILL
president and CEO, Acosta Sales & Marketing
solutions," Hill explained.
In 2008, for example,
Acosta expanded into the
military channel through
the acquisition of a 50-yearold family business.
"The channel really
people and new resources,
plus we have given our clients a solution in a channel
where perhaps they did not
have as robust solutions. The
benefits of scale can allow us
to provide better services."
Acosta's
acquisition
strategy, he said, revolves
around enhancing the services it provides or finding
additional services it does
not currently provide.
'~s we look at our core
platforms, I think there's
an opportunity to do acquisitions that take us into
channels where we have not
been in the past," Hill said.
"I think you'll see us do some
acquisitions in the marketing
space in the coming months
to better serve our clients."
Saidnawey of JOH said
he believes it is a "very fertile
time right now" for acquisitions in the agency space.
"Retailers are demanding more and more value
services, and there is significant expertise in the smaller
broker/rep groups that are of
extreme value to the retailers," he explained. "But as
consolidation continues, the
demands put on these smaller reps -such as syndicated
data, category management,
space management systems
-create more opportunities
for acquisition.
"Some of these smaller
brokers and rep groups add
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12 SN August 22, 2011
RETAIL
.
so much value, yet they can't
take it to the next level, so I
would say there are opportunities to merge, and continue
to grow in those areas."
JOH, for example, has
made two recent acquisitions -a small bakery broker
called Over The Top Bakery,
and another small alternative-channel broker that has
international reach - and
is looking at other potential
acquisition candidates.
Likewise, Crossmark has
also grown through acquisitions that have strengthened
its presence in alternate channels. The company made an
acquisition in 2010 of a firm
called TNT, in the convenience-store channel, which
has been fully integrated
since April of last year.
"It was perfect with us
winning the Kraft snacks
division for convenience
and for grocery," explained
Crafton.
Crossmark also created a
new company called MPG
Drug after the acquisition
of MPG, which was an independent company that
specialized in headquarter
selling at drug stores.
Retailer Services
Crossmark for several years
has focused on expanding
its services to retailers by
providing resets and remodels and other services
around that function. It created its ProSet offering to
help fulfill that mission.
"It's been
shown
countless
times that a
combination
of direct and
outsourced
sales forces
is the most
efficient route
to market.''
JOE CRAFTON
"A number of sets out
there were designed with
the retailer's and the supplier's best interest in mind,
and some of them look like
they were designed in a
vacuum," Crafton said. "So
we set about re-engineering
that process so we could
help retailers manage the
massive number of category resets and remodels that
occur during the course of
the year - planning the
work, organizing the work,
scheduling the work, executing the work and then
rolling that back in a report
to give them visibility."
Crossmark now has customized programs at Walgreens, Rite Aid, Duane
Reade and also a number of
grocers.
"In this whole process of
resetting categories and resetting stores, since retailers
are using supplier resources,
it's not quite as organized
and carefully calculated
and mutually beneficial as
it should be, so we come in
and help them with that,"
Crafton said.
Crossmark also has a
retail services partnership
with rival agency Advantage. The two formed a joint
venture in 2009 to provide
product demonstrations at
Wal-Mart locations, and
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Continued from Page 13
have since expanded into
product dem nsrrarions at
Sam's Club.
Through
Crossmark's
own Crossmark Events, the
company also recently began
providing ampling at Spartan Stores and has tested the
service at other retailers.
"We are now one of the
largest in-store event companies in the U.S., and we
will execute over 6 million hours of demos this
year," Crafton said. "Each
of those is hundreds of interactions of consumers
when they are in the buying mode - when they are
in the path ro purcha e.
We are the las commercial.
they see. Everyone wants to
be first, we want to be the
last commercial they see
before they go to the cash
register."
Crossmark has also
formed a joint venture with
FLW Outdoors, a division of
Jacobs Management Group,
which runs fishing tournaments, and lifestyle and
branding experiences in
partnership with Wal-Mart
and many consumer goods
companies. The new venture, called Out Front Marketing, sets up trucks and
trailers outside Wal-Mart
stores around the country
to promote products.
These "mobile brand
boxes" are heavily branded,
"so it's compelling to the
consumer and draws them
over to experience the product," Crafton explained.
Crafton said Crossmark
currently has two supplier
clients for Out Front Marketing- Sony PlayStation and
Straight Talk cellular service
- and has other supplier
clients, including some grocery companies, lined up to
launch at Wal-Mart this fall.
"Wal-Mart has gotten
behind the program and
supported it," C rafton said,
noting that the program
was co-developed with Wal-
Mart's marketing and merchandising team.
Out Front Marketing
currently has two trucks
that travel from store to
store, and would like to
ramp up to 100, he said.
Crossmark also recently
made a change to the way
it provides coverage in Wal-
store. Demos run every
Thursday through Sunday
52 weeks a year. Most are
national programs, though
a vendor may demo some
products on a regional basis,
King said.
Advantage has added an
element most traditional
demo companies do not
''[CPG companies] are under
cost pressures, so they're
looking for ways to go to market
more efficiently.''
SONNY KING
chairman and CEO, Advantage Sales & Marketing
Mart's stores.
"Recognizing that the
bulk of the business is done
on the weekends, working
Monday through Friday
was not optimal," Crafton
explained. "So we shifted
our coverage to cover the
weekends.
"The reaction from the
supplier community has
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been fantastic. And WalMart felt like it was a huge
step in the right direction,
because we are helping [reduce] their out-of..srocks."
Like Crossmark, Advantage has expanded its
in-store demonstration services to other retailers. It has
been doing in-store demos
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for Supervalu for the past 18
months.
"Historically, sales agencies didn't participate in the
demo business, but we've
upgraded the program from
what the demo compani do
by offering more than just a
table with a few items stacked
on the floor," said King ofAdvantage. "We use professional
people in uniforms who are
trained in cooking and sanitation, and we display product on beautiful racks that
hold a lot of merchandise."
The people doing the
demos are the same from
week to week within a given
store, whereas demo companies ha e traditionally used
different people who are in
regular street clothes rather
than a uniform, King pointed out.
After working with WalMart and Sam's, Ad antage
expanded its demo program to Supervalu's banner chains, doing demos
52 weeks a year in roughly
80% of the stores.
The themes differ at each
chain. At Wal-Mart the
demo theme is "Bright Ideas,"
and at Sam's it's "Taste and
Tips," but the programs are
almost identical, King said.
At Supervalu the theme
is "Good Things in Store."
For Supervalu, Advantage
expanded the program to
encompass more racks per
supermarketnews.com
have, King said. "We hand
out a 3-by-5 card with attributes of the products such as its health aspects
- that have been developed by our own marketing
department in conjunction
with the manufacturer."
One of the most important things in retail today
is the in-store experience,
King said, "and the retailers
we work with believe our
demos improve the in-store
experience for the consumer because our people come
across better.
"The other plus for retailers is, our demos sell more
product. At Wal-Mart and
Sam's we've [doubled] the
lift on demos up to 20 times
regular movement.
"The norm is a lift of between 5 and 10 times normal
movement while the demo is
in place, and after that it tapers off, though the lift continues for several weeks."
The program has been
equally successful at Supervatu, King added.
King said Advantage
expects to add another national retailer for its demo
services "before the year is
out," though he declined to
name it.
Rather than acquiring its expertise in in-store
demonstrations, Advantage
started the demo program
from scratch, King said.
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The demo business has
been more lucrative than
Advantage
anticipated,
King said. "When we got
into it, we believed in-store
demos were a $400 millionto $500 million-a-year business within the food class
of trade. But it turns out it's
a multi-billion-dollar business that goes beyond food,
and we've now expanded
it to encompass consumer
electronics at Best Buy and
middle-market restaurants.
"It's a huge business, and
supermarkets are just one
part of it."
Business Innovation
Advantage initiated a business innovation group earlier this year - what King
termed "a think tank" to
enable the agency to come
up with new items and new
creative ways to come to
market.
For example, King said
ASM is testing several
health and wellness initiatives - an area King
described as "ground-breaking" for Advantage.
ASM is in the process of
opening a health care division to service key opportunity gaps within the health
care sector. "Products and
services offered will be limited to one aspect of the
health care sector but will
build upon ASM's foundation and success in the CPG
industry," he said.
'~SM currently has several test initiatives in execution that range from in-store
health fairs within the club
channel to wellness consultancy in the drug channel to
experiential events supporting health-plan providers.
"The health care sector is a huge space, and it
continues to grow exponentially each day. ASM will
ultimately take a lead position in this space, providing
a full range of services."
Among its early efforts in
this category were a series of
health and wellness events
last June at Sam's Clubs, in
which ASM worked with
the company to support its
extstmg monthly health
screenings. The program
leveraged a host of tactics
- from traditional print
and radio to the advent of a
wellness advisor positioned
at the front of the club to
greet members and direct
them to the screening area.
In the past the screening environments from
club to club had been inconsistent, with a lack of
branding in the screening
area, King pointed out.
However, at the events last
June, in-club execution was
in excess of 97% over two
weekends, King said; and
the events drove a recordhigh average of 75 screenings per club, compared
with the previous average
of 55, with some clubs re-
porting out-of-stocks on
screening kits in less than
38 minutes.
An event scheduled at
Sam's for Sept. 1 will focu s
on diabetes, King said. SN
Additional reporting
by Elliot Zwiebach
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