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Build Relationships to Win Deals With Large-scale Retailers and Grocers

Guest Blog By Marty Gallant

In the consumer goods industry, securing premium retail placement is one of the primary concerns for distributors as well as manufacturers. Often, it is the only obstacle keeping companies from reaching the next level. With an economy at rest, the opportunities for optimum retail placement have shrunk, and competition has increased.

Vitamins are one of the more difficult consumer goods areas to navigate in the category of chain drug, mass market and grocery stores. Scores of large chain stores are swallowing up smaller chains and steadily rebranding them as spinoffs of their own brand. In the past few years alone, Walgreens has expanded its prominence as the largest chain drug retailer in the United States following its acquisitions of Happy Harry’s, Duane Reade and USA Drug.

Situations like this have presented challenges for many smaller consumer goods providers. Not only do they need to work toward securing shelf or retail placement, they also must strive to earn the confidence of these retailers to maximize the time their products are in stock. The question then becomes how you convince a retailer that your items deserve prominent placement and promotion in an overcrowded vitamin section.

Know your prospective retailer’s set. Before the appointment with the buyer, visit a number of stores in the chain that vary in size and location. Stores in the same chain can have different size sets, with different products making individual planograms. The locations of the sets can vary from store to store depending on the individual layouts.

In larger sets, bad placement can cause an item to get lost among a sea of other offerings. Low shelf placement in a small set can cause the item to get lost completely because they often are not as visible to shoppers.

Know your competition. Become well-versed in the category as a whole in addition to items similar to your own. Know the retail price points of your competition. Some questions to ask yourself include:

  • Would your item be one of the higher priced items in the set?
  • Would it be one of the lowest?
  • Is there a private label brand similar to your products that the retailer already carries?

Small consumer goods providers involved with the vitamin category will find that some retailers choose to place more of an emphasis on the vitamin section in their chains, while others will sacrifice the shelf space for other categories in the health and beauty set.

Provide the buyer options. If you are not a vendor of record for the prospective retailer, then do not enter the meeting pitching only one item. Most retailers would prefer not to deal with a one stock-keeping unit (SKU) vendor. Instead, they are more likely to pursue pitches that include a line of items providing the opportunity to select what fits their sets and stores. The more options you provide, the better success you are likely to have.

For the reasons mentioned above, it is important for small consumer goods providers to not only pitch a retailer on the purchase of an item, but to provide legitimate reasons to award the item prominent shelf placement when the topic enters the conversation. As brand name chains absorb more and more of these smaller companies, the competition grows. Earning premiere placement and long-term contracts in retail accounts can make or break those in the vitamin category and beyond.

Marty Gallant is the president and CEO of Natural Product Solutions LLC, a natural products development and manufacturing company. For more information, please visit www.virmaxinfo.com and follow us on Twitter at @VirMaxDS.

Retail Merchandiser magazine is pleased to present the points of view of many different industry stakeholders. If you would like to contribute your own guest blog to our site, please contact the editor at russ.gager@phoenixmediacorp.com.

 

What Are ‘Conflict Minerals’ – and Why Should I Care?

Guest Blog by T. Markus Funk

In the morning hours of Aug. 22, law firms, boardrooms and compliance professionals around the globe were humming with anticipation (or perhaps more accurately, laboring under a chilly frisson of dread). The cause for this collective anxiety was the SEC’s much-anticipated – and much-delayed – announcement of the Dodd-Frank Wall Street Reform and Consumer Protection Act’s final disclosure and reporting rules (the “rules”) concerning “conflict minerals” (generally tin, gold, tantalum or tungsten or any other minerals or their derivatives determined by the Secretary of State to be financing conflict in the Democratic Republic of Congo or adjoining countries). Would one man’s well-intentioned humanitarian effort once again become another’s costly export of moral imperatives for difficult-to-achieve public policy objectives?

What Happened?

The SEC approved the highly controversial Rules by a narrow 3-2 vote. The net result is that a considerable swath of corporate America, including many retailers, must now conduct “a reasonable inquiry” into the origins of those minerals and disclose any use of them on a new Exchange Act filing (“Form SD”).

Moving from the general to the specific, the rules apply to public companies using any (yes, even trace amounts of) conflict minerals, where the minerals are “necessary to the functionality or production” of an item the company (1) makes itself or (2) contracts a third party to make on its behalf.

Critically, the latter “contract to manufacture” provision applies to retailers and other corporations who have others manufacture products for the business, provided the corporation has “any influence” (a term that is left intentionally undefined and thus amendable to broad interpretation) over the manufacturing process. So if you, for example, are a retailer who directs a manufacturer to custom-make a certain product for you that contains some amounts of gold or tin, then there is a very good chance that you will fall under the rules’ considerable scope.

National Retail Federation Vice President Jonathan Gold noted in his post-announcement statement, “It’s very important that a distinction be made between a retailer who is acting as a manufacturer and has control over what is in a product and the vast majority who do not.” According to Gold, “While retailers abhor the violence in the Congo, compliance with these regulations could still be extremely difficult, and there is considerable debate on whether filing reports with the SEC will make any difference.”

The SEC estimates that the rules will affect as many as 6,000 listed companies both foreign and domestic. Private businesses, moreover, will be pulled into the rule’s orbit to the extent they supply SEC-registered companies. Companies must compile their data every calendar year, starting Jan. 1, 2013, and file their first Form SD by May 31, 2014 

What Now?

Retailers subject to the rules’ oversight and disclosure requirements who have not yet established a compliance and due diligence management frameworks should consider doing so. Although some of the rules’ mechanics lack definition, here are some basic steps retailers should consider taking:

Determine whether the rules may apply to you:

  • Are you a Section 13(a) or 15(d) issuer?
  • Do you, as part of your business, either (1) manufacture products or (2) contract with others to manufacture products for you while having “any influence” over these manufacturing activities?
  • If the answer to the immediately foregoing is yes, are conflict minerals (generally tin, gold, tantalum or tungsten or any other minerals or their derivatives determined by the Secretary of State to be financing conflict in the Democratic Republic of Congo) “necessary” to the product’s “functionality” or production?

Create conflict minerals risk profiles based on:

  • Preliminary lists of products potentially containing conflict minerals.
  • Key supplier documents and agreements.
  • Targeted interviews of personnel with supply chain oversight.
  • Prioritized lists of potential problem areas and ways to address them.
  • Assemble an internal conflict minerals compliance team with representatives from manufacturing, engineering, procurement, finance and legal.
  • Build a work plan, timeline and compliance budget

Design and implement a practical supply chain compliance program, including a:

  • Conflict minerals code of conduct setting forth expectations for employees and transaction partners (including suppliers).
  • Compliance questionnaire for suppliers.
  • Supplier compliance database.
  • Risk management plan.
  • Customized “country of origin” inquiry program.

Develop:

  • A database of supplier personnel who should receive conflict minerals compliance materials.
  • Develop questionnaires and certifications for suppliers and determine any additional supplier documentation, due diligence and compliance requirements.
  • A risk-management plan covering procedures for suspending or terminating suppliers that violate procurement policies, and consider alternative sources for conflict minerals.
  • An integrated method of addressing the conflict minerals rules, FCPA, California Transparency in Supply Chains Act, and other laws and regulations bearing on your supply chain due diligence and oversight obligations.

Train relevant employees and key suppliers regarding:

  • Conflicts minerals rules and resources.
  • Best practices for supply chain investigation and oversight.
  • Cross-training for key suppliers with greatest risk exposure.
  • Distribute an initial written communication to suppliers educating them on the Rules and your company’s compliance obligations.

For the text of the 356-page “Final Rules,” click here.

T. Markus Funk is a former federal prosecutor who previously worked for the State Department and a Perkins Coie partner who helped launch the firm’s Corporate Social Responsibility and Supply Chain Compliance Practice (the first such dedicated practice among the 100 largest law firms in the United States). He can be reached at MFunk@perkinscoie.com.

Retail Merchandiser magazine is pleased to present the points of view of many different industry stakeholders. If you would like to contribute your own guest blog to our site, please contact the editor at russ.gager@phoenixmediacorp.com.