Zero hour

An expert offers strategic advice on successfully waging war on meat case out-of-stocks.

By Ken Wagar

The fresh meat case in supermarkets has undergone significant transformations over the past decade in packaging, products, and case-ready offerings.

As a result a considerable number of fresh meat items are fixed-weight, ordered by the piece, and imprinted with conventional UPC codes. Just a few years ago, almost all fresh meat items were random-weight and produced in-store. This change in package configuration allows retailers to tag shelves with reorder tags, and to specifically identify shelf space by item in a manner similar to grocery and dairy department shelves.

These changes should have reduced the number of fresh meat out-of-stocks, compared with the days when all product was packaged in-store and case space was considered to be "flex space" rather than a more traditional planogram. However, based on analyses of fresh meat work we've been involved with in recent years, out-of-stocks continue to remain at levels exceeding any other department in the store.

Our retail and supplier clients are always amazed at the number of out-of-stocks we uncover while working with them. Their first reaction is disbelief, but as they conduct their own store visits and examine the analytics, it becomes clear that the issue is real and that it's detrimental to the success of both the retailer and the producer/supplier.

Having been involved in developing category business plans for over a decade in virtually every meat department category, we rely on the key metric of the percentage of stores that generate "zero sales" of an item for any given week. We further validate the zero-movement items by looking at their baseline sales levels, which we refer to, appropriately enough, as a "zero-movement report."

While the zero-movement report doesn't absolutely confirm an out-of-stock, the presumption is that if it were in stock, it would have a sales rate approaching baseline movement. Our subsequent store visits and audits have confirmed that there's a direct correlation between the zero-sales movement and the availability of the item in the store. Our analysis has also confirmed that improved in-stock positions grow overall category sales.

Across a varied base of retailers, we've found that fresh meat out-of-stocks exist in between 30 percent and 50 percent of stores. Worse yet, these numbers often exist for the 20 percent of category items that generate 80 percent of category sales.

The numbers encompass SKUs we would intuitively believe would reduce out-of-stocks, because they're fixed-weight and/or case-ready, including dinner sausage, breakfast sausage, marinated meats, partially prepared and fully cooked entrees, ground turkey and turkey parts, and many smoked meat items.

Why is this happening? We believe the mindset remains in the meat departments that the meat case is flex space. In the days of 100 percent back-room preparation, sale items were cut and filled first. If time remained, other basic and more highly merchandised cuts were prepared. What was in the case tended to be a function of ads and labor availability, rather than of strategic assortment.

When I went through store manager training 35 years ago, we were taught that the meat case should be leveled and products spread out to "cover the wires" first thing in the morning, and again whenever the case was low. This practice still exists today, despite instructions from corporate to "leave holes" for proper ordering and stocking.

Although it's possible to use shelf price and reorder tags, more often than not they're not used in the fresh meat case. Where tags are used and diligently monitored, in-stock rates are significantly improved.

Another challenge is that shelving assigned to an item is often insufficient for full case pack-out, which results in product being placed in front of adjacent items or in adjacent space. Once again, the consumer can't find the item she's looking for.

Finally, we often find out-of-stocks that occur because a competing item or brand is on promotion. It appears that an irrational fear of shrink leads meat managers not to order a competing brand the week another brand is on ad. The consumer who is loyal to Brand A is forced to buy Brand B—the low gross-profit promotional item.

What's wrong with this picture? With all of the industry discussion of consumer-driven marketing, store differentiation, competing with the discounters on issues other than price, and branding the store, there's a breakdown in basic discipline around a consistent consumer offering.

Our zero-movement studies typically take place long after assortment rationalization. The measured out-of-stocks are on items already rationalized. We're failing to offer our consumers a consistent assortment of products and a range of value choices.

We remove choice of brand when another brand is promoted, forcing the volume into low-margin items or, worst of all, chasing the consumer to a competitor. Products get hidden behind overstocks, effectively creating a perceived out-of-stock and shrink on the "hidden" items.

When we fill adjacent space with the items we have and fail to reorder the items planned for that space, we end up with sections of the slowest-moving and least demanded items, and are out of stock on the faster-moving, higher-demand items. The treasure-hunt mentality of in-and-out items, changing brands, unique items, and novel package sizes that serves the club channel fails to serve the supermarket meat shopper. This isn't to say that this strategy wouldn't work, but it needs to be skillfully organized.

The following are some prescriptive remedies:

•Develop and enforce planograms.

•Develop and use shelf tags.

•Enforce that holes only get filled with the item that belongs there.

•Examine your reorder practices. Is computer-aided ordering an option? Can you link inventory to scan data?

•Develop a zero-movement report. Include a metric of opportunity that calculates what your sales would be if in-stocks achieved 90 percent to 95 percent. These numbers will help you realize the scope of the opportunity.

•If you're a retailer, challenge your suppliers to work the stores, ensuring that their items are tagged an in-stock.

•If you're a supplier, track your own sales rates and identify the stores where zero movement is a problem.

•Confirm that case packs fit on the shelf.

Ensuring in-stocks is a win-win-win. Retailers and suppliers both improve their performance, and shoppers find what they want when they want it.

Ken Wagar, a partner and consultant with PMG, LLC, has more than 40 years of experience in supermarket retail and wholesale. Wagar's key areas of specialization are fresh food category management and economic modeling.