Ex-PepsiCo Sales Director: 7 Easy Ways Unlock Tesco, Waitrose and Sainsbury’s With Category Management

0:00Hello, hello, hope you are wonderful. This episode is absolutely sh*****. It's absolutely amazing. It's with Kieran South, who's the ex-sales director at PepsiCo. We go deep into the weeds of what is category management. I never knew what category management was. I only learned about it later on. Category management is the secret weapon you didn't know you needed. Category management is basically the key to unlock every single supermarket you've ever dreamed of. Category management is a translator. It basically gets your gorgeous vision, your baby, your product, and it helps it speak in the language that buyers get and then that helps you unlock more listings and then that helps you build your brand.

0:40Category management is amazing and once you know it, it's just like, it just makes everything easier. It's like turn the lights on. You're like, bosh, that's where I'm going. Easy peasy, lemon squeezy. Look, full transparency, Kieran, Hugh, they're absolute legends but Northstar are a sponsor of the podcast. I really believe in them. I know that they're going to help so many brands keep on keeping on and look they work across so many different sizes of brands you maybe think i need to be a big brand or am i too small or am i too this they've got a product and give you sales data if you're zero to two million so if you're just starting out they still got a product for you which is amazing um sort of two million to five to six million which is always that sticking point they can give you access to shopper data the more you know your shopper the bigger your brand gets very very simple um they also do like one-off consultancy work like big project work if you're sort of that 10 to 15 to 20 basically ready to get to the to the pot of gold and that big exit um they do work that they just done something with ryan reynolds and wrexham lager and i'll put their email addresses in the show notes i definitely think it's worth having a demo i believe in it that's enough of me selling now to an episode jam-packed with value thank you so much hope you enjoy

1:57um guys today is going to be a sick podcast um i'm joined with my very good friend um and business partner uh kieran south who heads up north star uh which you've probably heard me badgering on about lots on the podcast but north star are uh category management specialists and what i wanted to do today is really dig into actually what is category management. I remember sitting in the office at ManiLife and I think loads of founders, you'll probably listen to this, go through this. You know category management's important, but you don't know why it's important. You kind of know what it is, but you don't really know what it is.

2:35Everyone tells you to be incremental, but what does that incremental actually mean? What does the buyer want? How much data do you put into the decks? All these things you kind of think you need, you kind of know you need to do, but you don't actually know what the fuck it is. um so i think and as i was saying to you before we hit record mate like even i there's the stuff i don't know about it so i'm yeah thanks for doing this i really just want to drill in and tell people how to use category management um and what actually what it is so thanks mate for doing this no pleasure thanks for thanks for having me i'm recording again stick into it so yeah i think i think the best way to start this is what how would you explain category management to like a five-year-old and that's a bit of a hard question to jump in with but as i say loads of loads of people know kind of what it is but what the fuck is it the same time do i mean yeah it's a really good question because i think for those who've been in the industry a while casket management gets banded around and everyone assumes everyone understands what it is but actually when you stop and pause and think what actually is it and how do you simplify it and why is it so important it's it's it's good just to do just that so i think the way i would describe it is how you would manage a group of products with a view of maximizing the sales and the profit from those products whilst meeting the needs of shoppers.

3:53So if I try and put that into practice, if you think of a retail, think of a retail buyer, they may have 200 different suppliers. They may have thousands of products. What they're trying to do is grow the collective. So they're less interested in brands. What they're trying to understand is, do I have the right range? Have I given the right products the right amount of distribution um have i missed am i missing an empd what pricing should i charge what promotions should i overlay if you walk into my store what display should there be if i'm on the web on the website what order do i lay everything out and they're trying to do that with a view of growing the whole so growing the sum of the parts i guess that's category management the way perhaps to think of it is um yeah that so that's from the buyer's perspective right is what so it's looking at the total category why is that important for challenge a brand to know that brilliant question so typically i'm going to talk i'm going to generalize slightly because again this isn't this is never really for sure but as a brand coming through you care about your brand you identified a need you care passionately about solving that need by designing the product and the brand and that's everything to you and you want to tell the world about it.

5:04Retailers in this example don't care about brands. They're interested in growing the category. So if a brand... Because that's what they're measured on. That's their KPIs, right? Yeah, exactly. I mean, they're... Exactly. It's a PLC and they've got a group of shoppers and they're trying to drive top line sales, bottom line margin whilst keeping their shoppers happy. So that's what they're trying to do. But again, this isn't just about retailers. This is for brands. It's a really good question. The brands who only think about their brands lose. The brands that can think about the category win because the retailers then think about their brand.

5:38So if you sort of put that in practice a little bit, if you're only thinking about your brand and how you're going to grow your brand and you and I go and see a retailer this afternoon, let's say we go to Sainsbury's this afternoon and we tell them passionately how good our product is, what it's going to do, why it's amazing, why they should list it, get them to try it. what we're not doing is putting ourselves in their shoes and thinking through okay well that all sounds good but what happens if i put that on my shelves digital physical shelves what happens um does that solve a need for my shoppers that isn't currently being solved does it still um south or another product because if it does we'll get onto incremental but it's not incremental so it's going to add complexity in and by the way i'm having 20 of these meetings every week and I'm being asked for hundreds of listings every week and I can't make some.

6:29So what I've got to try and do is work out which ones do I need to go after, which ones do I need to back. So as a brand, if I put myself, if I put that hat on to think it all through for myself, I'm asking myself those questions and I'm preempting a lot of that thinking. And as a result of that, I'll make better decisions. It's fascinating. So the day we're recording this, and we'll try and get it live in a couple of weeks, is Amelia from Bold Bean has just gone into Tesco and she just put a post out this morning saying like, you know, we kind of got into, I think those early, getting the early stage, you can sort of wangle a Whole Foods listing or wangle potentially even wangle a Waitrose listing.

7:08But even then you'd need data, but having the data, and Amelia was saying, it was the data that got us into Tesco and, you know, how we add drive incrementality. And as I say, we'll get onto that. And I think what's really interesting is, as you say, the brands that don't think about the category and only think about their brand, or sorry, the founders only think about their brand, not the category, lose. The ones who think about the category win. And I remember one of the most salient lessons out of anyone's taught me on this podcast was Lucy at Nice Wine. And she said, the goal as a founder is you often think, what my brand, my story, the founders are great at the storytelling, but she said it's a great reframe which links to what category management is.

7:48How do we make our buyer famous? so what are their kpis what are they getting measured and you really boil it down to the human list you've got human human level is most people want to want to most buyers want to look do well in their job to get status to get a job promotion to to rise up the ranks and it's like the category management is the thing that links the the founder's story product passion to the to to the buyers buyers um wants and needs and then that actually ironically not even ironically that's that dance is what pushes your product out to the consumers so it's the gorgeous little marriage i think um and yeah the way you've summed that up is super super simple now um describe what uh incrementality is again imagine i'm a two-year-old who's just you know just had a dummy taking it out of his mouth like describe what actually incrementality is because again that's another nebulous thing gets bandied around, but not everyone knows what it is.

8:50Even myself, I always get confused with it. Yeah, no, it's again, another good question. It's another really important part of category management as you start to think about it. So if I may use a couple of examples, so it's going to sound like I'm banging the big brands and supporting the small brands, which I guess maybe I am slightly, but if we were looking at a shelf now and we could see two different bottles of Heinz tomato ketchup on the shelf, slightly bigger bottle and a slightly smaller bottle. Product's exactly the same. The only thing that's different about them is the size of the packaging they're in and then the price.

9:23If we took one of those products away, would all of the shoppers that were previously buying the smaller bottle move into buying the slightly bigger bottle? The chances are probably yes. And therefore, the second product isn't incremental because when you don't have that choice to whether to buy it or not, you move your purchasing into the first bottle. So whilst the sales of our second bottle might be great, the incrementality would be low because without the choice of being able to buy it, you're happy to make a switch into a different product. That would be one example, like really low incrementality of that example.

10:02Second example, is that, what example is, is that like, is there a type which buyers think about with that example? Is that like, or is it just? switches. I guess the piece you're looking for all the time is you're looking for high rate of sale products. Having a product on the shelf that Johnny around the corner absolutely loves and comes and buys one a week when the average sales of everything else on the shelf are 30, then as much as you'd love to supply that product for Johnny, if you're Tesco, you're not going to do that. So you're balancing rate of sale, so high selling products with incremental selling products and what you're looking to understand is what's the perfect range so say your range is only 10 you can have 10 products you might not have the 10 best selling products if as per the Heinz tomato ketchup example one of those products um can be replaced by something more incremental okay this is this is great that's one example yeah go go go for the other ones, mate.

11:04Yeah. Let me use another one, which is the extreme version of that. So a recent example, fairly well documented would be in energy drinks. So the category over the last couple of years has done incredibly well. If you take Red Bull, for example, the Pioneer and I guess the growth in that category versus Perfect Ted, which would be a really good example. The Perfect Ted guys did a great job bringing match, I guess, to the masses. But if you look at it, if you took a perfect 10 off the shelf, would the sales go to Red Bull? And the answer is probably not. Maybe one or two, if they were selling 10, maybe one of those two from the 10 would move across and buy a Red Bull.

11:44But you would probably lose eight out of those 10 purchases. And the reason for that is the needs of the perfect 10 shopper aren't being met by the Red Bull product that's on the shelf in its place. Why is that? It's a different chopper. Why is that? Because Acha offers a different type of energy to Red Bull. And there's a number of examples behind it. But the key piece would be Perfect Ted would be highly incremental in that scenario. And therefore, the retailer would be loathe to delist Perfect Ted and just have two facings of Red Bull, even if Red Bull was selling more. Because they would lose a whole other sense.

12:26mate mate you've summed it up perfectly which and i think it's a question people can think about when they're you know creating their pitch decks and stuff to retailers if we took this off the shelf i.e perfect head would people switch over and that's when you that's why you suddenly see you know it makes even i think beer taps another great example like lucky saint have done a marvelous job with that so if you take lucky saint off what are they going to switch over to So obviously now there's lots more on draft alcohol-free beers, but, you know, 2017, 2018, that was far cool. Jubel, another beer brand.

13:01It's like you take that off, what do you replace it with? Well, nothing. And they're super incremental products. I swear, so that's almost like driving new shoppers to the category, bringing new people in. And I think, yeah, if we took this off-shelf, would people be able to switch over? a brilliant question to art for people to start thinking about but then also i swear there's other ways to drive incrementality in terms of like cash margin uh volume like what are the other ways which but which buyers think about and brands maybe or founders don't often think about yeah exactly if you're if you're a retailer there are four ways to grow the category so the first one is that you've got more shoppers coming into your stores now as good as any buyer might be it's difficult for a buyer to bring more shoppers into their stores but the big you know things like tesco or what they do with club card for example has helped bring more shoppers into tesco so that that will be one there's more shoppers you like to sell more then the next thing is that you're getting more of the shoppers in that store to buy into your category so we'd call it penetration the penetration of the category for every 10 shoppers in that store for every 100 shoppers in that store how many of them buy into the category that's the second way of growing the category so sorry sorry i'm gonna ask some dumb questions what i don't actually quite understand what what penetration is again this mate this is the thing it's all this all these wanky words you hear and i was like yeah i know exactly what penetration is i'm just like sat there sitting yeah just nodding my head yeah there's great penetration here yeah yeah so so so i know i know you sort of said it but like so so when you say a product's trying to go for penetration what does that mean like say you're a brand and they say right we're in we're in we're in tesco So now we really need to, you often hear founders say, I really need to drive the penetration.

14:48Like what the fuck do they actually, what do they mean? What do they actually mean? Like household penetration? Yeah. So let's use two examples. Let's use one for a retailer and one for a brand side of view. So from the retailer, what I say is like the ways they would grow the category. Penetration is basically the term means how many people in that store are buying the category. So if we use a practical example, we just talked about energy drinks. so um if we if we stood outside a i don't know a co-op store now and we counted 100 people through the door how many of those people would buy into the energy drink cap would buy an energy drink when they walked in the store say say 10 people who walked into that store bought into that and the penetration would be 10 10 of people in that store have bought okay to the category so yeah what what retailers are trying to do is increase the penetration the number of people who are buying into all the different categories in their store.

15:44They want the biggest share of wallet that's out there. That's what they're trying to do. And the way they do that is to get the right range in store for the right promotions. So the category management is basically how they do that. They're trying to drill from a brand point of view. So the Amelia News and the Ball Bean guys, which is just an incredible story, and they've just done an amazing job in there. But what they have the opportunity from a brand point of view is there are 27 million shoppers in Tesco every week that now have the opportunity to buy into the Bulbean brand. So when they're doing their shopping now, Bulbean have a huge opportunity to increase penetration, the number of people who are buying into their brand because their product is available.

16:29We're a whole set of shoppers that previously couldn't buy their brand, cannot buy their brand. So that's how they increase the number of the investors that's buying. that's super helpful and then the other three ways to drive incrementality so more shoppers is one penetration the percentage buying into you is two um how often you buy so industry word frequency that you're hearing about a lot how often people are coming back to buy more and then the last one is what we would call way to purchase and your example way to purchase is how much they buy. So if you normally buy, you'll see yogurts a lot do promotions where it might be five for price or even eight for price.

17:16What they're trying to do is stretch the amount that you buy every time you purchase. So premiumization is another example of that. So if you trade up to a slightly more premium beer, then your weight of purchase is increasing in terms of pounds. You might still buy one bottle, but if that bottle sells for a higher amount, you're stretching your way to purchase. Yeah. And this all makes total sense now because I suppose nine times out of 10, most challenge your brands to begin with, to begin with at least, hit the premium box, hit the incremental in terms of the newness box because they're always new avant-garde brands.

17:57But I suppose as you want to become a household brand, like your Bold Beans, like your Perfect Ted's uh and Brewdog did it by Brewdog did a gorgeous example of this they managed to stay premium and incremental but go household and that's when you've got to start thinking about the frequency the penetration um and that's where you get that's where it gets super super um uh fascinating and I that's why I find it endlessly fascinating it's it's all a game and it's just, it's how to kind of tweak those variables. Let me use an example, Dan. So this morning we were looking at the beer category and the craft beer category.

18:41And there were two brands both turning over about 10 million pounds a year. So good brands are in their scale-up phase. Face value, similar turnover, 10 million, similar growth, about 10%. So face value, these brands were performing in a similar way. But if you then put this, it feels slightly geeky at times the category management hat on and thought, okay, well, what role does category management have in what happens next on these two brands? So brand number one. This is from a brand perspective? From a brand perspective, purely from a brand perspective. So how would these brands use category management in real terms?

19:20And this is, so yeah, just to clarify this, so this is, you've got two beer brands. they've got a category manager in play both doing 10 million uh revenue both growing 10 percent i'm a category manager i work for the brand again so i think this is another thing is it's people know that they at some point maybe need a category manager but is it that important so having a fucking window cleaner like how important is it but it probably is pretty fucking important having clean windows i mean but um yeah yeah but so yeah so tell me about that yeah so let me use And again, I think when we saw the start around demystified category management, for me, it's a way of thinking.

19:59It's a fundamental way of thinking that's different as opposed to a job title. Now, there might be somebody whose specialism is category management, but for a challenger brand to go about only thinking about my brand to one that started to think about how do I think about my brand in the context of the category, that's where it starts to change. So the example we were talking about, brand number one, all of their growth was coming from penetration. Or put another way, all of their growth was coming from the fact they were attracting more shoppers into the brand. So all of their growth driven by new shoppers, they were appealing to new shoppers.

20:38New shoppers were coming to buy the brand that had never bought it before. And that's what caused them to add 10 % to their sales. Okay. Yeah, so brand one is penetration, all new shoppers. All new shoppers. And that penetration is coming because they've got more distribution? Could be. Could be lots of reasons. So it could be that they've got more distribution. It could be that they have run a promotion. It could be that they've done some advertising or media of some way, and that's driven increased awareness, and that awareness is seeing more people buy into the brand as before. Yeah. The summer's out at the weekend.

21:20Loads of reasons. Yeah, it's just good to get those down. Yeah, so the second brand, brand number two, also 10 million turnover, also grown to 10%. All of their growth, they didn't have any new sales from new shoppers. They had exactly the same number of shoppers, but those shoppers were buying either more frequently or buying more each time they'd been in store. so no new shoppers but the same number of shoppers were buying the brand more which one's better from a brand and a brand perspective than a retail but or does it even matter how you skin the cat

22:05for the i guess the the first thing is what do you do next so if you're okay yeah you're if you're the second brand of your brand number two, you've got an increasingly loyal, arguably set of shoppers who are buying your brand more often. They're choosing your brand versus other brands more often. So as you're thinking through your marketing plan, really understanding who those shoppers are and trying to reach out to them and just drive that loyalty even more, massively important.

22:36The question you're then asking is, have we tapped out? have we now reached the universe of people who love our brand or is there still huge headroom to get to more shoppers but the marketing levers so our marketing plans then need to be prioritized based on that so you've got some choices to make so do we want to invest our marketing money to try and get existing shoppers to continue to buy more because that's where all that growth is coming from whilst the second priority is are there other shoppers out there that we can persuade to come and try our brand for the first time and if so how are we going to communicate to them because it's a second separate message.

23:12Not better or worse, but just different. If we're thinking of promotions, we're going to run a promotion. If we run a price down promotion, all we're going to do is get the same number of shoppers to pay slightly less. When actually what we might want to run is a multi-buy promotion and reward those shoppers for buying more at a slightly discounted price. What's the multi-buy promotion for listeners? Two for a price or three for a price. You buy multiple items to trigger your discount. Yeah. And if they were trying to bring new shoppers into the category, right? Sorry, into their product. This is the second brand.

23:56Could they maybe partner up and do a link deal with a brand in a completely different category, like a big crisp brand? because I'm just thinking of other ways for them to bring new shoppers in if they're already at their sort of max, do you know what I mean? Yeah, exactly. Lots of ways. And yes, they could. They could run a price down promotion so they could try and reduce the price to try and incentivize people to move in. But I guess where category management comes in, and especially for the challenger brand community, is at the minute we could probably guess three or four ideas and we could try them and we could see if they could work and we could try some more and guess and see if they would work.

24:34but when you when you look at the way the bigger brands work and there's a lot of stuff around the bigger brands that you wouldn't want to replicate but in in consumer goods a lot of what a lot of the the arts of the way that the bigger brands use category management is absolutely perfect for challenge brands to start to use and this is a really good example so rather than guess we could know we could have a look and we could see well who are our shoppers are the shops in brand one the same as brand two or they're different if you're brand two and you think there are more shoppers to go after who would the shoppers be how would we describe them what what demographic what profile would they be what age are they um is it more male is it more female what else do they buy once you start to know those things you're guessing less on the tactics you use let's go let's go into specifics on that so let's just say like don't have to give a name of of let's just say let's just say it's like a brand like juba for example juba are absolutely flying i think they're a great example because they're super incremental um they uh you can just see that makes sense in terms of if we took this off the shelf or off the tap would would they people switch elsewhere no that's why it's incremental sick get that they're then obviously you know with the penetration, the frequency, the weight of purchase, the weight of purchase is easy to understand with the four packs.

26:03Frequency could be a hot day. Get all that. Say they get to a point where they're in Tesco. I don't know if they actually are or not, but let's just say they are and they hit that£10 million brand. In terms of the consumer piece, this is where I think it gets interesting. So how would they find out who their shopper is? Do you know what I mean? because they may have, from a brand perspective, almost like an avatar of a young 25 to 35. That's what everyone fucking picks. But in Clapham, what does the actual shopper data tell them? Yeah, it tells them whether their primary shopper is a 25-year-old male living in Clapham.

26:44So typically what we've seen, one of the things that's changed over the last few years is the growth of D2C. And one of the things that challenger brands have done incredibly well on D2C is use it to really understand who their shopper is. They've got a really clear profile of who their shopper is, and then they'd market incredibly well using social media to that shopper. They're doing a fantastic job. That's brilliant. When you then bring it into grocery retail, it's highly likely that the Jubel shopper, in this example, made up, isn't a 25-year-old from Clapham. Because if they would, they wouldn't be having the national success for that brand that they are.

27:19The shopper's going to be different. So if your brand is selling in Asda or Sainsbury or Tesco, the shoppers that are in those stores are more diverse, and there's a lot more of them. So the first thing you need to do is understand who your shopper is. The way you understand that, there's different ways. The way that all of the big brands do it, there are two ways. One is you use something called panel data. So Kantar, number one, buy country, Marlin, using panel data in the UK. Now, essentially what that is. What's panel data? When you say panel data. I caught myself going into jargon mode there.

27:55So you're right. No, no, no. That's all good about me. What can't I do fantastically well? And again, this is something every brand leader and every retailer works in this way. So when I explain it in a moment, this is how challenger brands can start to change the dynamics of the brand leaders dominating sales of brands in the UK. So what panel data is, is there are 28 million households in the UK, 28.3 million households in the UK. And then what Cantor are trying to do is profile those households and understand the behavior. So why and who, not just what selling, but why and who. So what they have is 30 ,000 panels.

28:40They've identified 30 ,000 households in the UK that when scaled up represent the demographics of 28.3 million. And then what they do is reward those 30 ,000 households to capture everything, scan everything they've bought in that week. So you get everything you've bought in your weekly shop and you scan it and you're paid and rewarded to do so. So if one week you've gone shopping in Sainsbury's, the next week you've gone in Asda, you record that. it's really interesting because we can then see not only what have you bought but where have you bought it what they then know is they know um a huge amount of information about those households so for example if you were one of the panelists they would have captured lots of information about you your age um income hobbies how many dogs you've got what size feet you've got everything you might want to be that's useful to understand the profile of you and if i was a palace they'd have the same so that's how brands can start to know not only what's been sold but who's buying it and if then there are changes week a week you can start to understand what the drivers of those changes are so in the example about jubel in beer you can use that information to know not just what we've sold but who's buying it and what else do they buy and if we've had a good month and a bad month we can see is that because we've got more shoppers coming in or is that because some of our shoppers have gone and bought a different brand in this last month.

30:04But you're not guessing. You now know the lights are on. You can see the answers to those questions rather than guess. It takes the guesswork out of the, and I suppose that's where the stakes get really high. As I was saying, these brands, like Giles Brook, a few things on that is Giles Brook was telling me about how Surreal had used their D2C data to get in, to actually get their foot through the door into Sainsbury's saying, look, we know our shopper from our D2C data is, as we put, you know, probably Clapham fucking goes to third space, all that shit. But then, and that's great for getting through the door, but as I was saying, if you want to go to that next level where it's like, how does Surreal take on Cocoa Pops or, you know, or maybe Dorset cereals, that data actually really gives you, as you said, it's turning the lights on, which is a great expression.

30:57Um, and I think it's, uh, yeah, knowing, knowing your data as, as you get bigger is, is, is vital in terms of now I'm, I'm, I'm very biased to, to the sort of the founder's story and the storytelling and the salesmanship. And, you know, I almost say fuck, like, sorry to say this, but sometimes a bit like, fuck the data, like, just, just go with, go with, go, go with like the founder can sell the vision really really well um but i'm i am i'm wrong but that was that was definitely my thinking probably until we started like um chatting and stuff like that and i think it's it's a it's a it's a gorgeous mix when you're trying to sell in if you know if it's too data too datery that's right way of saying it then it's going to look like look like uh every you know the pepsico uh and or unilever who's just a sort of part of my uh brashness but like a cog in the wheel is just coming through the revolving doors in Bracknell or Wellingarden City, you want to have that bit of magic which keeps it like, you know, the va-va-voom, the je ne sais quoi of a brand selling.

32:04But then I think if you can marry that with data, it's almost like the founder's the attack and the date is the defence if we're using, making this analogous to football. But what is the sweet spot? And like, say you were to write a deck for Sainsbury's tomorrow and we were selling in Kieran's salt and vinegar crisps, for example, or maybe we need to make it a bit more incremental. Say they were vegan prawn crackers, salt and vinegar crisps, for example. What are you, so opening slide, in your opinion, do you put the data from the category problem for the top? Do you start with the story? Like what would you personally put from all the brands that you've worked with and seen work?