Shelf-Ready Packaging: the Balancing ActBreakout 4.4 ECR Forum

Berlin Thursday 29 May

The SRP balancing

act

SRP

Social Econo-mic

Environ -mental

Structure09.30 Opening Xavier Hua, Carrefour, and

Bernard Fradin, Kraft Europe

09.40 Social Pillar ECR Baltic

09.50 Economic Pillar ECR Italy

10.15 Environment Pillar ECR UK

10.25 Questions to panel of speakers

10.45 Refreshments

Guidelines for a collaborative approach to SRP, based on a joint

business case assessment

Testing the business case approach for the hair and body

wash category

Reminder:

What has ECR Europe delivered so far?

July 2007

SRP

business case pilotJanuary 2007

SRP Blue book

Several tools were developed to support the business case methodology and collaborative engagements

Business Case

MediumLow

Shopper Benefit Opportunity

Volu

me

Medium HighC

ase

Cou

nt (o

r Fa

cing

s) 20%

50%

10%

10%

10%

Illustrative

Focus Area

Store Channel / Format / Size

High Level Prioritisation

Business Case Evaluation

SRP Solution Assessment **

Store Audit & Checklists

** Adapted from ECR UK RRP Tool

Solution Assessment & In-Store Audit

Use of SRP is spreading across major retailers across Europe

Estimate of sales in SRP

Baltics 5-10 % all categories

France20% private labels 5% national brands

Germany37% all categories42 % food22 % non-food

Netherlands < 10% of all SKU

Spain 20 -

35 %

UK

Tesco: 22,000 lines Asda: 23,000 mainly food lines Sainsbury's: All ambient, food, grocery and chilled categories

Numbers not available for other markets via ECR organisations

Currently SRP still gives rise to some issues –

sustainability can only be

attained through a balanced approach

☺ SRP can… SRP can also…

Social

•

Make shelf replenishment and shopping easier

•

Be perceived as labour reduction policy•

Make shopping more difficult if not well designed

Economic

•

Improve shop floor operations•

Improve sales•

Add costs to supply chain•

Make shop floor operations more difficult if no proper design and training of staff

•

Destabilise pallet loads if not strong enough

Environmental

•

Reduce need for primary packaging as it stabilises the product

•

Lead to higher perceived volumes of packaging on shelf

•

Add packaging in the supply chain

Structure09.30 Opening Xavier Hua, Carrefour, and

Bernard Fradin, Kraft Europe

09.40 Social Pillar ECR Baltic

09.50 Economic Pillar ECR Italy

10.15 Environment Pillar ECR UK

10.25 Questions to panel of speakers

10.45 Refreshments

10

Structure09.30 Opening Xavier Hua, Carrefour, and

Bernard Fradin, Kraft Europe

09.40 Social Pillar ECR Baltic

09.50 Economic Pillar ECR Italy

10.15 Environment Pillar ECR UK

10.25 Questions to panel of speakers

10.45 Refreshments

11

The Social Effect of SRP

Anna Zolotarjova, Supply Chain & Logistics Development Manager, Rimi

Baltic

12

For new EU member states, SRP is largely being driven by labour market conditions

–

GDP year-on-year growth in 2007 up to 11% in Latvia

–

Lowest level of unemployment 3.2% in Lithuania

–

Negative migration index up to -0.3% in Estonia

–

Population decline up to -0.65% in Latvia

Labour market drivers of SRP vary across Europe

13

SRP helps address the social challenge faced in store

•

Stores are regularly

short of planned employees by ≥6%,

•

Store staff

turnover is reaching critical rates

•

Number of overtime hours in RIMI stores exceeded

500,000 in 2007

•

87% of employees

doing the work in store are women

•

Hard working conditions is a top reason for store

employees to leave

Unemployment rate fallsUnemployed as % of workforce

4

6

8

10

12

14

16

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Estonia Latvia Lithuania

SRP is an imperative to improve working conditions in grocery retail

14

SRP’s

social role is not limited to store employees

SRP helps to improve the shopping experience

–

Consumers

demand for convenience, choice and availability

–

Sucessful SRP solutions

increase brand visibility and add structure to the shelf, thus making it easier for shoppers to navigate

–

SRP is a solution to secure on shelf availability

in the prevailing labour market conditions

15

RIMI Baltic is making it easier for staff and shoppers through SRP

By collaborating•

Developing Category SRP Roadmaps and fit-for-purpose solutions together through in-store SRP training sessions for suppliers facilitated by IGD

•

Carefully evaluating category needs for SRP–

priorities

–

main issues

–

best practice solutions

•

Showing example with private lable products

•

Sharing retailer’s understanding and outlining main priorities through SRP manual

16

RIMI Baltic is making it easier for staff and shoppers through SRP

By using SRP in stores

•

Educating store employees on how to recognise and treat SRP

•

Focusing common efforts of–

Category Management

–

Operations

–

Supply Chain

on in-store implementation of SRP

17

RIMI Baltic is making it easier for staff and shoppers through SRP

By using SRP in stores

•

Educating store employees on how to recognise and treat SRP

•

Focusing common efforts of–

Category Management

–

Operations

–

Supply Chain

on in-store implementation of SRP

18

Structure09.30 Opening Xavier Hua, Carrefour, and

Bernard Fradin, Kraft Europe

09.40 Social Pillar ECR Baltic

09.50 Economic Pillar ECR Italy

10.15 Environment Pillar ECR UK

10.25 Questions to panel of speakers

10.45 Refreshments

ADVISORY

Berlin, 29th MAY 2008

“The Italian Scenario”

©

2008 KPMG Advisory S.p.A., an Italian limited liability share capital company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

Efficient Consumer ResponseECR Ita liaEfficient Consumer ResponseECR Ita lia

20© 2008 KPMG Advisory S.p.A., an Italian limited liability share capital company and a member firm of the KPMG network

of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.Efficient Consumer ResponseECR Ita liaEfficient Consumer ResponseECR Ita lia

Agenda

• Italian

context

• Italian

pilots

• A direct experience: selex

& kraft

• Our

first results

21© 2008 KPMG Advisory S.p.A., an Italian limited liability share capital company and a member firm of the KPMG network

of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.Efficient Consumer ResponseECR Ita liaEfficient Consumer ResponseECR Ita lia

Italian

Project objectives

•

Diffuse the SRP experiences deriving from ECR Europe model

•

Define a collaborative process for the development of SRP solutions

•

Identify tools in order to support SRP solutions’ development

22© 2008 KPMG Advisory S.p.A., an Italian limited liability share capital company and a member firm of the KPMG network

of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.Efficient Consumer ResponseECR Ita liaEfficient Consumer ResponseECR Ita lia

ECR Italy SRP Project Team

XForma

23© 2008 KPMG Advisory S.p.A., an Italian limited liability share capital company and a member firm of the KPMG network

of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.Efficient Consumer ResponseECR Ita liaEfficient Consumer ResponseECR Ita lia

SRP Development

in Italy

ECR model

diffusion

TheoryTheory DeveDeve-- lopmentlopment TestTestResearchResearch DiffusionDiffusion

State of the Art

Italianpeculiarities

Business Case

SRP implementation

24© 2008 KPMG Advisory S.p.A., an Italian limited liability share capital company and a member firm of the KPMG network

of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.Efficient Consumer ResponseECR Ita liaEfficient Consumer ResponseECR Ita lia

SRP Italian

Survey

2007: starting

point

Long-List möglicher Fondsgesellschaften22 Lack of common standardsLack of common standards

and supply chain costs as main SRP barriers

Long-List möglicher Fondsgesellschaften33 Easy to identify and to shelfEasy to identify and to shelf

as most important functional SRP requisites

44 In-store efficiency / better on shelf availability as SRP benefits:

more on the Retail sidemore on the Retail side……

Long-List möglicher Fondsgesellschaften11 LimitedLimited

diffusiondiffusion

of SRP solutions

25© 2008 KPMG Advisory S.p.A., an Italian limited liability share capital company and a member firm of the KPMG network

of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.Efficient Consumer ResponseECR Ita liaEfficient Consumer ResponseECR Ita lia

Long-List möglicher Fondsgesellschaften22 PotentiaPotential

common common standardsstandards

difficultdifficult

toto

applyapply

Long-List möglicher Fondsgesellschaften33 Adoption of 1 or 2 prioritiesAdoption of 1 or 2 priorities

in functional requisites

44 Better brand recognition: significant SRPbenefit

also on the Manufacturer sidealso on the Manufacturer side……

Long-List möglicher Fondsgesellschaften11 Confirmed trendConfirmed trend

of SRP expansion

SRP Italian

Survey

2008: one year

after

26© 2008 KPMG Advisory S.p.A., an Italian limited liability share capital company and a member firm of the KPMG network

of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.Efficient Consumer ResponseECR Ita liaEfficient Consumer ResponseECR Ita lia

Italian

peculiarities

in the ECR Europe SRP Model

••

Overall adherenceOverall adherence

to the ECR Europe model

••

Collaborative approach as essentialCollaborative approach as essential: SRP must not be a retailer’s push only…

••

Waste managementWaste management

as issue but still worthy effortworthy effort: - Limit different materials in the same SRP solution

- Adopt solutions in which materials can be easily separated

- Reduce primary package where possible

27© 2008 KPMG Advisory S.p.A., an Italian limited liability share capital company and a member firm of the KPMG network

of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.Efficient Consumer ResponseECR Ita liaEfficient Consumer ResponseECR Ita lia

ECR Italy SRP Pilots

Time

Pilo

t im

pact

M 1 M 2 M 3 M 4 M 5 M 6

New concept development

Already on going SRP solutions

Implementation of solutions already tested abroad

SRP complete solution developed in Italy

…

28© 2008 KPMG Advisory S.p.A., an Italian limited liability share capital company and a member firm of the KPMG network

of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.Efficient Consumer ResponseECR Ita liaEfficient Consumer ResponseECR Ita lia

ECR Italy SRP PilotsSRP Type

Channel

Category

Pilot impact

Auchan

-

CocaColaCarrefour

-

P&GEsselunga

-

Mars

ItaliaSelex

-

Kraft

Mono

MultiHigh Low

Shelf

tray

Ready

to

sell pallet

Beverage

Grocery

non food

Grocery

food

29© 2008 KPMG Advisory S.p.A., an Italian limited liability share capital company and a member firm of the KPMG network

of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.Efficient Consumer ResponseECR Ita liaEfficient Consumer ResponseECR Ita lia

A direct experience: SELEX & KRAFT a successful

balanced case

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Shelf Ready PackagingThe Balancing ActA successful experience

Economic PillarBerlin, May 29th

2008

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31

THE BALANCING ACT

Develop a WIN WIN WIN solution in order to understand

how to build and maintain a balance among the overall

involved factors

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32

AGENDA

Kraft and Selex

business

Category & Shelf

analyses

Project milestones

Test

results

Next

steps

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33

WHO IS KRAFT IN ITALY?

ti 2006

Helping People Around the World Eat and Live Better

Turnover €

626MM

990 people

3 plants

More than 12 brands

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34

AND... WHO IS SELEX ?

2007 Turnover €

7,400 MM;

Market share 7.7%;

18 associated groups;

Associated firm leading the projectis Ali in north east Italy

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35

WHY MAYONNAISE CATEGORY?

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36

WHY MAYONNAISE CATEGORY?Low category visibility and appeal in the aisleLimited / No presence of SRP for mayonnaise jars

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37

30”for 15

glass

jars

WHY MAYONNAISE CATEGORY?Long replenishment time / High risk of breakagesDifficult to handle in the store, especially 500ml jar

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38

WHY MAYONNAISE CATEGORY?Difficult identification of brands / variants on shelf

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39

WHY MAYONNAISE CATEGORY?

Risk of sales loss when the shelf is half emptied

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40

SITUATION ANALYSIS – CURRENT TRAY

Only

10% of clients

use current

tray

on shelf

# Jars 15# Facings 3 x 5Dimensions 26 x 44 cm

Logistic info on pack2 materials: carton + plastic

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41

Reasons

of not usage

of current

tray

SITUATION ANALYSES – CURRENT TRAY

Difficult handling

28%Low appeal / good

looking

44%

Carton

cover brand labels

28%

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42

PROJECT OBJECTIVES

Increase category/brand turn-overImprove category image & visibilityIncrease shelf density

Use SRP as POScommunication vehicle

Effectiveness & efficiencyof packaging cost

Improve identificationouter case in“back

store”

Reduce replenishment time

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43

STRUCTURE OF THE PROJECT

LABELS’

VISIBILITY

100% CARTON(one material)

NEW CARTON MATERIAL

COLOURED

GRAPHIC

NO(Plastic ensures

jars

transportation)

٧

NEW SRPJar

500ml

AREAS OF IMPROVEMENT

٧٧

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44

CONTROLLED STORE TEST

Alì

Point of sales (Selex)

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45

STRUCTURE OF THE PROJECTThree different store-formats

Supermarkets (1000 sm);Large supermarkets (1600 sm);Hypermarkets (2800 sm);

Weekly monitoring of dataSalesReplenishment timing#

of jars / facing on shelf

Shelf density

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46

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47

QUALITATIVE & QUANTITATIVE RESULTS

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48

SHOPPER PERSPECTIVE - QUALITATIVE

In-store

questionnaire

resultsBrand/Category more visible

72%

It

contributes

to make

shelf

tidier 68%

I Like

it!

65%

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49

TRADE EMPLOYEE PERSPECTIVE

Reduces

breackages

risk

Easier

to identify Easier

to replenish

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50

TRADE EMPLOYEE PERSPECTIVE

Quantitative results

-

timing

Pre

sorting

identification -80%

Back store

identification -45%

Replenishment -82%

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51

MAIN RESULTS - QUANTITATIVE

Project resulted economically positive!!!!

Sales Turnover +4%

Net impact PositivePackaging costs

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52

Evaluation

of further

improvements

on SRP

Roll-out

on national

scale

Opportunity

of SRP implementation

on:other sizes (250ml jar) & variants (Legeresse...)

Use SRP to communicate new news to consumer

NEXT STEPS

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53

A

WIN WIN

WINsolution

for all !!!

KraftSelex

and

final shopper !!!

THE BALANCING ACT

A successful story!!

54

Structure09.30 Opening Xavier Hua, Carrefour, and

Bernard Fradin, Kraft Europe

09.40 Social Pillar ECR Baltic

09.50 Economic Pillar ECR Italy

10.15 Environment Pillar ECR UK

10.25 Questions to panel of speakers

10.45 Refreshments

© IGD

Have you ever stopped purchasing food and grocery products as a result of any of the following?

11

15

17

27

28

35

35

28

0 20 40

Not stopped purchasing for any of these reasons

Learning more about how food is produced in a TV documentary

News stories about food scares (e.g. bird flu, foot and mouth)

Too much packaging

Hearing or reading about a company that made you question their ethics / values

Discovering from food labelling that products have ingredients you or a member of your family are allergic to

Hearing or reading about the government / politicians of the country which made you question supporting products from a particular country

Hearing or reading about a logo (e.g. organic or fair-trade) that made you question the claims made

Source: IGD Shopper Research 2007

% Main Shoppers

© IGD

Courtauld Commitment

• Aims:

– Design out packaging waste growth by 2008

– Deliver absolute reductions in packaging waste by 2010

Retailers’

commitment to reduction –

in UK

Source: The Brewery

© IGD

10

9

8

7

6

5

4

3

2

1

(GJ

/ Per

son

/ Yea

r)

Ener

gy u

se in

the

food

cha

in

Food supply (farm / sea as prepared food

leaving the factory)

Primary packaging

Secondary & transport packaging

Factory to shop

transport

Retailing Consumer shopping

Consumer cooling / freezing

Consumer cooking

49% 7% 3% 3% 3% 5% 16% 14%

Industry Council for Packaging & the Environment

Packaging protects far more resources than it uses

© IGD

Packaging Lifecycle & Secondary Packaging

Home

Retail

Extraction Manufacture Filling

Distribution

Inci

nera

tion

or L

andf

ill

Com

post

Return /

Reuse

Recycle

Tertiary Primary Secondary

Source: IGD Research

Secondary packaging design can have a major influence on the reduction of overall packaging and waste

© IGD

Examples of SRP and packaging reduction

Source: IGD Research

© IGD

2007Count: 48 cartons Pack: 6 across X 8 deepPallet Configuration: 8 cases/layer;

80 cases/pallet

2008Count: 35 cartons Pack: 5 across X 7 deepPallet Configuration: 9 cases/layer;

90 cases/pallet

New shipper case is more efficient and environmentally friendly USA / Macaroni & Cheese

BenefitsEasy open / Less laborEliminate overhang

Printed caseReduced case count

Reduces corrugate by 20%

© IGD

Germany / Central Europe Jacobs Coffee SRP tray facilitates in store handling with minimal outer packaging waste

Corrugate tray – No hood – No wrap

62

Structure09.30 Opening Xavier Hua, Carrefour, and

Bernard Fradin, Kraft Europe

09.40 Social Pillar ECR Baltic

09.50 Economic Pillar ECR Italy

10.15 Environment Pillar ECR UK

10.25 Questions to panel of speakers

10.45 Refreshments