Knowledge Bank Blog, Category Strategy

Category Strategy: 4 Things to Think About – No. 1

Category Strategies are presumptuous

In the last few years we have done a lot of Category Strategy work for FMCG companies. We have worked in fresh, chilled and ambient food, in several non-food categories, in the UK and internationally.  In doing so, we have learnt a lot about key issues and opportunities for Category Strategy in our industry.  Over the next four weeks, we’ll talk about four big ones.

The first issue is that too often, Category Strategies are presumptuous.  They make the assumption that the audience will think it is crucial to grow the category, and that the category will receive decent investment. Anyone who has worked in a Retailer or multi category FMCG, will know that this can be a false assumption.

In fact, it is critical that before a Category Strategy identifies WHAT needs to be done to grow the category, it shows WHY growth is important. Those working day-to-day in the category (brand managers, the buyer) may not need convincing. But those with roles that span categories, who make choices on where to allocate investment and effort, often do.  And normally these people are essential to the Category’s success.

So how do you go about convincing them to get on board with the strategy?  By first clarifying the Role that the Category plays, for the Supplier and the Retailer.  In other words, why it is important.  And there can be three elements to this.

First the Commercial Role. What does it contribute in Sales, Growth and Margin?  Obvious but very important.  For instance, if a retailer doesn’t get it’s fair share of toilet paper sales, it is a big enough Category to hurt commercially.

Second the Strategic Role.  Beyond narrow Commercial performance, what does or could the Category do for the companies involved?  Take Ready Meals.  It is growing at the expense of scratch cooking.  Assuming it delivers greater profit per meal, it is therefore playing a premiumising role.  And with Grocery under pressure from Foodservice (Deliveroo, Just Eat), Ready Meals is key in the fight for share of evening meal.  In other words, it is playing a key battleground role against foodservice.  So we have two strategic reasons why Retailers need to focus attention and investment on Ready Meals.

Finally, the Reputational Role.  Sometimes companies do things for reasons beyond the purely Commercial or even competitive.  Take healthy snacking. Yes, it is in growth.  Yes, it can offer margin enhancement.  And it can plug losses from the decline of indulgent snacking.  But it is also important to companies, to do the right thing in the face of the obesity issue.  As a result, many Grocers are opening up space near the tills for healthy snacking brands.  There is a reputational reason for them to get behind healthy snacking.

So don’t be presumptuous.  Before you launch into HOW you will grow the category, be very clear on the Role the Category plays, and WHY it is important to focus effort on it. However obvious that may seem to you. Think about the Commercial role, the Strategic role and the Reputational role.

Next week, our second issue.  Too many Category Strategies are too complicated, and as a result some of their best thinking is lost.  What can you do to avoid that fate?