Mushroom Council Shrink Findings

1
Mushroom Council Shrink Findings

• Prepared by
• Perishables Group, Inc.
• May 2003

2
Table of Contents

• Page
• Introduction 2
• Objective 3
• Approach 4
• Summary of Findings 6
• Store Performance 11
• Research Findings 16
• In-Store Findings 31
• Conclusions 45

SaveMart\PrivateLabelResults.ppt
3
Introduction

• In 2001 and 2002, the Mushroom Council and the
  Perishables Group Inc. initiated research to
  understand the factors leading to and effecting
  shrink in the mushroom category.
• Utilizing the Mushroom Councils current retail
  database, retail practices show dramatic
  variations in shrink from store to store and
  chain to chain.
• Through analysis of the data and conduction of in
  store intercepts and in store-testing, the
  Mushroom Council has developed a greater
  understanding of the causes of shrink and has
  developed specific recommendations to retailers
  to help improve overall mushroom sales and
  profitability.

4
Objective

• The main objective of the research was to
  identify key factors and causes of shrink at
  store level.
• This involved
• identifying those factors leading to shrink
  (e.g., shelf temperatures, backroom procedures,
  ordering procedures, merchandising practices).
• documenting how shrink varies by store based on
  current operating procedures.
• determining mushroom category shrink levels that
  optimize performance.
• reviewing and summarizing findings at retail to
  document optimum factors minimizing shrink while
  maximizing volume.
• testing recommendations and finalizing the
  practices that result in optimum shrink
  management.

5
Approach

• Work associated with the research included
• Working with four chains from different regions
  of the country to participate in the research
• Schnucks, SaveMart, Kroger Atlanta, and
  SuperTarget
• Collecting, cleaning, and processing scan and
  shipment data for the 4 chains.
• Running a linear regression on shrink to
  determine what factors correlate with shrink.
• Analyzing shrink levels at store level by package
  type to understand item level differences.
• Measuring demographic differences based on store
  type.
• Creating high shrink and low shrink clusters
  based on each chain.

6
Approach (-continued-)

• Work associated with the study included
• Conducting in store audits (2 surveys) to
  determine and document factors influencing shrink
  such as space allocation, handling procedures,
  and assortment.
• Correlating the store audits to actual shrink
  factors to determine the relationship between the
  two.
• Interpreting actual findings and identifying the
  main contributors of shrink.
• Applying recommendations into the high shrink
  stores to measure impact of adjustments at
  retail.
• Determine impact made at store level by stores
  following shrink reduction measures.
• Results follow.

7
Summary of Findings
8
Summary of Findings

• RESEARCH FINDINGS
• 1. High shrink stores average shrink is almost 3
  times (25 versus 9) that of the low shrink
  stores.
• 2. Stores that keep their bulk and packaged
  mushrooms in different locations at retail have
  higher shrink.
• 3. Allocation of mushroom space based on
  department dollars and category contribution is
  critical!
• 4. High shrink stores are over allocating on
  brown and specialty mushrooms and under
  allocating on whites.
• 5. Shrink awareness charts in the backroom are a
  factor in controlling shrink at store level.
• 6. Stores who utilize one person to write the
  mushroom orders have significantly lower shrink.
• 7. Store placement is not a key factor or cause
  of shrink.
• 8. Backroom receiving and rotation are not a
  cause of shrink when comparing high and low
  shrink stores.
• 9. Adjacencies are not a key factor or cause of
  shrink.

9
Summary of Findings (-Continued-)

• RESEARCH FINDINGS
• 10. High shrink stores have more out of stocks
  (8 on average) compared to low shrink stores.
• 11. High shrink stores are averaging
  significantly more markdowns than low shrink
  stores.
• 12. Mushrooms on the shelf are being
  over-allocated in high shrink stores.
• 13. High shrink stores have higher packaged
  temperatures (averaging 48 degrees).
• 14. Product quality does not appear to be an
  issue on the retail shelf as it relates to
  shrink.
• IN-STORE TEST FINDINGS
• OVERALL FINDINGS
• 1. Tests showed Retailer A stores reducing
  shrink while Retailer B stores increased shrink
  considerably.
• 2. Multiple package types of white whole
  mushrooms are impacting shrink significantly in
  the negative direction.
• 3. Opportunities exist to do follow up testing
  on shelf inventories as well as reduced whole
  white sets (will be incorporated into cold chain
  study).

10
Summary of Findings (-Continued-)

• IN-STORE TEST FINDINGS
• RETAILER A FINDINGS
• 1. Test stores decreased their shrink
  percentage 6 compared to a year ago during
  the same time period.
• 2. Test stores increased their volume (9),
  dollars (12), and Profit (33) significantly.
• 3. Brown subcategory shrink increased 12
  versus a year ago while the white (8) and
  specialty (4) categories recognized declines
  in shrink.
• 4. Packaged and Bulk shrink declined 6
  comparing 2002 to 2001 in the test stores.
• 5. Bulk white mushrooms contributed the highest
  shrink percentage at 57.
• 6. On average, the test stores saved 30
  dollars per store per week compared to a year
  ago.

11
Summary of Findings (-Continued-)

• IN-STORE TEST FINDINGS
• RETAILER B FINDINGS
• 7. Test stores increased their shrink
  percentage 13 compared to a year ago
  during the same time period.
• 8. Test stores decreased their volume (10),
  increased dollars (2), and Profit (7)
  significantly.
• 9. All subcategories shrink increased on
  average 10.
• 10. Packaged and Bulk shrink increased 12
  comparing 2002 to 2001 in the test stores.
  
• 11. Whole 8oz shrink increased significantly
  (21) in 2002. Sliced shrink declined 5.
• 12. Bulk Oyster mushrooms contributed the
  highest shrink percentage at 95.
• 13. On average, the test stores lost 99
  dollars incremental per store per week
  compared to a year ago.

12
Store Performance
13
Shrink Percentages

• 20 stores from each of the 4 chains were
  utilized to measure category performance. The top
  10 stores with the lowest shrink percentage and
  the bottom 10 stores with the highest shrink
  percentage were used for the test.
• High shrink stores average shrink is almost 3
  times (25 versus 9) that of the low shrink
  stores. Shrink is higher at both the subcategory
  and segment level. Over a 52 week period the
  difference in dollars lost for a 100 store chain
  with 25 mushroom shrink would equate to 244
  thousand dollars (based on weekly mushroom sales
  of 281).

1
14
Store Performance

• Stores with low shrink contribute considerably
  more to department sales with mushrooms then high
  shrink stores.
• Based on a 100 store chain with department sales
  of 25,000 per week the .9 difference in
  contribution equates to an extra 1.17 million in
  mushroom sales over a 52 week period.

15
Store Performance

• Low shrink stores are performing better in
  overall volume, dollars, and profit on a per week
  per store basis.
• Shrink plays are large factor in overall mushroom
  sales. Stores controlling their shrink perform 3
  times as well!

16
Demographic Information

• Stores with lower shrink have a higher
  percentage with family income above 30K and
  average produce dollars above 32K.
• Statistics show there is a relationship between
  department dollars, income, and shrink (see page
  16). No high shrink stores had department dollars
  above 32K.

17
Research Findings
18
Product Allocation

• Stores that keep their bulk and packaged
  mushrooms in different locations at retail have
  higher shrink.
• 28 of high shrink stores (twice that of low
  shrink stores) keep their bulk product separate
  from their packaged product. Low shrink stores
  (89) allocate their bulk and packaged mushrooms
  in the same section.

2
19
Space Allocation

• Allocation of mushroom space based on department
  dollars and category contribution is critical!
  Low shrink stores carry over 2 times as much
  space (square feet).
• While set size appears to be in line with shrink
  loss, drilling down further to package type (see
  the next 3 slides) reveals a disconnect in actual
  space allocation.

3
20
Space Allocation

• High shrink stores are over allocating on brown
  and specialty mushrooms and under allocating on
  whites.
• High shrink stores are carrying the same amount
  of Portabella space as low shrink stores.

4
21
Space Allocation (continued)

• High shrink stores should not be carrying the
  same amount of space on exotics since their sets
  are twice as small.

4
22
Shrink Signage

• Shrink awareness charts in the backroom are a
  factor in controlling shrink at store level.
• 67 of high shrink stores use no signage in the
  backroom!

5
23
Ordering Protocol

• Stores who utilize one person to write the
  mushroom orders have significantly lower shrink.
• Only 67 of high shrink stores use the same order
  writer on a regular basis.

6
24
Store Placement
7

• Store placement is not a key factor or cause of
  shrink.
• Surprisingly, a higher percentage of low shrink
  stores keep mushrooms in the back of the produce
  department.

25
Backroom Receiving
8

• Backroom receiving and rotation are not a cause
  of shrink when comparing high and low shrink
  stores.
• It appears stores have a backroom protocol in
  place.

26
Product Adjacencies

• Adjacencies are not a key factor or cause of
  shrink.
• Highest of adjacencies are coming from packaged
  salads. 94 of high and low shrink stores have at
  least one adjacency next to cooking vegetables or
  packaged salads.

9
27
Out of Stocks

• High shrink stores have more out of stocks (8
  on average) compared to low shrink stores.
  Portabellas are driving the out of stocks.
• It appears that Portabella product is being
  thrown away. Out of stocks were also 7 higher on
  Mondays than on Fridays.

10
28
Markdowns

• High shrink stores are averaging significantly
  more markdowns than low shrink stores.
• More markdowns implies there is a higher amount
  of poorer quality product on the shelf. There are
  3 more markdowns on Monday compared to Friday.

11
29
Inventory on Shelf
12

• Mushrooms on the shelf are being over-allocated
  in high shrink stores (package counts for whites,
  portabellas, and specialty mushrooms are similar
  in low shrink stores).
• Smaller stores with less shelf space should carry
  less product. Stocking over 3 high causes product
  breakdown. Package counts on the shelf remain
  consistent between early (Monday) and late
  (Friday) week.

30
Product Temperature
13

• High shrink stores have higher packaged
  temperatures (averaging 48 degrees).
• 40 degree temperatures are leading to product
  breakdown. Older cases could be causing the
  higher packaged temps. Temperatures did not vary
  in the cases by day.

31
Product Quality
14

• Product quality does not appear to be an issue
  on the retail shelf as it relates to shrink.
• Product quality appears to be consistent in both
  high and low shrink stores. White product quality
  was slightly better on Friday (higher of good
  ratings).

32
In-Store Findings
33
Retailer A Shrink Comparison

• Test stores decreased their shrink percentage 6
  compared to a year ago during the same time
  period. Stores not adjusting their sets remained
  flat in their shrink percentages.
• By adhering to the merchandising and assortment
  protocols, the test stores out-performed the rest
  of the chain in shrink declines.

1
34
Retailer A Category Performance

• Test stores increased their volume (9), dollars
  (12), and Profit (33) significantly.
• Adhering to the standards helped increase overall
  category performance in the test stores.

2
35
Retailer A Subcategory Shrink

• Brown subcategory shrink increased 12 versus a
  year ago while the white (8) and specialty (4)
  categories recognized declines in shrink.
• Opportunity exists in refining overall brown
  square footage at Retailer A.

3
36
Retailer A Package Type

• Packaged and Bulk shrink declined 6 comparing
  2002 to 2001 in the test stores.
• While shrink improved, overall percentages are
  higher than optimal.

4
37
Retailer A Shrink Item Detail
5

• Bulk white mushrooms contributed the highest
  shrink percentage at 57.
• Small bulk white should not be included in lower
  income/smaller departments when bulk white large
  are also offered.

38
Retailer A Shrink Dollars Lost

• On average, the test stores saved 30 dollars
  per store per week compared to a year ago. This
  represents a dollar savings of 18.
• When stores follow an operating protocol, the
  benefits achieved can be significant.

6
39
Retailer B Shrink Comparison

• Test stores increased their shrink percentage
  13 compared to a year ago during the same time
  period. Stores not adjusting their sets increased
  their shrink percentages 3.
• Why protocols were put into place, it appears
  ordering and shelf inventories accounted for
  inflated shrink averages.

7
40
Retailer B Category Performance

• Test stores decreased their volume (10),
  increased dollars (2), and Profit (7)
  significantly.
• While volume declined, overall dollars and margin
  increased slightly.

8
41
Retailer B Subcategory Shrink

• All subcategories shrink increased on average
  10.
• Since merchandising and assortment practices were
  being monitored, it appears shelf inventories
  were driving shrink up.

9
42
Retailer B Package Type

• Packaged and Bulk shrink increased 12 comparing
  2002 to 2001 in the test stores.
• Improvements need to be made to current Retailer
  B protocols and standards.

10
43
Retailer B Top 3 Items

• Whole 8oz shrink increased significantly (21)
  in 2002. Sliced shrink declined 5.
• Retailer B is generating 75 of their sales
  volume from the top 3 items.

11
44
Retailer B Shrink Item Detail
12

• Bulk Oyster mushrooms contributed the highest
  shrink percentage at 95.
• While Bulk Specialty were not recommended in the
  test sets, some stores did bring in product
  during the test (negligible in movement).

45
Retailer B Shrink Dollars Lost

• On average, the test stores lost 99 dollars
  incremental per store per week compared to a year
  ago. This represents a dollar increase of 80.
• High white shrink percentages are driving total
  dollars lost.

13
46
Conclusions

• Although are findings were divided when comparing
  Retailer A to Retailer B, it does appear that we
  were able to glean information that does
  highlight the fact that assortment and
  merchandising standards are critical in
  controlling overall shrink. What we do know is
  that for lower income and smaller departments
• 4 foot sets are optimum.
• Bulk Specialty products should not be carried.
• 14oz Stuffers and 16oz White Whole should not be
  carried due to excessive amounts of whole white
  product on the shelf.
• Bulk brown assortment should be limited to
  Ports.
• Mushrooms as well as other highly perishable
  produce items must be given greater attention
  everyday.