April 25, 2006

Excerpts: Shelf Life by A.J. Scribante

By: 800-CEO-READ @ 2:03 PM – Filed under: Management & Workplace Culture

This excerpt from Shelf Life: How an Unlikely Entrepreneur Turned $500 into $65 Million in the Grocery Industry is on how Pepsi recognized and took advantage of all that MAJERS (a company that helps grocery stores stay on top of their competitors' price offerings) offered. A.J. Scribante's story is an interesting one in that he took something already available (weekly grocery ads), combined them and made them into a product.
Aisle 11 The Shelf of Perpetual Learning
This is the story of an organization and an individual who recognized the value of what MAJERS did, and by intelligently implementing that service and information, achieved great things for that organization. The company I am referring to is Pepsi, and the individual is the companys then vice president Bob Sander. Pepsi Takes on the Champ, read the cover story of the June 12, 1978, issue of Business Week. It could have read, Bob Sander of Pepsi Takes On the Champ. I had been working with Coca-Cola with ten markets of coverage and Pepsi Cola with three markets. Each one quickly expanded to our fifty-five market coverage, and then to our total 102 markets. Coca-Cola had been a client of MAJERS since the early days of our business, and they too recognized the value of the information we provided. Over the years their account with us grew significantly, and top management was always interested in our presentations. All our accounts in the soft drink business received the same information. Coke was handled by our Atlanta office and Pepsi by our Stanford, Connecticut, office. In our Chicago office we handled RC while the Omaha office handled Dr. Pepper and 7-Up. Shasta was handled out of the San Francisco office. We tried to keep obvious competitors in separate offices, as to reduce any question of a conflict of interest, and our salespeople knew not to share information on their clients with others. We had a very strict policy: if they did share information about other clients, they would be fired. Just as we gave Coke the same information as we gave Pepsi, we also gave them seasoned, experienced individuals to service their account. But it was up to them to take maximum advantage of the information we gave them to increase their own sales. Coke couldnt afford to let Pepsi get all of the A ads in any specific market, so they didnt ignore our information. Then Pepsi began to get aggressive as well. My first pitch to Pepsi was back in 1968, when the soft drink giant was headquartered on Park Avenue in Manhattan. I wanted to talk to their VP of sales because most of the time the sales VP is the person who implements the promotional programs. At that time, the ear I was seeking was Bob Sanderss. I knew Bob from Scott Paper Company in Philadelphia, and had sold him our service when he was the VP of sales there. A few years later he relocated to Pepsi, so I was glad to have an old friend that would soon become a new contract. So we can review the value, why dont you pick several markets and put some information together, Bob said. Then come back in and share that with us. The presentation was made up in Pepsis new headquarters in Purchase, New York. Donald Kendall, CEO and chairman of the board of Pepsi, and the president, John Sculley, sat in on my presentation, in addition to fifteen or twenty others. They were excited because at that time we were offering them not just data, but also the promise that Id report back to them on a quarterly basis and make a presentation of the information wed found. Id point out to them the A ads that they were getting and we would make sure we covered the competitions activity as well. At first, I surveyed three markets for Pepsi. Since we were already doing business with Coca-Cola, the information database on carbonated beverages was there for me to analyze. We broke it down by performance over the past six months, then also by region, market, and account. I showed them the three markets and the information we had gathered and computerized from those markets. We could format it any way a client liked and it would show them what accounts in what market had the greatest potential. I showed them the A, B, and C ads they received in each of the three markets in addition to the ads received by each of the competitive brands. I also explained how the ad classification was determined. Because they were savvy, the chiefs at Pepsi were able to discern that this was significant information. Of course, they wanted to expand from the three markets I had shown them, Bob Sander told me. At that time MAJERS had fifty markets under analysis. Pepsi ordered a twenty-five-market study and then I went back and assembled the information and returned to make the presentation. At that time, we were able to demonstrate the A, B, and C ads, the weighting, and their share of the promotional activity. A simple presentation of facts showed that in one market Coke was outperforming Pepsi with a single act: getting more A ads than Pepsi. In another market, they were holding their own. In a third market, they were outperforming Coke. Sander saw where he had an opportunity. I want to implement this with my salespeople, he told me. He took his program and our information and built a system of incentives with his sales organization. It became MAJERSs information, it became the MAJERS system. The goal: to attack U.S. markets that were heavily dominated by Coca-Cola. In the 1970s, Cokes share of the domestic market was estimated at 34 percent. By working together with MAJERS information, in 1977 Pepsi increased its volume of units sold by 11 percent, while Coke only increased by 7.3 percent. In a period of five years, Pepsis share of the market had grown from 15 percent to 22 percent, giving Pepsi a reason to be optimistic for the future, and Coca-Cola a reason for concern. ------ I still feel we can be number one, Pepsis then president John Scully said in the June 12, 1978, issue of Business Week. Determined to continue to expand its share of the market, Pepsis managers constantly made calls to our people to inquire about specific ads. Bob Sander was determined to use feature ad placement to make Pepsi as big a player as Coke was in the retail soft drink market. During presentations, Sander and other Pepsi executives were particularly engaged, eager to know every detail about what ad combinations were running in each market, in addition to the size, displays, and subsequent sales from these features. Mike Allen took over the Pepsi account at MAJERS from Larry White in September 1981 after Larry was promoted to the newly created position of vice president of marketing. MAJERSs account with Pepsi was $300,000our companys largest at that time. Mike saw the potential for Pepsis growth, giving up other accounts to focus his attention on improving their sales performance. That Pepsi was our biggest client was due, in large part, to Bob Sander, Pepsis previous VP of sales, who made our weighted index of Pepsi/Coke feature activity a key sales incentive for his team. He included our measure in bi-monthly briefings to Pepsis chairman Don Kendall, When Ron Tidmore took over from Sander, he was equally focused on MAJERS and feature ads. His sales managers constantly called Mike Allen to question our classification of specific ads. Soon, we were refereeing in Pepsis hard-played game with an equally tough team from Coke. In the summer of 1982, at our annual planning meeting to finalize our commitments, Mike Allen presented Pepsis, and other clients, commitments to the company. During the prior five years, rapid sales growth came primarily from selling new clients. By 1982, we had sold over 95 percent of U.S. packaged goods companies, and Mike believed that future growth would have to come from expanding relationships and revenue with large, sophisticated clients like Pepsi. With the support of Mikes boss, John OKeefe, he proposed to focus most of his time on the high potential Pepsi account and give up a number of other accounts in his mission of delivering a large sales increase to MAJERS. His strategy paid off. With the help of our excellent research analysts, Rich Wellen, Kathy Finnegan, and Karen Walsh, Pepsi continued to increase market share in their dogfight with Coke, and within three years our annual revenues from Pepsi increased from $300,000 to more than $3 million. Allen loved making presentations to the Pepsi Bottling Group, where the companys president, Bob Detmer, executive vice president, Roger Enrico, and their team were intensely focused on beating Coke. One example of Pepsis attention to detail was when Coke began paying retailers to run multiple package ads, which included combinations of cans and bottles. Pepsi wanted to know every detail about these adswhat combinations of ads were running in which markets, and at what prices, and whether Coke was really getting incremental displays and sales from this strategy. Of course, MAJERS could provide all of that informationand more. Encouraged by Roger Enrico, we worked with marketers Frank Wainright and John Voaden to deliver a series of consulting projects using feature ad data, scanner and store delivery records, and in-store display information to understand Cokes strategy and formulate a response. Of course, we would have done the same thing for our client Cokeif they had asked. In February 1982 Allen presented the MAJERS system to eight hundred sales managers at the Pepsi Bottling Group Annual Conference in Palm Springs. For most clients, we developed slides at our own expense. But Pepsi wanted all of their presentations to be consistent. When Allen brought his draft presentation to Pepsis graphic artists, they had been instructed to redesign it as a dramatic five-screen show, complete with special effects. At the conference, Allen was surprised to find that most of the Pepsi senior managers used three-screen presentationsand only the highest officers John Scully and Roger Enrico used more than five. Clearly, features were a hot item for the company! As a result of our presentation, Allen was invited to speak at a similar conference for Pepsi USA, and then contracted to conduct ten regional workshops with their sales teams around the country. Later in 1982, Roger Enrico was promoted to president of Pepsi USA, and he brought Dan Clark with him from the Pepsi Bottling Group as vice president of marketing. Dan was seeking to increase the intensity of focus in smaller markets, beyond the 106 then tracked by MAJERS. Allen worked with him to develop a custom panel to track another 100 markets exclusively for Pepsi. Closing this sale brought Pepsis MAJERS account to more than $2 million annually. Around this time, Pepsi held one of their Top of the Top meetings, where CEOs of major grocery chains met with Pepsi senior management to discuss presentations by top people from major consultancies. I was invited to speak at this event and we were able to close the sales of several of our new products over the next few years. After that meeting, I gave Allen some specific actions that I thought would be beneficial for Allen to take at Pepsi. Allen considered them carefully, but decided that my recommendations were not right for the account at that time. I was quite persistent, and we discussed this with considerable energy on both sides. But then I relented and decided to allow the field generalMike Allenmake the final decision. He later told me that it was a real positive to work for a company where he could disagree with the founder with no negative effect on his career. Of course, Allen was delivering dazzling results. In early 1983, Allen walked into the office of Joel Mesh, research director at Pepsi USA, and almost tripped over a three-foot-high pile of boxes. Joel told him mournfully that Pepsi had contracted with a vendor to track in-store displays. But instead of getting reports and analysis, they only got reams of raw data. At MAJERS, Larry White and Bob Schmidt were in the midst of developing a MAJERS in-store display tracking service so Allens interest level in Pepsis data was high. He asked Joel Mesh to let him take a couple of boxes back to our headquarters and analyze it. Two weeks later, Allen was able to present the analysis of the data to Pepsis senior management team, which lead to an even larger consulting project for MAJERS. In late 1983, when Pepsi signed on as the first client for our display service, a key reason was that we had demonstrated our commitment to helping them use information to improve their business. The display contract put Pepsis account with us at well over $3 million annually. By 1984 our Pepsi account had increased to over $4 million annually and by 1986 we had a $6.5 million contract. As Pepsi pushed for greater growth and success for their operation, MAJERS was equally invested in helping them achieve those goals. The beauty of our business was that the stronger our relationship was with a client, the better results we could likely obtain for both of our companies. Our work with Pepsi became the epitome of a mutually beneficial relationship. By utilizing performance measurements and monetary incentives for its salespeople, Pepsi was able to overtake Coke at the retail level, though Coke would continue to dominate in sales of fountain syrup. But MAJERS wasnt in the soda fountain business. ---- This excerpt is from Shelf Life.