Many in-stores that employ category management find their systems are too inflexible for bakery nuances. Brookshire’s system works out the kinks in bakery to allow greater focus on true profitability and staff training.
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You're an in-store bakery director and your manager shoots an email requesting you to update your sales and gross margin forecasts for the next two reporting periods. And, your manager wants the figures for a senior management meeting in two hours. If you're like many of your counterparts in the industry, you will scramble, pulling your initial forecasts, applying guesstimates based on current sales trends, accounting for any changes in promotions and drawing on gut feelings for good measure. You then will hold your breath as you click “send” when forwarding your update.
But, relying on guesstimates and gut feelings ensures accuracy only slightly better than had you thrown a dart while blind-folded. In-store management at Brookshire Grocery Co., Tyler, Texas, believes dart-throwing belongs only in family rec rooms and taverns.
Since applying new management tools during the last 12 months, “We now make decisions based on facts and not on opinions based on personal preferences,” observes Linda Wiggins, vice president-bakery/deli operations. She and other company officials are developing a business strategy designed not only to track and forecast financials quickly and accurately but to enable each of the firm's 149 stores in five states to meet local customer needs. The strategy includes:
introducing category management to optimize inventory control, to identify top sales potential by product and to build sales and profits;
tapping the company's newly installed state-of-the-art software network to retrieve and analyze bakery sales performance data precisely and at nearly real time;
organizing stores into market clusters based on local demographics, not geographical location; and
developing a product knowledge-based training program that will help turn all store employees into sales “ambassadors.”
Brookshire applied category management to bakery operations about 18 months ago and implemented the software to track sales performance only a few months ago. Yet, the changes already are yielding positive results, officials say.
They point to greater ability to identify products with strong sales potential, capacity to adjust product lines more quickly, consistency in store-to-store bakery offerings, greater control of costs, enhanced product quality and fewer stales without corresponding losses in sales.
“Before category management, we based decisions on movement through our warehouse and central bakery, sales through the cash registers and, too often, on gut feelings,” recalls John Rose, category manager — bakery. He is responsible for selecting and purchasing products from vendors and Brookshire's central bakery, setting retail prices, tracking sales by product category and meeting gross margin goals.
Rose collaborates with Wiggins, who within her management responsibilities, focuses on bakery sales, merchandising, training and labor costs. She is supported by six bakery/deli zone supervisors. A bakery manager's job includes, among other duties, displaying products correctly and in appropriate quantities, selling them and controlling stales to help support gross margins.
Each supervisor is responsible for 20 to 30 bakeries. Supervisors establish bakery labor hours in consultation with store directors. Though Rose is not responsible for labor costs, he considers labor when selecting products, ensuring that employee skill sets and equipment are in place and that labor costs can be justified.
“We can dig into a product category, break it apart and see unit and dollar movement, stales and returns, as well as margins. All of this is on an Excel spreadsheet,” Rose says. “This allows us to identify which products are selling in which stores. We can quickly see those products that need attention.”
After analyzing product sales and unit movement, Rose regularly updates the bakery schematics, or planograms, which were developed with the introduction of category management. To ensure that schematic-based displays and sales are not compromised during holidays, the bakeries set up two 6-ft. tables each to display holiday products, based on schematics for the tables.
“Having precise sales data by category in each bakery and schematics to merchandise the products have enabled us to pinpoint weak points quickly and address them. Category management and merchandising work in concert to get the results we want,” Rose notes.
The system takes guesswork out of product management, especially when introducing new products, he continues. “We introduced crusty bread products and bagels each about a year before our consumers had accepted them,” he recalls. “We could not track exactly how much product was moving when and where. As a result, we threw out a lot of bagels and crusty breads. Now we can pinpoint sales activity exactly.”
Category management also appears to reduce stales without losing sales. “Historically, we always thought 10 percent stales was a good figure — at 6 percent you would lose sales, at 15 percent you probably would go out of business,” Rose says. “Since we introduced category management, we've seen stales drop regularly to about 6 percent. But, we need more time to see if 6 percent is a realistic figure.”
To ensure that category management would be effective and efficient, the company last year invested in state-of-the-art software company-wide, replacing several different programs used by various departments. The new program enables all departments “to speak the same language,” which results in uniform reports.
Each department uses features applicable to its operations. For in-store bakery, recording, analyzing and displaying category management reports is a primary function. The system can generate a wide variety of reports, based on purchases through the central warehouse and from the central bakery; in-store labor hours; and scanned sales data, including product variety and price with date and store location.
Sales of random-weight items, for example donuts, cookies and bagels, require cashiers to check price look-up codes and enter prices manually. “If the system has a weak spot, this is it,” Rose says. “But, manually recorded sales are very small. The lion's share of bakery sales is scanned with bar codes provided by manufacturers, our central bakery or our in-store bakeries' scales.”
The reports, presented on Excel spreadsheets, show how each product category contributes to bakery sales and profits.
“The software allows us to change products easily because we see exactly how products are selling and contributing,” he says. “For example, we launched a gourmet cinnamon roll line last summer, and we've been able to track the sales every day in every store. We can compare them in many ways, such as tracking their sales trends by store banner or location.”
Bakery/deli Director Wiggins adds that the reports also help better manage holiday products. For example, “if a bakery over-surveyed [over-ordered] a product, the daily sales data would identify the problem,” she says. “The bakery manager could develop an exit strategy to minimize the damage and not be saddled with excessive unsold product.”
Further, Rose uses the price data to ensure that the bakeries sell their products at correct prices. “We might see a store selling a coffeecake at less than what other stores are pricing it. That price may be correct; but, at least, we can almost immediately spot the difference to question it.”
Despite the software's rapid speed, Rose explains that he obviously cannot monitor every product in each bakery every day. The company recently initiated schedules for category reviews. In bakery, Rose identified 10 major categories and reviews one each month, breaking it down to its smallest elements, such as number of SKUs, cost, sales dollars, gross margin, percent of bakery sales, suppliers, etc.
The process requires almost a month to review one category thoroughly. “We compare products within the category and the category as a whole to bakery sales, and make adjustments as needed,” he says.
For example, bread products break down to artisan, organic, retarder-to-oven and other breads. “We might learn that sales of organic products are doing fine, but that margins are off our goals,” Rose explains. “Maybe we would decide to leave organic breads alone — units are growing. Our focus is on margin dollars, not margin percentages. We take margin dollars, not percentages, to the bank.
“Unit sales continue to rise, so we decide to make up the low margin with another bread product. A coordinated strategy enables us to reach our goals for the bread category.”
To avoid problems by waiting 10 months for a category review, Rose occasionally performs a quick scan of a category to ensure its performance is on track. For example, zone supervisors recently have been focusing on increasing sales of fresh-from-the-oven French bread, sold beginning at 4 p.m. near the checkouts.
“We know our sales from year-ago periods. With a few clicks of the mouse, we now can check sales each day. This doesn't require a whole category review,” he says. “The software allows us to act or react quickly, rather than wait until it's too late to take advantage of an opportunity or fix a problem.”
The category management and software programs also will enable Brookshire stores to optimize a plan to offer products targeted to their local demographics.
Currently, the company is organizing its service-oriented Brookshire's and Super 1 Foods warehouse stores into three or four clusters. The clusters will be identified by demographics, not by geography, for category management purposes. Rose notes that clustering will be facilitated because product lines and prices in the two store formats largely are similar.
“Using clusters will allow us to apply category management specifically to stores in their clusters rather than using a one-size-fits-all approach,” Rose says. “For example, we have stores in Louisiana that sell loads of king cakes before Lent. If you were to display king cakes in a West Texas store, many customers wouldn't recognize them; that would require a different sales approach.”
Though packaged bakery foods with bar codes are a boon to tracking sales, they have led to more self-service merchandising, which according to Wiggins, has reduced customer contact and, thus, opportunities to sell product. To increase employee-customer interaction, she is championing a product knowledge-based training program.
The goal is to educate every sales person in every bakery to sell every product effectively. “They will do it by engaging customers on the sales floor, not only from behind the service cases,” she says. “They will be on the floor with product samples, explaining the products and suggesting that customers try them. When customers taste the products, we believe they will buy them.”
Under development during the last several months, the program includes creation of laminated product information cards. Manufacturers have helped to provide information for talking points. For example, one card describes the cinnamon rolls introduced last summer. Points include that the rolls are baked fresh in store and are prepared with the best quality icing, cinnamon and other ingredients.
“Repetition will reinforce the sales staffs' product knowledge and build their confidence in interacting with customers,” Wiggins notes.
The initial cards focus on fresh-baked in-store products for the first 12 weeks. The second 12 weeks will cover health-oriented items, such as sugar-free, gluten-free and other products. “Consumers, including diabetics, don't think of the bakery for their dietary needs,” she says. “We need to educate consumers that our bakeries offer these products.”
The program, which ultimately will include all departments, will involve all store employees. For example, one week before weekly Wednesday promotions, a store's training coordinator will ensure that each store employee will have tasted the products to be featured. Employees will offer their opinions about the products and sign a sheet indicating that they participated.
“By having this product knowledge, cashiers, for example, will be able to engage in conversations with customers while they check out. Everyone in the store will be promoting the products,” Wiggins says.
She acknowledges enabling greater interaction with customers has raised concerns about increased labor costs. The company is examining opportunities to assign clean-up tasks in bakery, deli and other departments to a store sanitation crew that would work throughout the store.
“To develop labor allocations, we're conducting activity-based [time-and-motion] studies to identify the time necessary to perform each task,” Wiggins says. “We're doing this in conjunction with establishing sales goals.
“It's conceivable that we can improve contribution to overhead by having a skilled sales person sell more product, offsetting the additional cost of the sanitation crew.” Longer term, bakery and other departments will be able to attract better-qualified employees, “who really enjoy food and want to sell it,” she adds.
During Modern Baking's visit, Brookshire's had begun testing the program, and Wiggins expected it to be introduced in four test stores by April with a company-wide roll out by Oct. 1. Results to be tested include departmental sales, as compared with stores without the program, and sanitation audits prior to and after the tests.
“Supermarket operators have sought to improve their bottom lines by reducing costs, mostly in labor hours. In bakery, excessively cutting labor will lead to box [cold-spot] bakeries, nothing more than center store displays,” says Wiggins. “Our customers want to experience fresh, good food, and this program will give us the ability to sell our way into greater profitability.”
Rose and Wiggins believe having category management, stores clustered by demographics and better-trained employees will empower the bakeries to better weather the economic recession. The privately-held company does not release sales or earnings; however, Rose notes that the bakeries are profitable, adding that “sales are holding their own. The trend remains good in large part because our customers continue to reward us with repeat sales.”
Wiggins and her team will be particularly busy the rest of the year. While she rolls out the training program, Rose will be getting through the first round of category reviews by November.
“It will be tedious. But, after we have history for each category, the process will run more smoothly,” he says. “After that, we will have a challenge to integrate the bakeries into the clusters. Clustering will dictate product mixes that match the bakeries in each cluster, regardless of banner. This will be a lot to juggle.”
Undertaking these projects, while confronting a recession, will be no mean feat. Yet, Brookshire's bakery team can take comfort knowing that they have at their disposal tools that most other in-store operators only dream of having.
Headquarters: Tyler, Texas
Web site: www.brookshires.com
Senior bakery management: Linda Wiggins, vice president, deli/bakery operations; Chris Mooney, vice president, category management-fresh; John Rose, category manager-bakery; Ronnie Brown, Charlotte Eldridge, Roy Hahn, Trina Hamill, Kathy Levingston and Joe Owen, bakery/deli zone supervisors; Nancy Brown, bakery inventory control analyst
Number of stores with bakeries: Brookshire's Food Stores, 119; Super 1 Foods warehouse stores, 29; Olé Foods, 1
Store/bakery sizes: 20,000 to 80,000 sq. ft./824 to 1,000 sq. ft.
Market served: North Central and East Texas, Arkansas, Louisiana, Mississippi
Number of bakery employees: 3 to 12 per bakery
Products: full line with nearly 500 products of 700 available offered daily
Major in-store production equipment: vertical mixers; roll-in proofers, retarders; fryer; rotary rack and/or revolving tray ovens, cake image projector, computerized decorating machine, bread slicer, walk-in refrigerator/freezer
Plans: fully integrate bakery category management; assign bakeries' product lines based on local demographics; roll out product knowledge-based employee training to increase sales
Bakery supply distributors: Brookshire Grocery central warehouse, SouthWest Foods (company central bakery), Merchants Bakery Supply, Bakery Crafts