Legacy brands like Clorox and General Mills are facing increased competition due to store placement by retailers using their own data gathering practices to see what customers prefer to shop for and how they behave in stores, according to a report by The Wall Street Journal.
The change comes from grocers deciding to use their own research, as opposed to allowing the brands to dictate what they think is best in terms of shelf space. The change means that more smaller brands and niche products are starting to increase in sales.
“Our retailers have better information now,” General Mills Chief Executive Jeff Harmening said. “So more of our conversation is about ‘How do we drive growth together?’”
Retailers like Walmart and Kroger are using increasingly sophisticated data gathering tools that include things like video surveillance to study customers. They use metrics like “walk rates,” which measure how willing a customer is to search for an item before they give up.
High-yield grocery items get shelf space in what is called the “strike zone,” right below a person's eye level, according to Hershey Co. Chief Sales Officer Phil Stanley.
“There’s a lot more precision in how we think about the aisle today,” said Stanley.
Kroger especially has put a lot of money into collecting data, which has been altering relationships it’s had with big brands for years, said Michael McGowan, vice president of the company’s data analytics division.
“We’re also looking at customer loyalty metrics to assess how folks engage with brands,” McGowan said.
Many of the older brands have not kept up with customer trends toward healthier foods, and that has also been a factor in deciding shelf space.
Retailers would often listen to what they called “category captains” in things like cereal and soup because those companies spent the money on research, but things have changed and retailers are relying more and more on their own data.
One former Kroger executive said the relationship between retailers and legacy brands has forever changed.
“It used to be more of a personal relationship,” he said. “It’s become cold, hard facts that make decisions.”