Category management was originally invented as a collaborative retailer-manufacturer effort to spur growth and profitability, while offering better service to the customer. In practice, the focus was on efficiency gains and cost cutting, therewith underexposing the important differentiation of the retail brand.
Elsevier Food International, Vol. 5, Number 3, September 2002
Pascal Kuipers

"Catagory management is yesterday's news", says Tom Stephens, president of Brand Strategy Consultants. "It's dead in the US. It failed miserably. It was intended to improve profitability and real value to customers by increasing line extensions and SKUs that make sense to them. But this intention did not come true. Category management has only been executed as a cost cutting process. With 99 per cent of North American retailers it's dead and finished."
John Zealley, partner at Accenture, thinks that "category management lies at the heart of value creation in the food industry". It is not dead. It is alive, but time is needed to upgrade the category management process from pure cost cutting to value creation. "For strategic purposes category management needs a three to five years time frame before it will give more value to the customer", Zealley says. "With few exceptions, however, most retailers have a short-term view as they are pressured to perform every quarter. The incentives people work under don't allow a longer term perspective and every quarter prices and conditions are renegotiated with suppliers. For real category management innovation is needed but there are lots of manufacturers whose growth resources are limited due to retailers' price focus. Time and a focus on output are needed to create value via category management. "
Exceptions to Zealley's rule are Tesco and Marks & Spencer. "With its Every Little Helps strategy, Tesco is pushing innovation forward", he says. "And despite its problems in recent years, Marks & Spencer have been renowned for their exceptional sense of value creation for its customers. If you look at the best practices shown at the ECR Europe conference, you can see how collaboration can make the difference. If this kind of category management was to become consistent behaviour, the situation in the food industry would be totally different. Compare it to industries like aerospace or automotive where commitment is long-term based, the food industry is essentially short term focused."
"Questioning if retailers use category management well enough to differentiate their retail brands, one can say that the more adversary retailer-supplier relations are, the lower the level of category management is", says Michael Kliger who is a Principal at McKinsey in Munich, Germany. "The level of category management in the UK is higher when compared to Germany, where it is reduced to merely improved buying. UK retailers structurally implement category management practices in their operations and relations."

Light category management
Time-consuming planning processes and the difficulty in scaling this across multiple categories is an often-heard stumbling block for retailers when they try to implement category management. That is why many retailers opted for a less ambitious operation than the original eight-step model for category management (see sidebar).
"We opt for a 'light' version of category management which offers our category managers more time to manage the category with a clear vision on the future", says Xavier Ury, director purchases development of the Belgian retailer Delhaize. "Category management isn't buying only. We compare performances and share best practices within the Delhaize group worldwide and we benchmark our performance with state-of-the-art retailers. For our key categories, we do not rely on category captains but we collaborate with different suppliers, large and small, even with specialists in niche markets with an interesting and value-added vision. This is essential: we ask suppliers to share their vision on the future and collaboratively we design category plans. Doing this in-depth for all 100 categories that exist nowadays is an impossible job. Therefore we opt for a light category management approach."
"The issue with the original eight-step process was not in its complexity but with several other factors", says Kevin Stadler, senior vice president collaboration and business solutions of IT solutions provider JDA. "Firstly, most companies implemented category management as a project based on workflow rather than a process-based one. Secondly, the steps in category management did not have defined data flows, and no standards for data exchange were created. This meant that most practitioners spent a lot of time on data manipulation and re-keying information. And finally, the process did not have an electronic protocol for information exchange. Most companies therefore could not implement category management as originally defined because they were islands." 
Stadler acknowledges that technological advancement is not the only answer to the trouble with category management. Unless there are standards and both retailers and manufacturers understand how the business process works collaboratively, then technology will only cure part of the issue", he says. "The concept of retailer and manufacturer working collaboratively to optimise a category is going to increase in the future. 11 may not be called category management but some form of collaborative commerce. The truth is that the eight steps of category management did not go far enough in defining the areas that manufacturers and retailers can provide business synergy by combining resources to optimise the value chain."
"Whether it's the eight-step or the day-to-day approach Accenture developed, companies should choose the most appropriate solution to their business", Zealley says. "But all of this just refers to the toolkit for category management. Essential is the mindset. Fresh and non-food categories are evolving. New formats (e.g. c-stores) gain market share. In general, complexity increases and therefore more collaboration is needed. No one can be an expert in everything."

Category management first developed in the 1980s in North America, where grocers had to respond to two issues: new competition from mass merchants who diversified in offering food items and increasingly sophisticated customers with constantly changing preferences. In need for differentiation of their store concepts retailers found in category management an interesting way to- in co-operation with their suppliers- efficiently service their target customers while lowering cost. With a new set of customer-focuses data, category management enabled fact-based decisions that aligned categories around customer requirements. Retailers could now buy and promote products based on solid statistics and through consumer research. Different category management processes exist but the most commonly known is the eight-step process developed by The Partnering Group.

Fresh category management
Most retailers look at the fresh categories to position their retail brands and in these categories there are not that many branded goods suppliers. The important fresh categories mainly fall under a retailer's remit and therefore the question arises as to whether category management as a joint retailer-supplier initiative is of limited importance, given that it concerns dry groceries categories

Canadiab retailer Loblaws' private label President's Choice, on sale overseas at Hong Kong retailer Park'n Shop (1998)

that will become less important for food retailers.
"I don't agree with identifying category management necessarily with retailer-supplier
collaboration", says Kliger. "That's one way of doing it. But whether you do it collaboratively or not, the ground rule is that a retailer manages each category as a strategic business unit to optimise customer satisfaction and category performance. One key element of category management is to become less supplier and more customer oriented.
Supermarkets don't necessarily need suppliers in managing a category strategically. In fresh categories they can rely on data they produce themselves. Discount stores on the other hand focus less on fresh food and more on dry groceries, whereas hypermarkets consider non¬food categories important USPs for their retail brand. The roles different categories play within the brand positioning depends on the retailer's customer target groups."
"No one would deny the importance of fresh categories for retailers, but personally I think that packaged goods will remain an essential component of the assortment", says Alain Galaski, CEO of the European Brands Association AIM. "Successful retailers will manage the right mix based on superior customer understanding. Category management can be done with any supplier, including fresh. In fact, the work ECR Europe did on day-to-day category management was intended to make it accessible to smaller players." Jeff Schomburger, Procter & Gamble's vice president customer business development Western Europe, is a strong believer in the benefits of specific packaged goods categories (in which his company holds a strong position) to distinguish the retail brand. "If you look at what grocery retailers all over Europe are doing with exciting Health and Beauty Care departments and innovative Baby Care Solution Centres, you can see that they clearly differentiate their shopping experience and add value to their target shoppers", he points out. "Many are 'branding' these departments and position these as a 'store within the store'. The category sales and profit growth for the retailers doing this is awesome."
Schomburger acknowledges that retailers sometimes lose perspective in assigning roles to specific categories to build loyalty of targeted shoppers. "Sometimes retailers focus more on efficiency aspects", he says. "And frankly, that's OK. But this work should be a mix of art and science versus a one-size-fits-all."

Real category management
Schomburger stresses that category management is by no means dead. Not in Europe and surely not in the us: "You only have to walk stores in the us and look at the sales and profit growth of US retailers to see that they significantly improved the shopping experience and differentiated their offer. Examples are Target, Publix, Harris Teeter, HE Butt, Safeway, Meijer and Kroger."
"US retailers' sales and profit growth and their improvement of the shopping experience and differentiation of the offer is due to a great number of factors", responds Stephens. "The fact that category management may well have contributed to that is no argument against it being dead today. That's like saying a person is not dead because their legacy still exists. If they're dead, they are! But their contribution is no less. My point is that many retailers hung their focus on category management and used it purely as a method to improve profitability and not to differentiate their store on the basis of better choice for the consumer. Choice to some means more and more SKUs. Choice to me means real choice: a limited number of the major brands and very strong private label. P&G especially would benefit from a reduction in useless (unprofitable in $ return) SKUs as most of their products are major brands that do command a presence on most shelves. Most US retailers believe in the right of every SKU (provided of course that it can pay its slotting fees) to be on the shelf. That's why they have in excess of 30, 40 and 50 thousand grocery SKUs and are not making any significant reduction in this massive commitment to so-called choice for the consumer. If category management was working, we would see a major reduction in SKU count and a major increase in Private Label facings on the shelf, as well as giving the consumer a real choice: four or five major brands as well as private label in each category. Category management as it was 'invented' has run its course, made a contribution and now we're on to other issues."