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Category Management

Category Management is a way of thinking

This quick blog highlights that a category management mindset, i.e. category management is a way of thinking, is more important than the process, data used etc. Hard discounters and P/L manufacturers have been able to successfully grow their sales / share by focusing on meeting shopper demands. Hard discounters and P/L manufacturers generally have less resources (people, data, research) for category management but they have achieved sales / share growth due to having the correct mindset.      

Category Management can be described as a business model where manufacturers and supermarkets work collaboratively in long-term mutually beneficially relationships towards the common goal of maximising shopper and consumer satisfaction. The outcome of these partnerships should be to maximise the long-term financial results for manufacturers and supermarkets.  

Supermarket Industry financials

‘To put it bluntly, much of the $5.7 trillion global grocery industry is in trouble’

Source: McKinsey

(Reviving grocery retail: Six Imperatives, 2018)

The following industry financials have led some people to question whether a category management approach is the best approach for the supermarket industry.


“For grocers in developed markets, both growth and profitability have been on a downward trajectory due to higher costs, falling productivity, and race-to-the-bottom pricing. One result: a massive decline in publicly listed grocers’ economic value.”

Source: McKinsey

(Reviving grocery retail: Six Imperatives, 2018)

McKinsey research for large CPG manufacturers highlights that:

median revenue-growth rate has slowed dramatically, from 9.7 percent at the end of 2001 to a mere 1.2 percent at the end of 2018. At the same time, the costs to serve their retail partners (as a percentage of net sales) have been rising by an average 40 basis points since 2016.’

Source: McKinsey

(‘Power partnerships’: Manufacturer – retailer collaborations that work, McKinsey, 2019)

Increasing sales of hard discounters, P/L (private label), small brands and online have changed the structure of the industry. This has led to declining sales / profitability for some major supermarkets and brands. Category management is not the cause of the decreasing sales / profitability. Ironically, hard discounters, P/L (private label) manufacturers and small brands are using a category management mindset to grow their sales and share.

Hard discounters

Steenkamp and Sloot (Retail Disruptors, The spectacular rise and impact of the hard discounters, 2018) believe that hard discounters ‘have irrevocably changed the face of retail in Europe and Australia, and are making steady inroads into the US’. Hard discounters have achieved this growth by adopting a category management mindset. They have listened to their shoppers and improved their offer. Research highlights that shoppers have been switching to hard discounters due to an improved offer. Hard discounters have:

  • increased the number of SKUs ranged
  • increased the product quality
  • maintained competitive pricing

For example, as explained by Xan Rice (The Aldi Effect: how one discount supermarket transformed the way Britain shops. The Guardian. 2019) Aldi Britain developed their 1990’s offer from 600 basic items to nearly 2,000 SKUs. Aldi Britain also improved the quality of their range.

Aldi’s victory was to show there was no shame – and in fact there was satisfaction – in shopping at a discount supermarket’.

Source: Xan Rice

(The Aldi Effect: how one discount supermarket transformed the way Britain shops. The Guardian. 2019)

Australian research also highlights Aldi has adopted a category management mindset. Aldi Australia has won the Canstar Blue award for ‘most satisfied customers’ 7 out of 9 years to 2019. This independent research highlights that Aldi Australia has created on-going shopper satisfaction over the long term. Interestingly Aldi Australia has achieved this result without an e-commerce / online offer. This result in Australia has been in part due to Aldi changing shoppers’ perception of P/L (private label).

‘Private labels have traditionally been seen as the cheap and nasty alternatives, but perceptions are changing and consumers are switching to save. There has been a huge change in attitudes in a short space of time.’

Source: Canstar Blue

This research highlights that hard discounters, such as Aldi, have utilised a category management mindset. They have empowered their shoppers so now their shoppers decide their offer. The sales / share growth of hard discounters has decreased sales / share for full-service supermarkets and major branded manufacturers. This structural change in the supermarket industry has been a factor in decreasing financial returns for some full-service supermarkets and large manufacturers.

The key message here is that category management is a way of thinking, not a process. Hard discounters, such as Aldi, have a customer centric culture that focuses on understanding and meeting their shopper demands. Aldi does not have better suppliers or category process or more data etc. They actually have less data as they don’t have store loyalty cards! They have a category management mindset i.e. put the shopper first in the decision-making process.

P/L (private label)

When consumers consider quality, many view private-label products as good and getting better’.

Source: Nielsen

(The rise and rise again of private label, Nielsen, 2018)

Nielsen research (The rise and rise again of private label, Nielsen, 2018) highlighted that by 2016 P/L (private label) was 42% of sales in Spain, 41% in UK and 36% in Germany. Part of the sales growth of P/L (private label) is due to shoppers switching to hard discounters. The other major factor driving P/L (private label) sales growth is shopper satisfaction. This is an example of manufacturers and supermarkets adopting a category management mindset.

Previously, P/L (private label) was made to hit a certain cost / retail price point. This approach limited sales as shopper demands were not included in the decision-making process. Historic shopper research highlighted that shoppers thought P/L (private label) was an inferior product vs branded goods so shoppers did not buy it. Today manufacturers and retailers have improved the product quality of P/L (private label) to be similar to major brands. P/L (private label) ranges also meet shopper demands for value.      

“Globally, 39% of consumers single out value for money as the key factor influencing their choice of brand, followed by enhanced or superior quality (34%), price (32%) and convenience (31%). Meanwhile, only 28% of consumers are influenced by the fact that a brand is well known and trusted”

Source: Nielsen

(Consumer Disloyalty is the new normal, Nielsen, 2019)

The key point here is that category management is a way of thinking. P/L (private label) manufacturers and supermarkets have improved the quality of their range to meet shopper demands. This change in thinking has led to increasing sales of P/L (private label) in many markets around the world. Obviously, the sales growth of P/L (private label) has decreased sales for branded manufacturers.


The continued sales growth of hard discounters and P/L (private label) has highlighted the opportunity that adopting a category management mindset offers manufacturers and supermarkets. Interestingly these manufacturers and supermarkets generally have less resources (people, data, research) to invest into a category management process. What they do have is a category management mindset.

Unfortunately, many manufacturers and supermarkets, some with greater resources, are not achieving the same long-term financial success of hard discounters and P/L (private label). I strongly suggest that this is due to people having a ‘trading’ mindset whilst completing a process labelled category management.  

The information provided in this blog post was general in nature. If you require more information I offer a free initial consultation by completing a contact us form.

Thank you,

Tim Bowen