The Supply Side: Nestle studies SNAP impact on product sales

by The City Wire staff ( 51 views 

There are 47 million consumers receiving SNAP benefits (commonly known as food stamps) that equate to $74 billion in annual food sales. Wal-Mart, as the nation’s largest grocer, has said it garners about 18% of the SNAP market, or roughly $13.2 billion in annual sales.

Nestle, a large food supplier to Wal-Mart Stores, began two years ago to measure the SNAP benefit on its company sales at Wal-Mart using analytics and point-of-sales data. Nestle said this study does not take in account the SNAP cuts that took place late last year.

“We set out to discern when SNAP customers shop — the day of the month. Where they shop — which stores. And we used sales data to figure out what products they were buying. When you know all of this about shoppers you have a trifecta that can help influence sales, by making sure you have the products they want in the stores they shop on the days they shop,” said Ginger Brooks, director of strategic marketing for Nestle.

Brooks and four of her colleagues presented the case study at the recent Supply Chain Conference at the University of Arkansas.

Brooks said Individual states oversee the SNAP payments and dates of fund deployment range from every day of week in some states, while others issue SNAP only on the first to the fifth day of the each month. Still, others pay mid-month and a few states pay at the end of the month.

Nestle then looked at which Walmart Stores were high traffic SNAP sites and began to track the sales data of the large count Hot Pocket items in those stores.

Brooks said Nestle’s sales increase for Hot Pockets mirrored the dates of SNAP fund payments. By the fifth day of the month in Arkansas the product had a 200% lift in sales directly linked to the SNAP payments. In Arkansas, she said about half of the Walmart Stores are high SNAP usage.

“That’a big impact with not a lot of recovery time for the supply chain, especially when you consider they are always shopping on the same day. In Georgia the SNAP funds go out every other day, and the stores have little time to recover,” Brooks said.

The propensity to be out-of-stock is high just after the SNAP deployment dates so Nestle worked with their supply chain and the retailer to make sure they have product in the stores, especially those with high demand. Cheri Dillard, supply chain manager for Nestle, said it is a supplier’s nightmare to have SNAP funds paid and shelves empty at the retailer.  

“Over 50% of SNAP shoppers don’t own a vehicle. They are depending on someone else to get them to store for their shopping. If we don’t have the products they want on the shelf that day, they are not going to come to back. It is a lost sale,” Dillard said.

She said shelf space is limited especially when trying to place enough product to handle a 200% sales increase, and it’s likely suppliers don’t have enough modular space in the typical aisle placement. In some cases Dillard said the sales lift is much higher than 200% on SNAP days. She said it is important to work with the category manager on sales feature promotions that provide for additional buying and storing of product.

But that’s not enough. Nestle has its own team of merchandisers out in the high SNAP user stores working with Walmart Store management to make sure they have enough product on the floor the days SNAP funds are paid. Dillard said every store has its own specific replenishment plan for Nestle product, a plan that was put in place after all data was mined, including SNAP payments dates and regular payday cycles like the first and the 15th of each month.

“We can’t have products sitting unsold for two weeks in one store and shelves empty in other stores. So each store has its own plan,” Dillard said.

Greg Kessman, supply chain director for Nestle, said getting the product to the store on time is just half the battle. Nestle also went to work setting up an alert system that is triggered when shelves are empty, but the product is somewhere in the back room.

“We know out-of-stock is a huge opportunity and Nestle set out to measure its true lost sales from on-shelf availability issues with data analytics written in-house,” Kessman said.

The off-shelf alert system was first tested in five supercenters in California. Nestle put a team of merchandisers in the stores to check all alerts to get a sense how many false positives they could expect. The alert system test triggered 575 off-the shelf alerts, 225 of those were actual out-of stock incidents. The company said it worked to get the system to an 80% accuracy level and now it is used throughout Nestle’s business with Wal-Mart.

Nationwide, Nestle said it gets between 40,000 and 60,000 alerts daily from Wal-Mart Stores for products that are off the shelf. As to a return on investment, this application of data analytics Nestle reports a $100 benefit every time it detects and corrects 10 off-shelf incidents.

The supplier said just using the point of sale data generated by the retailer does not tell the whole story. That is why it has worked with Wal-Mart sharing its own statistics and bringing in the government SNAP data to paint a picture of opportunity for generating more sales —  a win-win for both players. Nestle said that happens because it is making sure it has the products SNAP customers want on the Walmart shelves at the precisely the right time.