Supply Side: Kroger challenges Wal-Mart in supplier friendliness

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Retail suppliers chose Wal-Mart as the top retailer to do business with again in 2016, but unlike the other 19 years Wal-Mart took the top prize, Kroger finished in a virtual tie for the No. 1 spot, according to Kantar Retail’s recent U.S. PoweRanking survey.

The 20th annual survey, which asked retailers and suppliers to rate one another on more than 10 different metrics, indicated a shift from prior years. Kantar Executive Vice President Dan Raynak said Wal-Mart has been a clear leader in many metrics from supply chain dominance to being the most likely to survive 15 more years. But he said Kroger’s acquisition of analytics firm 84.51 has helped the grocery retailer gain and apply shopper insights. He said the retailer has its merchants and marketing co-aligned with the 84.51 insights and the retailer has become a challenger to Wal-Mart.

Suppliers like Wal-Mart for its size and scale, but they voted Kroger No. 1 for “best buying teams” as well as “most innovative merchandising” which will likely make Kroger hard to beat next year. Wal-Mart finished just one-tenth of a point higher than Kroger in this year’s survey of 600 suppliers and retailers.

Raynak said regional grocers overall had a strong showing in this year’s report. Publix, a regional grocer in Florida, ranked No. 6, while Texas-based H-E-B garnered eighth place. Wegmans of New York came in at No. 9. He said deep discounter Aldi also made the list and ranked high by suppliers for future longevity.

Suppliers in the survey said Wal-Mart’s greatest strengths are in supply chain efficiency and ability to drive large scale growth, but Kroger was voted the “best retailer to work with.” Target came in No. 3 and is seen by suppliers as an innovative marketer with strong category leadership and store branding. Amazon ranked fifth overall given high marks for strong branding and loyal shopper base. Costco was fourth overall.

Wal-Mart and Kroger tied for the highest score in “clearest corporate strategy” with a comfortable lead over the other retailers in the survey. Suppliers said Wal-Mart’s corporate strategy has been consistent and clearly communicated by all levels of the business. Suppliers also said all aspects of Kroger’s business are reinforced in the corporate strategy, regardless of leadership changes. Costco, Publix and Target also ranked in the top five in this metric.

Target took the top score in “Best Store Branding.” Kroger came in second, pushing Wal-Mart into third place this year.

When asked which retailers would be around in 15 years, suppliers thought Wal-Mart had the best odds, noting that the investments being made in omni-channel and customer conveniences help to ensure Wal-Mart’s “strong position in 10-15 years,” the report noted. Kroger ranked second, with the report suggesting Kroger has the ability to adapt better than its competition to changes in consumer behavior and preferences. Amazon pulled into third place because of its ability to innovate, invest and execute while always meeting or exceeding customers’ expectations.

Looking at retailer business fundamentals from buyer teams to supply chain management and digital platforms, Kroger topped Wal-Mart. Suppliers said “Kroger buyers understand category dynamics better than anyone else.” While Wal-Mart came in second, suppliers said the retailer is “truly best in class” when it comes to supply chain.

When looking merely at digital platforms, Amazon ranked first this year, moving up from fourth place a year ago. Wal-Mart ranked second, falling from first place in 2015. Target and Kroger ranked third and fourth for digital platforms.

Shift in Supplier Rankings
Procter & Gamble held the No. 1 spot for several years but was ousted in 2016 as PepsiCo claimed top honors from the retailers in the survey. Raynak said PepsiCo showed broad improvement across many of the strategic and operational metrics in the study. He said the beverage giant was praised for providing top-class capabilities in the area of data analytics and sharing those insights with its retail partners.

Coca-Cola received the top ranking for innovative marketing ranking No. 2 this year. Raynak said the beverage companies perhaps scored better with retailers because of their direct-to-store shipment models which bypass the retailers’ distribution centers. This helps shave time and costs from the supply chain, which has become more important as retailers have to invest more heavily in e-commerce capabilities. He said beverage is still largely an in-store purchase and not one of the categories like diapers and razors that have migrated online.

Procter & Gamble ranked third this year, just one point behind Coca-Cola. General Mills ranked fourth.

Looking at manufacturers with the clearest company strategies, PepsiCo took the top spot, rising from third place a year ago. Retailers said PepsiCo’s strategy provides steady growth, and it’s easy to follow. Procter & Gamble fell one spot this year landing at No. 2. The retailers said P&G manages to keep a clear and consistent strategy which has proven successful for retailers over the years. Coca-Cola rose three spots to No. 3 this year as retailers recognize the company’s efforts to deliver a clear strategy.

Brand loyalty and importance are huge for suppliers and PepsiCo also garnered the top ranking in that metric, according to retailers. Procter & Gamble ranked No. 2, falling one spot from a year ago. Coca-Cola came up three spots to rank third this year with retailers citing the beverage company for expanding its product line, acquiring new beverages and focusing on energy drinks that have been popular with all ages.

Looking at business fundamentals, retailers said PepsiCo “works well with their customers to provide a good mix of resources and programs with strong attention to detail.” PepsiCo took first place in this business fundamentals metric rising from third place a year ago. Coca-Cola ranked second, moving up two slots from a year ago.

Retailers said, “Coke has more doors than any of the other beverages we sell. Wide variety, clean appearances, great prices, and very popular items with good sales.”

General Mills ranked third for business fundamentals, moving down from second place a year ago. Retailers noted in the report that General Mills is “fantastic to work with due to their flexibility in funding, knowledgeable sales staff and good collaboration on strategies affecting both parties.”