By Brad Dorfman
CHICAGO, July 2 Eric Dilling spends so much time in the Woodman's grocery store in North Aurora, Illinois, that the store manager thinks he is "almost like a Woodman's employee."
But Dilling actually works for Kraft Foods Inc KFT.N. The ubiquitous presence he and other Kraft sales representatives have established at stores throughout the country is a key to Kraft's "Wall-to-Wall" sales strategy, which has helped boost sales even as the U.S. economy struggles.
Ramping up new product development, a management restructuring and the acquisition of Groupe Danone's (DANO.PA) biscuit business might have been bigger news in Chief Executive Irene Rosenfeld's nearly two years at the helm of the largest North American food company.
But Wall-to-Wall, an overhaul of how Kraft sales reps work with retailers, has been a big factor in helping the company swing to sales increases.
Sales at stores where Wall-to-Wall was put in place showed an an additional 1 percentage point increase in the year ended April 30, compared with stores where the program was not in place, said Todd Hanus, vice president for sales operations and strategy.
That pace picked up late in the year, with sales up an extra 1.8 percentage points at Wall-to-Wall stores in the eight weeks ended April 30, he said.
Under Wall-to-Wall, a Kraft sales rep can be at a store every day and is responsible for almost the entire portfolio of Kraft products, ranging from Oreo cookies to Kraft salad dressing, to Oscar Mayer bacon.
In the past, Kraft's portfolio was split between sales reps who handled the Nabisco cookie and cracker business and were in stores three to five days a week, and reps who handled the rest of the portfolio and were in stores one to four times a month.
Wall-to-Wall takes advantage of Kraft's scale to bring the benefits of the hands-on merchandising of the direct-store distribution model used by Nabisco, while maintaining the lower cost of the warehouse distribution method used in the rest of the portfolio.
Under the new system, Kraft sales reps can make sure shelves are stocked with Kraft products, and work with store managers to promote specific products and put them in special displays in order to attract customers.
Dilling's daily trips to the store help him get those displays for Kraft, such as one near the front of the store loaded with Kraft's reformulated salad dressings -- a major product change the company is promoting.
"A lot of times, you don't get displays unless you have a presence," said Andy Anundson, the Woodman's store manager.
WALL STREET REACTION
While Wall-to-Wall might not be as high profile as a merger, or as visible to consumers as a new Oreo cookie, Wall Street analysts are taking note.
"The lift in sales growth that Kraft is registering at its Wall-to-Wall locales is especially important, in our view, in the context of the current inflationary environment," Andrew Lazar, Lehman Brothers food analyst, said in a recent note.
Food companies have significantly raised prices in the past year or so to cope with soaring commodity costs. Those price increases could cause customers to seek cheaper alternatives, so any steps that can boost sales make sense, Lazar wrote following a Kraft-sponsored "field trip" to see Wall-to-Wall in action.
Lazar noted that Wall-to-Wall has not increased Kraft's costs, "though we believe this is something only a company with considerable scale across the store like Kraft can do."
Kraft first began testing a Wall-to-Wall model in 2004, Hanus said. The company rolled out a pilot program in 2006 and expanded it in 2007 and 2008, and now uses it in more than 15,000 U.S. stores.
Hanus said some sales reps chose to leave Kraft as the new system was put in place.
"When you combine two different models, there's a lot of trainings, there's a lot of learnings that need to happen," he said.
(Reporting by Brad Dorfman; editing by John Wallace)
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