Workshop Series: Ashish Sinha
The purpose of this paper is to describe the implementation of a category management tool, known as Category Optimizer, at Foster’s Wine Estate Americas for one of its brands—Beringer California Collection (BCC). Fosters was facing a common management problem: that of harnessing its portfolio of Beringer California Collection wines to increase profitability, improve its competitive position, and defend against a disruptive new entrant in the U.S. wine market called [yellow tail]. Category Optimizer™ combines the parsimony of an internal market structure with the advances that have been made in assortment planning in operations research, assortment and Stock-Keeping-Unit (SKU) level modeling, mixed logits, and the marketing literature on the perceptions of variety of assortment to develop and estimate a model on readily available store scanner data. The model subsequently uses these results to inform strategic and tactical decision-making. This approach led to recommendations that initially seemed counter-intuitive; the normal response would be for Fosters to consider lowering price to maintain share and volume, a strategy not inconsistent with many of the recommendations of Hauser and Shugan’s (1983) Defender model. However, considering the additional degrees of freedom that a product range offered for defense, we demonstrated that a combination of price increase together with the introduction of a volume-flanker product in a new channel would improve profits, increase revenue, and protect and enhance market share. These were successfully implemented in early 2008, earning rich dividends for the company, increasing profitability by 70%, revenue by 3%, EBIT by 8.5%, while also having a positive impact on its brand ranking: in 2008 it debuted at number six among the international wine brands. It also managed to play an important role in deposing the market share leader, [yellowtail], from its dominant position. We conclude the paper by providing examples of other companies where this approach has also been successfully implemented, and by discussing some avenues for future research.
Ashish Sinha -- Professor and Head of School of Marketing, Australian School of Business, University of New South Wales, Sydney, Australia -- obtained his PhD from University of Alberta, Canada in the area of Marketing Science with minors in Statistics and Economics. His major area of interest lies in developing models that help managers make better decisions. This interest is a natural extension of his work at Information Resources Incorporated, Chicago, USA, where in the role of Vice President and Chief Modeler of Analytics Insight Group he spearheaded the development of several multi-million dollar products including Attribute Drivers, Consumer Mix Drivers and Portfolio Drivers. He has consulted for many Blue Chip companies, including Kraft, Pepsico, Frito-Lays and Campbell Soup Company, among others, and has taught several executive programs for Companies, such as, General Electric, Coke, Hershey and Eli Lilly. He has advised many consulting houses and regulatory organizations, including Mckinsey, Information Resources Incorporated and ACCC, and was involved in the design and marketing of the analytics offerings of Synovate Aztec in Australasia and Synovate MMA in the United States. His work has appeared or forthcoming in many academic and trade journals, such as Marketing Science, the Journal of Marketing Research, the Journal of Retailing, Marketing Letters, the Journal of Retailing and Consumer Services, the Journal of Business Research, Industrial Marketing Management and Australasian Marketing Journal. He is also the recipient of several academic awards, including the Davidson Award for the Best Journal of Retailing Paper, Australasian Marketing Journal Best Paper Award, Academy of Marketing Science Best Dissertation Award and AMA Best Market Research Paper Award. He is a twice-finalist for the prestigious INFORMS Marketing Science Institute Gary Lilien Practice Award in recognition of his work in the areas of Category Management, Assortment and Disruptive innovation.