Much progress continues to be made on our 2021 Convergence initiatives. We are well on our way to achieving $15 million-plus in member value creation. We are delighted with the support we are getting from a broad range of co-op and divisional support teams, as well as participation by members in both our AWG Brands and strategic planning councils. 

In our AWG Brands initiative, we have made great strides in developing revised go-to-market positioning for both Always SaveⓇ and Best ChoiceⓇ. In addition, we are seeing the financial benefits of our enhanced private brand sourcing process and are in the final stages of delivering the outcomes of these negotiations to members in natural cheese, ice cream, cookies, crackers, and pretzels. 

In our assortment optimization initiative, natural cheese is the first category being launched to members at food shows. The new cheese assortment represents a deep look at data and analytics, and the recommendations resulting from that analysis show how members can win in a critical destination category. The initiative outcomes include relaunched pricing, promotional strategy, assortment portfolio, and planogram support. Members can sign up for this cheese initiative by reaching out to their respective division teams. Over the next few months, additional category relaunches will be rolled out, all designed to help members win at the shelf. 

In technology, we also continue to make great strides. Our goal in the Convergence technology initiative is to significantly improve the way we use data and analytics for decision-making. Over the past 60 days our technology team (working in conjunction with our merchandising team) developed analytical and reporting capabilities for improved category management (standardized assortment optimization) and trade compliance collaboration reporting. We are now prototyping the use of these analytical and reporting toolsets with the expectation of using both capabilities for our 2022 planning. In addition, much work has been achieved in the information-sharing portal initiative. We have narrowed down the selection to two potential suppliers and expect to make our final decision in September. Most importantly, our plan is to use this portal for our collaborative strategic planning efforts, again supporting the 2022 operating plan. 

We have continued to develop a broad range of member communications. Numerous videos and podcasts for members, suppliers, and our internal teams are now available. Our goal in our Convergence communications program is to ensure that all our members, supplier partners, and internal teams fully understand go-forward strategies, executional tactics, and the ongoing results of Convergence. 

The September newsletter reflects progress over the first six months of Convergence. As you can tell, much has been achieved and will continue to be achieved as we progress throughout the rest of 2021. 

Let us now give you more details of the progress to date. 

AWG BRANDS

The Convergence plan for AWG Brands is targeted to deliver $118 million in member value over the next three years. That member value gets achieved in two ways: 

1. Increased AWG Brands sales 

2. Cost of goods improvement through supplier reviews 

In April, a private brands member council of several AWG members as well as key AWG teammates was organized to better understand how to improve AWG Brands. This council developed enhanced brand positioning recommendations for both Always SaveⓇ and Best ChoiceⓇ. This brand positioning outlines the strategic differentiators for these brands for AWG teams and in the market. They will allow all stakeholders to understand product assortment, pricing strategy, promotional plans, merchandising objectives, and advertising messaging. In the next month, as Clearly by Best Choice and Best Choice Superior Selections brand positionings are completed, the deliverables from this effort will be communicated throughout the membership. 

With respect to the initiative related to AWG Brands product costs, sourcing efforts have been initiated across multiple categories to achieve either reduced cost of goods or avoid a manufacturer cost increase. The targeted outreach on key categories includes extensive negotiations with current suppliers, as well as an expansion of the supplier base when necessary. Considerations around product quality and packaging design are also being taken into account during these discussions, as well as a continued focus on product innovation. As the assortment optimization initiatives are taking place, AWG Brands are also garnering more shelf space to help deliver on the increase in sales these efforts are intended to bring. Member value has already been derived as a component of the larger cheese category assortment optimization and will continue to be a focus during the upcoming cookie and crackers initiative. The next set of targeted private brand categories to undergo cost-of-goods reviews include Salad Dressings, Paper (Bath and Facial), Frozen Potatoes, Household Cleaning, Diapers/Training Pants, Coffee, Tea, Powered Drink Mixes, Fabric Sheets and Laundry, and Condiments.

 

ASSORTMENT OPTIMIZATION

During the development of the 2021 Convergence initiatives, assortment optimization was identified as one of the top three areas of focus. The goal was to design, develop, and implement a standardized process by which AWG members could increase shelf productivity. Over the next three years, the member value benefit from assortment optimization will be approximately $92 million.
Six categories were initially targeted for assortment optimization including Frozen Prepared Meals, Diet and Nutritional Bars, Natural Cheese, Laundry Soap and Detergent, and RTE Cereal. Progress has been made on all six of these categories as they are now through baseline analytics. Recommendations have been developed for future assortments.
During August and September, the first of these assortments, natural cheese, is being launched at food shows. Click here to hear from Tye Anthony and Jim Fitterer about this initiative. The new natural cheese assortment (integrated national and private brand) is designed to help members offer consumers a differentiated natural cheese assortment. Analysis identified highly productive, nonproductive, and missing items from the category.
In addition, that same analysis quantified needed price changes as well as localization opportunities. Paired with the sourcing work the AWG Brands team did, this integrated assortment optimization led to $6.9 million in cost of goods reduction (over three years) which will help members realize a more competitive shelf.
The economics are clear: improved sales, optimized pricing where needed, increased promotional dollars, improved overall shelf management, and improved inventory turns. More categories will follow, all utilizing the standardized category relaunch methodology established with natural cheese.
The team is excited about the potential of real and profitable growth for members as a direct result of this completed work, as well as the work which will be done, in category management-based assortment optimization.

TECHNOLOGY – ENABLING CAPABILITIES

The foc us of our Convergence technology initiatives are quite simple: improve ways of working together by using technology to automate, inform, educate, and create a standardized call to action for our co-op, member, and supplier partner organizations.
The executive team identified category management as an immediate need. During the past several months, we created an integrated merchandising and technology team to define and implement a best practice capability in category management, starting with assortment optimization. As of August, standardized assortment optimization analytics and reporting will be used to help achieve more profitable shelf assortments (both national and private brand.)
A second major technology initiative is our work in trade compliance collaboration. Again, an integrated merchandising and technology team was chartered to design and implement standardized analytics and reporting capability allowing our co-op to better understand all supplier partner trade and promotion investments. We launched this initiative with 20 key manufacturers asking them to help us understand their overall investments in our co-op. Our goal is to simply understand if the co-op is getting its fair share of manufacturer investments. From early results, we think there is a significant upside in member value creation going forward.
The third major technology initiative is the work we are doing in the design and go-forward implementation of an information centric supplier partner portal. Our goal here is to improve overall supplier partner collaboration. We want to simplify how we negotiate with our 3,500+ suppliers eliminating all interaction and cost-duplicative efforts. As of the end of August, we will be in the final stages selecting the go-forward information sharing portal partner. Our expectation is to improve forecasting and planning by the end of the year.

FINAL THOUGHTS

The first six months of Convergence has been a whirlwind of strategy, planning, and action plan development. We are now entering the initial execution phase of Convergence with our members. Our next six-month efforts are designed to help members realize meaningful benefits in winning at the shelf. Our divisions will be engaging members in our private label, assortment optimization, new item introduction, and information sharing initiatives. The pace and scale of Convergence is expected to significantly increase.
We are excited for you as a member to actively engage in Convergence. The value in this work is specifically designed to increase your growth and profitability with each program initiative you adopt. If you have questions about how to adopt the new cheese program or the additional category relaunches coming soon, please contact your division representative for more information to help your organization get started. Each of you adopting and taking advantage of these benefits, as our members, are critical to achieving total benefits success.