Aligning strategies and creating value the Walmart way

Having laid a foundation of access, transparency and trust since arriving at Walmart U.S. four years ago, chief merchandising and marketing officer Duncan Mac Naughton’s top priority these days is leveraging joint business planning processes with up to 300 key suppliers to tap new growth opportunities.

Mac Naughton shared his vision of joint business planning, or JBB, and expectations of trading partners who participate in the process during the 13th annual Emerging Trends in Retail Conference presented by the Center for Retailing Excellence in the Sam M. Walton College of Business at the University of Arkansas.

“It is about making the long term mutual commitments that allow us to transition from the tactical and transactional to long term strategies,” Mac Naughton said. “We still have very difficult conversation and we still disagree with each other, but the JBP structure brings us back together.”

Walmart works with between 16,000 to 20,000 suppliers at any given time, according to Mac Naughton, but the JBP process is limited to roughly 300 suppliers. That’s because achieving alignment on the broad, overarching strategies that guide the business over a three year span, or even longer, is limited by the availability of Walmart’s senior merchants and top level executives within a suppliers’ organization whose involvement in the process is essential.

Mac Naughton identified six key expectations for JBP participants beginning with the view that suppliers should have their best, most empowered team calling on Walmart. Companies are also expected to be active participants in JBB and focus on driving every day low cost which underpins Walmart’s every day low price value proposition. JBP participants are also expected to be leaders in what Mac Naughton calls “new and ownable innovation. He said he expects JBP suppliers to invest in Walmart because doing so is the equivalent of investing in their customers and market share and to approach the relationship in a manner that is open, trust-based and transparent.

The latter is something Jeff Schomburger, president of the Procter & Gamble Walmart global team called being, “respectfully real.” Schomburger was part of a panel presentation with Mac Naughton and Dina Howell, CEO of Saatchi & Saatchi X on the topic of innovative joint business planning with Walmart.

While Mac Naughton talked in broad strokes about Walmart’s philosophy on collaboration, JBP and expectations, Schomburger put meat on the bone by describing P&G’s experience with Walmart that led to a resumption of sales growth and share gains.

Schomburger was part of the original P&G account team that was created in Northwest Arkansas in 1989 when the company’s sales to Walmart were $400 billion. Today, P&G sales to Walmart U.S. alone are roughly $10 billion, he said.

“I guess you could say Sam’s idea of collaboration has worked pretty well,” Schomburger said, referencing a quote from Walmart founder Sam Walton that Mac Naughton had used in his presentation.

Although the business relationship is solid now, and Schomburger said at the end of 2010 and 2011 the companies were not aligned. P&G’s costs were going up and the company was looking to take prices up. Meanwhile, Walmart was in the midst of a leadership transition that involved current Walmart U.S. president and CEO Bill Simon and Mac Naughton and their desire to restore Walmart’s EDLP philosophy.

“We were late delivering against plans and we were having a really tough time,” Schomburger said.

However, during the past 18 months the situation has turned around and now P&G is aligned on strategy, delivering innovation and driving joint value creation. Thanks to JBP, P&G has major opportunities to close gaps between the 90% of households who shop at Walmart but may not buy P&G products at Walmart. He estimates there is $4 billion to $5 billion in sales potential for P&G products at Walmart if shopper conversion rates could be improved.

Schomburger then offered a detailed case study involving Febreze brand air care products. As a result of JBP, P&G identified opportunities that led the company to begin offering shoppers a regimen of air care products, new innovation, new scents and expanded usage occasions with products for specific rooms of the house. The result was a 34% sales gain in 2012 following a decline the prior year. P&G also extended the Febreze brand into car care with innovative demand creation strategies developed by Saatchi & Saatchi X.

The firm developed a unique looking feature display that fit on a pallet and held Febreze Car products and would attract shoppers’ attention. The display appeared in Walmart stores 30 days before it was supported with media so Howell said the display had to tell shoppers the product was for the car and drive people who are not buying into the category.