Cover Story: The Gillette Group builds a Pepsi community
Being chosen as Pepsi’s bottler of the year was an honor for the Rochester bottler, which is affiliated with The Gillette Group Inc., La Crosse, Wis., the company says. The Gillette Group is owned by the Gillette and Vinger families, who are second- and third-generation descendents of the company’s founder Norman Gillette Sr. The group provides management direction to a network of three Pepsi franchises and distribution facilities in La Crosse, Rochester and Mankato, Minn. In addition, the group has a branch warehouse in Decorah, Iowa.
Although one of its four facilities was singled out for the award, The Gillette Group considers the award a reflection on the entire organization, says Fritz Truax, chief executive officer of The Gillette Group.
“Even though our Rochester location received the award, we want to give credit to the entire Gillette organization,” Truax says. “We feel it’s a reflection on the entire company’s performance in executing sales and distribution activities with our customers.”
As a private company, The Gillette Group does not publish its sales, but places itself as the No. 9 U.S. Pepsi bottler by volume, Truax says. The company is primarily a distributor of Pepsi and Dr Pepper Snapple Group brands, which it acquired in 1992 through its acquisition of Northland Beverages. The majority of its products are packaged by Wis-Pak, Watertown, Wis., a co-op of Pepsi bottlers. The Gillette Group is one of 16 founding members of the co-op, which packages 95 percent of the products distributed by The Gillette Group, Truax says.
The Gillette Group’s territory varies. Its Rochester location includes the Mayo Clinic, a nonprofit medical practice, as one of its major accounts. With 40,000 employees, the Mayo Clinic is the largest employer in Rochester, and The Gillette Group accounts for 90 percent of beverage sales at the clinic, says Greg Kiser, sales manager of Pepsi-Cola Bottling Co. of Rochester Inc.
In addition to city markets, the group’s reach expands 60 to 70 miles outside each of its facilities, Truax explains. More than half of its distribution area is rural, the company says.
As recognized by PCNAB’s Bottler of the Year award, The Gillette Group maintains a strong presence in its territory. Among other tactics, its presence in the area is indicated by permanent billboards branded with trademark Pepsi logos at the main roads into La Crosse, Rochester and Mankato. The strategy was pioneered by the company’s founder Norman Gillette Sr.
“We want people to know they live in a Pepsi community so [the billboards] have been in place for many, many years,” Truax says. “Our most visible location is probably the one people see when they cross the Mississippi River bridge heading into La Crosse. There’s a large billboard that has been Pepsi for as long as any one of us can remember.”
The business was founded in 1937 by Gillette, who initially ran it out of Viroqua, Wis. He carved out a market for Pepsi through sampling and saturation advertising, including prominent local signage and radio advertising. Both marketing strategies continue to be pillars of The Gillette Group today. In addition to the billboards, the modern-day Gillette Group continues to invest in local radio, which is a good fit for its rural communities, Truax says.
The company continues to emphasize the strength of its relationships with its customers, which are a result of the dedication of its employees, many of whom are long-term, Truax says. It also honors its founder’s entrepreneurial spirit through growing its market share not only in traditional Pepsi products, but also through new PepsiCo brands as well.
“As the market shifts from carbonated soft drinks to other products, we want to make sure we compete for leadership in all beverage categories, which is difficult due to the competitive nature of the industry in which we operate,” Truax says.
Regular and diet Pepsi and Mountain Dew remain the company’s strengths, but The Gillette Group also has developed a strong campaign around SoBe Lifewater, says Al Tolzman, director of sales and marketing for The Gillette Group.
“We invested heavily in SoBe Lifewater,” Tolzman says. “It’s a product we believe in. It’s part of the change that is occurring in the industry. We started focusing on Lifewater long before Glaceau was purchased by our competitor. We had placed an emphasis on getting racks and displays out, not knowing that they were coming behind us. We were aggressive in price and promotional activity and as a result, our SoBe numbers have been very strong.”
The company ties in SoBe Lifewater with community events featuring Safe Assured, an organization that provides identification records for children and others. The Safe Assured events are one of the many ways The Gillette Group is involved in the communities it serves. The company’s owners are donors to the Gift of Life transplant house in Rochester and Gundersen Lutheran Medical Foundation in La Crosse. The Gillette Group also supports many charities, groups and events in its individual markets.
With the economic downturn, the company has noticed its consumers’ increased priorities on promotion and value.
“We are unique in that we receive 52 weeks of advertising from 90 percent of our large format retailers,” Tolzman says. “And that’s good because Pepsi and Mountain Dew are always on sale, but it also requires us to provide value pricing every week. We’re more aggressive in our pricing strategy as a result of that. We have been able to maintain our share because our products are nearly always in value to our customers.”
To keep up with consumers’ stock-up purchases, The Gillette Group takes advantage of direct shipment through its partnership with Wis-Pak. The program ships full pallets of product from Wis-Pak’s bottling facilities direct to The Gillette Group’s customers. Currently, 32 percent of the company’s sales are distributed through direct shipments, the company says.
The company also began expanding its foodservice options. In March, The Gillette Group began offering New England Coffee and other hot beverages to its customers. It also has placed a priority on expanding popular retail brand Diet Mountain Dew into fountain distribution.
The Gillette Group is not afraid to make changes to maintain its performance. Prior to 2003, the company approached sales from a geographic position â€” each individual location maintained its own strategy. As the company’s customer base started to consolidate and national accounts became more prevalent, it moved to a more centralized sales and operations organization.
“We used to have separate pricing strategies and customer distribution agreements, and now everything is unified into one,” Tolzman explains. “We believe it’s been beneficial to have our customers on the same program and strategy regardless of which Gillette division they receive their products from.”
Sales and marketing strategies are developed by The Gillette Group senior management including Tolzman; Cal Erickson, marketing director; and Bill Sullivan, director of national accounts. Mark Gamoke, director of operations for The Gillette Group, organizes the distribution side of The Gillette Group’s divisions.
Not long ago the company’s sales team, or trade development representatives (TDR’s) as they are known to The Gillette Group, was responsible for selling all accounts in a given area regardless of channel size, Tolzman says. Organization based on geography was challenging and time consuming for the representatives, so The Gillette Group reorganized the TDR’s to focus on either large format or small format accounts.
Instead of balancing the promotions and merchandising needs of all formats, this strategy allows TDR’s to specialize in one channel or in some cases a particular retailer. Large format representatives are focused on particular retailers, such as Wal-Mart or Target, Tolzman says. The increased focus has helped with training representatives and, “has really helped key in on the execution,” he says.
Each trimester, the senior management team meets and designs The Gillette Group’s sales, marketing and distribution plans. These meetings are held alternately at each of the company’s facilities and begin with a canvas of the market by the entire senior management team. The in-market visits are a strength of the company, Tolzman says.
“We’re very active in the management, from the CEO down,” Tolzman says. “It’s important for our employees to know that we’re in the trade; we don’t sit back in our offices. We are out there with the customers handling and seeing what’s going on, and that’s really been an advantage for us. We know all the customers and they know we care about their business, and that’s important.”
Trimester sales and operational plans are communicated to the teams at each facility. The strategy is monitored through monthly meetings and weekly sales calls. However, communication is not limited to to-do lists from senior management, Sullivan explains.
“I think our biggest point of difference is that we tell our employees why we’re doing things,” he says. “We try to tell them why we think a new product or promotion is going to be successful and why we want to get into the program. What we’re looking for is feedback on what do they think we can do to enhance that.”
The Gillette Group also monitors each division’s achievements in certain initiatives for an internal competition. Each trimester, the division that garners the most points against its Key Performance Initiatives is bestowed The Gillette Group’s Golden Eagle Award. The award is currently held by the Rochester facility, Kiser says.
With the recent challenges with the economy and the beverage industry, the Gillette management team also felt it was important to make the rounds to each of the company’s facilities and speak to employees about the state of the company and its business. Truax says the meetings are especially important to communicate to The Gillette Group’s employees the importance of their performance.
“It’s important for them to understand the many challenges we face in our business,” he says. “They need to understand where we are focusing our efforts so they can prioritize and execute against our strategies. Whenever representatives from PepsiCo visit our markets, the compliments we receive regarding what our front-line employees do in the marketplace is always very positive, and they need to hear that. They need to hear that even though the trends are not where we would like them to be, the execution our employees deliver is consistently at a very high level.”
As manifested through the reorganization of its sales structure, The Gillette Group operates under the principle of continuous improvement throughout its operations.
A few years ago, it converted several of its sales and light-duty vehicles from pickup trucks to smaller model station wagons. The smaller cars get 10 miles more per gallon than the previous models, Truax says. The Gillette Group also updated a substantial portion of its fleet and equipment to the new Pepsi logo in 2009. The remaining portion in need of update is on the docket for 2010, the company says.
The company also introduced several additional initiatives to encourage sustainability, such as local recycling programs. In addition, the company removed the lights from its vending machines to conserve energy in major accounts, such as Mayo Clinic, Erickson says.
One of the biggest changes the company implemented in the past year was a change in its delivery schedule. In September, The Gillette Group reorganized its delivery schedule from 8-hour days, 5 days a week to 10-hour days, 4 days a week. This change appropriately suits its customers, both city and rural, and has allowed the company to reduce the mileage on its delivery fleet by 137,000 miles.
As PepsiCo promotes its own Power of One strategy following its acquisition of The Pepsi Bottling Group and PepsiAmericas Inc., independent bottler The Gillette Group plans to continue its business model, Truax says.
“I think we’re all questioning how this will impact the future, but I think we’ll learn a lot more over the next several months as to what kind of impact [the purchase] will have on independent bottlers,” Truax says. “Everything we’re hearing from the leadership of PCNAB is that they still have a very strong need for valued independent bottling partners. The Gillette organization will continue to focus on doing our best to execute against the many brand and customer initiatives we have in front of us.”
Whatever the challenges may be, Tolzman also sees an advantage in the consolidation.
“I think we’re looking at it as an opportunity to have our voice heard and to remain active on the national scene. We want to continue to be on the forefront of the initiatives that they roll out,” Tolzman says.
Overall, The Gillette Group intends to stick with its priority of continuous improvement, which includes emphasizing the power of its employees.
“We try to convey to our employees that they are our competitive point of difference,” Gamoke says. “It is our people and the customer service they provide. It’s the attitude that is presented and the attitude we work with. It’s all these things that make Pepsi the preferred supplier to the majority of our accounts.” BI
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