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Ready, Aim, Shop

By Jul 01, 2007

U.S. soldiers in Europe will be getting a surprise this summer.

They will be handed a free slice of Land O’Lakes deli cheese when they enter their local commissary. And if they like it, they can redeem a discount to buy more.

Sounds just like the stores back home, doesn’t it?

Well, not quite.

Military commissaries sell groceries and household supplies to armed services personnel. These shoppers pay 30% less than the normal shelf price despite a 5% surcharge to fund construction programs and store equipment.

Some stores are tiny outlets with only one or two cash registers. Others take up 60,000 square feet. But, together they generated $5.4 billion in sales last year, a $48 million increase over 2005, according to the Defense Commissary Agency (DeCA), which runs them.

What’s more, the 270 stores are an important market for packaged-goods brands.

For one thing, only branded goods are sold in commissaries, so marketers have a chance to build loyalty.

“These are younger buyers, building their brand habits early in life,” says Paul Burke, national account manager for Land O’Lakes. “You have an opportunity to communicate your brand message with a very loyal and dedicated consumer base without the blurring of private label.”

For another, DeCA runs a full calendar of promotions. And it gives marketers a wide latitude for conducting their own.

“You will see displays that you could never imagine at a traditional grocery store,” Burke says.

Land O’Lakes spends $250,000 on event marketing in the military stores.

But it started its cheese program, Family, Friends and Freedom, to help DeCA. The agency planned to take over the running of its delis from an outside franchisee and it needed to pump up its offerings.

The dairy marketer brought in its entire cheese line, helped train staff and developed promotions to build traffic. Static clings, recipes and picnic tip tear pads supported the promo.

Land O’Lakes has also conducted sweepstakes. The winner of one contest got a trip to the Edelweiss Lodge and Resort in Garmisch, Germany. And 5,000 patrons entered a sweeps to win baskets filled with picnic fixings.

The result of all this? Deli cheese sales are up almost 80% over their 2004 level, and double-digit growth is expected this year, Burke says.

“These customers are loyal, not only to the commissary but also to their brands,” says Barbra Stabno, president of Bard Advertising, which runs the Family, Friends and Freedom program for Land O’Lakes, and also assists General Mills and Sara Lee in this market.

Then there’s General Mills, DeCA’s third largest packaged-goods vendor.

It recently launched a summer promotion in which Pillsbury cookies are baked right in the store — if the smell doesn’t get shoppers, the free samples will. Coupons are also being distributed.

Another ongoing General Mills promotion is a sampling program called Just Add Milk.

Last year’s version featured a huge display piled high with 300 cereals. Customers who purchased three boxes received a free bowl.

In addition, the shoppers could redeem neck-hanger coupons for a free gallon of milk.

The event generated an 80% lift in case sales over 2002, the first year the promotion ran, says Scott O’Toole, business planning manger for General Mills’ Military Region.

General Mills also runs a winter promotion for Progresso soups called Warming up America, using scarves and hats as giveaways.

“Being able to develop a multi-tactical program that has a strong in-store presence helps build awareness and drives sales,” says Jay Zemke, vice president, Strategic Development, at Bard.

And the customers? They visit their commissaries about 18 times per year, usually timed around their two-week pay cycle.

“It’s an event when they go shopping at the commissary,” O’Toole says. “They belong to the ultimate club, the military. This isn’t something you can just walk up to and get a membership to. They go and they buy and we need to reward them.”

In addition to the consumer promotions, General Mills runs a contest for the commissaries in which a trophy is awarded to the store that creates the best display and shows the largest sales gain versus one year ago, O’Toole adds.

Like other packaged-goods firms, General Mills customizes national promotions for commissaries. This fall it will run a campaign tied to breast cancer awareness and research.

Coupons

Meanwhile, military shoppers are some of the most avid coupon clippers around. They produce a redemption rate of 23% for on-shelf coupons, compared with 6% for civilians, according to a report from CMS, a promotions industry vendor.

That may be because coupons can be put on shelves directly by brokers. And flyers can be handed directly to patrons as they enter the stores.

There are several main commissary coupon vehicles. One is Maxi Saver, a flyer containing 20-plus coupons with a total value of around $20. Roughly 600,000 are hand-distributed each month.

The participating brands? Unilever, Procter & Gamble, Kraft, Mars, Campbell’s, Quaker and Cadbury Schweppes are a few.

“The same manufacturer who can be putting coupons into Texas can be putting them into Germany, Korea or Japan,” says Geoff Kronik, a sales representative for Maxi Saver Group, Inc., which runs the program.

A sister program, Commissary Money Saver, features an advertising circular with a monthly circulation of 500,000.

Both products are distributed only in the U.S. The reason? Many manufacturers have different prices overseas to account for transportation costs, Kronik adds.

Other coupon programs include Military Life, Coupon Connection and a hybrid consumer/FSI magazine called Family.

The In-store Experience

DeCA also encourages marketers to run events — like barbecues in summer or TV giveaways during the football season.

“Don’t go into a commissary hungry around lunchtime because you will be running across a lot of people cooking food,” Kronik says.

He adds that the outlets have “the volume of a club store and the atmosphere of a grocery store.

But giving customers an exciting in-store experience is one thing. Getting them there is another.

DeCA, a unit of the Department of Defense, has been trying to undo a perception that commissaries are not as nice as regular grocery stores and that the service isn’t as good.

One problem is that items are often sold out. “The velocity in which these people buy makes it difficult to keep things in stock,” says O’Toole. “It’s tough. People buy, and they buy in large quantities.”

But a recent survey by DeCA showed an increase in satisfaction in 14 categories, from 4.4 in 2003 to 4.61 in 2006. And another poll found that commissaries scored higher than the grocery industry average, with the exception of U.S. grocery chain Publix, says Randy Chandler, chief of DeCA’s semi-perishable division.

About 11.8 million people have commissary shopping privileges: active duty personnel, reservists, retirees, family members and authorized civilians working overseas. The stores are seen as one of the greatest benefits offered by the military, right up there with health coverage. With good reason: The savings can total $2,900 per year for a family of four.

Even so, many men and women in uniform don’t use them because they are too far away. Regular users tend live within 15 to 20 miles.

But the packaged goods industry is trying to get them there anyway. The American Logistics Association, a trade group made up of manufacturers, reps and brokers, formed its Commissary Council Consumer Awareness Team several years ago. Its mission? To get shoppers into stores through non-traditional means.

One way of doing that is to advertise in service association magazines like Military Spouse, says Russ Moffett, the team’s chairman and vice president of headquarters operations for Sarvis, which provides sales and merchandising support to DeCA.

The group recently began placing ads in all Navy football game flyers.

And it plans to add more magazines.

“This is the first time anyone has gone and tried to reach these people through other means,” Moffett says. “We’re trying to get to audiences who are not on the installations.”

While it’s difficult to determine the ROI on the ads, the team has persuaded brands like Pepsi and Coke to include coupons with their ad copy.

And don’t think that the online channel has been neglected.

Last year, DeCA developed a program called Virtual Commissary. Shoppers can now buy more than 100 gift baskets online. And they will eventually be able to purchase hundreds of commissary items — a great convenience if they live far from a store.