How Acosta Stocks Your Grocer's ShelfBy
After one of the four plants that produce Kellogg's (K) Eggo brand waffles had to be shut down in late 2009 as a result of flooding and another was crippled due to manufacturing mishaps, shortages of the frozen breakfast staple spread across the U.S. While Kellogg struggled for several months to get production back online, the billion-dollar Eggo brand saw its share of the frozen breakfast market slide from about one-third to 19 percent in early 2010, according to researcher Nielsen. That's when Kellogg—which has no shortage of in-house marketers—turned to Acosta, an 84-year-old sales and marketing firm.
Acosta has 13,000 workers patrolling 130,000 stores in North America every day for blue-chip clients such as Kellogg, Procter & Gamble (PG), and Nestlé. They pay Acosta to persuade retailers such as Wal-Mart Stores (WMT) and Kroger (KR) to carry, prominently display, or even promote their products to build future sales. Acosta even helps craft revival plans for brands that need to regain the attention of retailers, as it did with Eggo.
"We are the brand behind the brands," explains Chief Executive Officer Robert Hill, who learned the trade from his father and grandfather, who owned a small sales agency that Acosta absorbed in 1994. Acosta, based in Jacksonville, Fla., was bought in January by private equity firm Thomas H. Lee Partners for $2 billion.
As grocery producers jack up prices to cover surging commodity costs, Acosta's revenue—which comes from commissions and totaled $1 billion last year—keeps climbing. "Acosta has a seat in the boardroom when it comes to a brand's overall business strategy," says Mark Baum, a partner at strategy firm Marcat Group. This month, Acosta got the contract to handle Starbucks' (SBUX) packaged coffee, a $500 million business, after the coffee giant ditched previous marketing partner Kraft Foods (KFT).
Acosta's 1,000 clients include two-thirds of the No. 1 and 2 brands in most supermarkets. Kellogg chose Acosta because of its expertise in frozen foods, says Michael Hunter, who oversees Kellogg's sales strategy for that business. Acosta handles frozen brands such as Ore-Ida and Birds Eye and has reams of consumer preference data it can use to convince retailers what strategies work in the freezer case.
For accounts such as Eggo, Acosta representatives work with national retailers to plan what their store shelves will look like, recommending extra space for fast-selling items and placing new products at eye level to grab attention. They also craft the manufacturer-funded promotions (such as two-for-one deals) scheduled at busy shopping times such as holiday weekends. Acosta deploys teams to work in stores about once a week to ensure that products are stocked and merchandised correctly. In 2009, Acosta steered Nestlé through a two-month recall of its Toll House cookie dough when at least 72 people became ill after eating it raw. In two weeks, Toll House was back on every major retailer's shelves.
Acosta has been working with Kellogg since 2001, and its point man on the Eggo account makes two or three trips to Kellogg's Battle Creek (Mich.) headquarters each month. Last spring, when the Eggo plants were back on line, Hill's team met with retailers such as Kroger to plot Eggo's return. Acosta's sales team suggested a back-to-school promotion in the middle of August that would feature two boxes of Eggo's most popular waffle flavors for $4—more than $2 off the regular price. Acosta's in-store reps began selling the promotion to retailers a month earlier, and when Eggo's boxes came back, they got ample display space and prominent positioning. Last month, Eggo's market share rose back above 30 percent.
The bottom line: Big food companies use marketing firms such as Acosta to promote their goods and win shelf space at supermarkets nationwide.