Standard Health Beauty and Cosmetic Manufacturer Assessment Items

Item

Detail / Questions

Priority

Key Action

ACQUISITION / MERGER / HISTORY, ISSUES

Capital allocation history / results

Traps:  Deal fever, more fun to acquire than grow

ADVERTISING

Ad testing effective?

Half of all advertising and trade spending may be wasted – must spend anyway

BIG MISTAKES TO AVOID

Debt

Companies in big, continuous change, turmoil, strategy change

The “Lemming” factor

BRAND / MARKETING

CRITICAL ACTION NEEDED BY BRAND / CATEGORY?

BRAND TRIAGE:  KEEP, GROW, MILK, DISPOSE

Brand Vitality?

Quality of Analysis, Category, Competitive, Sales Lift Information?

Repackaging / line extensions vs. new products?

Listening to consumers?

Understand consumers better than competitors?

Understand value consumer attaches to brands, buying behavior?

Walking stores?

Key Measure:  Increasing Share

Command Premium Price?

Compete on Substantive Consumer Benefit vs. Other?

Assuming Can’t Compete in Disadvantaged Category?

Too Many Skus?

Which brands respond better to different mixes of:Advertising? Trade promotion? HQ call sales efforts? What is optimal spending per brand?

Icon Brands That Have Been Starved?

Positioning questions / think through:

- What has been tried in U.S.?  What worked?  What did not work?  Why?

- How is brand positioned in Europe?

- What is working in Europe that might be duplicated in U.S.?

- What are other position attributes?  Natural product?  High research product?  Has true efficacy / clinical / technical / visible advantage?

- How to take advantage of the high re-purchase and brand loyalty?

- Price decisions

- Level of retailer to pursue:  Prestige, High, Medium, Low

- What would be needed to encourage consumers to trade up to more profitable prices (similar to pricing in Europe?)

- What else is needed to emulate the success of Nivea, Eucerin and other successful introductions of European products in the US?

BRANDS, IMMEDIATE ACTION NEEDED

Does a narrow regional focus to build momentum, demonstrate a win make sense?

BROKER

VALUE FOR MONEY SPENT?

Right HQ Call coverage in right place

Right merchandising services?

BUSINESS PLAN, FULL

-       Competitor analysis

-       Market analysis

-       Strengths and Opportunities

-       Weaknesses and Problems

-       Consumer Trends

-       Facial care, color cosmetics, skin care: implications and interactions between the categories

-       Operations plan for product and customer service

-       Financial plan with milestones

COMPETITOR COMPARISONS

Ratio analysis findings?

Cost of Goods

Costs of Major Departments

Sales, Marketing Key Contrasts

Strategy Key Contrasts

Do we understand their major plans?  Response in process?

CULTURE ISSUES

Mindset of Return on Invested Capital?

Meritocracy vs. Bureaucracy?

Overhead Growth?

Executive Communication to Troops and Reverse?

Inward Focused vs. External Service to Customers Stakeholders?

Bias for Action:  “See a Snake and Kill It?”

Consequences:  E.g. “1/4 point share loss…”

“One Size Fits All” Trap

E.g. “Tight on financial targets, lose on How”

Clear accountability-reward-penalty, especially in matrix organizations

Fact based?

Strategic plan descends through organization to right action?

Autocratic?  Political?  “Jim said…”?

Cooperation and information sharing between units vs. Duplicate functions and information hoarding

Right key measures for each sector of business?

CUSTOMER SERVICE

Accurate, responsive to retailers?

Cost competitive?

ECONOMY

Current impact, implications

Future implications

FIXTURES

Timing on specifications and delivery

Field installation and stocking

Repairs in field

Implications of existing inventory

Consolidate purchases

FORECASTING

Affects product available to service retailers

Quality of retailer plans in the forecast?

Trap:  Forecast a number, miss it, forecast another number, miss it…

HEADQUARTER CALL SALES

Buying business at end of quarter?  Why?

Mix of product sold on discount vs. regular sales

Trade Loading

Planogram discipline

Category experts?

Consultative Selling / Profit plans for retailers?

Recruiting / interviewing / selection / hiring / training (Analyst profile vs. the street smart profile?

Accountability, Tenacity, discipline, focus, “we are going to make the number – and here are the 6 backup places where we will get the number if the primary fails”

Motivation, how achieved for sales?  Small wins, sales builds confidence and success, people know HOW to make the number (not just having demands placed on them without tools to accomplish)

Trap:  Sales manager’s and VPs who have just spent a year in sales and gotten their “ticket punched”

Walking stores?

Negotiation skills with buyers, negotiating on interests, requiring win-win business

Strategic Selling (coach, technical buyer, user buyer, financial buyer)

Closing skills, ask for the order, what to do when “fact based selling” does not result in an order

How to get about the buyer level and work with senior executives

Dealing with Homestore / ISE / the “tax on manufacturers for merchandising services”

Effective trade funds spending, management, deduction clearing

Merchandising Services:  When, how much, why

Working effectively with brokers and third parties

Call reporting

Follow through on detail, promises, customer service problems

Qualifying opportunities

Selling in new items

Selling promotions

HEALTH OF BUSINESS, NON-FINANCIAL

Boom and Bust Cycle?  Too many new skus one year, too few the next?

Cycle of Doom?  Unrealistic objectives-build overhead-raise money-sales shortfall-increase prices-cut marketing spending-load the trade

INFORMATION TECHNOLOGY

Key efforts at present?

Track record of on time, on budget, as promised?

INTERNATIONAL BRANDS, GROW IN U.S.?

Assumptions by international owners that don’t work in US?

MAJOR CHANGE EFFORTS

Results Of Last Ten Initiatives?

On time, on budget, as promised?

Retailer Service Consolidation, Streamline, Cost Cuts

Retailer Terms, Policies Changes

Sku Count Reduction?

Other Cost Saving Efforts?

MERCHANDISING,  IN-STORE EXCELLENCE

Current In-Store State

Executive Philosophy / Views

Current Service Providers, Value for Money Spent?

Consolidate purchases?

MISC, BUT IMPORTANT

Best:  Monopolies / franchises / just add money and turn the crank

Best:  Immune to foreign competition

Best:  Contract with employees to make them more competitive

Trap:  “Two numbers”

NEW PRODUCT, R&D, INNOVATION PIPELINE

Critical for toiletries, many other HBC categories

Just line extensions and repackaging vs. substantive new products?

Able to grow own new products vs. buying?

Listening to consumers?

Understand consumers better than competitors?

Investment?

ORGANIZATION

Current State +/-

Best:  Designed After Work Understood

OUTSIDE OPINIONS, PRESSURES

Stock Analysts

Shareholders / owners

Are analyst reports for competitors available?

Ownership / Board Nature and Makeup, +/-

PRIVATE LABEL STRATEGY / RESPONSE

PURCHASING, SOURCING, MANUFACTURING, DELIVERY

Get product where retailer needs it?

Cost competitive?

RATIO ANALYSIS, FINANCIAL HEALTH

vs. INDUSTRY, KEY COMPETITORS

Sales:

Gross Profit:

Optg Profit:

Pre-tax Profit:

EVA:

Debt/Equity:

Stock Price – One Year History

Price to Earnings Ratio

Advertising to Sales Ratio (if up, trouble)

Trade / Promotion Spending to Sales Ratio (if up, trouble)

Earnings Guidance / Projects, Sustained Double Digit Growth?

Order to Cash Cycle

Forecast-Order-Manufacture-Ship-Delivery Cycle Too Long?

Sales, General And Administrative

R&D Spending

RETAILERS:  CVS

Current State?

Key Priorities / Action Needed?

RETAILERS:  GROCERY Big 5

Current State?

Key Priorities / Action Needed?

RETAILERS, GROCERY 2nd TIER

Current State?

Key Priorities / Action Needed?

RETAILERS:  OTHER

Current State?

Key Priorities / Action Needed?

J.C. Penny

Meijer?

Kohls

Club Stores (Sam’s, BJ’s Wholesale, Costco)

Kmart / Sears

RETAILERS:  TARGET

Current State?

Key Priorities / Action Needed?

RETAILERS:  WAL*MART

Current State?

Key Priorities / Action Needed?

RETAILERS:  WALGREEN

Current State?

Key Priorities / Action Needed?

RIGHT PEOPLE IN RIGHT JOBS

Interviewing / hiring

Selection track record?

Retention?

Evaluation system effective?

360 Degree Feedback for Executives?

Problem people removed rapidly?

SALES REPORITNG

Daily?

Effective?

SENIOR MANAGEMENT ISSUES / SKILLS

Focus / Vision / Clarity to All / “Janitor understands how he contributes to mission”

Candor / Transparency / Hard Eye on Hard Truths

Capital Allocation Results Record

Position / promotion / reward based on merit?

Delegation and development of 2nd tier of management, development of successor?

Demand making skills

Decision making skills

Leanness / Understand / Optimize Work / Outward-Customer Focus

Trap:  Micromanagers?

Trap:  Decisions made for other than the best business reasons?

Trap:  Financial Engineering instead of fundamentals (happy customer, happy employees, profits)

STRATEGY, OTHER KEY ISSUES

Long Term Economics of the Business

“Sales street smarts / close to retailer / shelf focus” vs. “demand brands / marketing / national advertising / consumer research / [ivory tower risk]” balance

TRADE FUNDS / PROMOTION SPENDING

Effectively spent?  Only where proven effective?

Can give-aways be cut?

U.S. BRANDS, GROW AROUND THE WORLD

Assumptions by US owners that don’t work internationally?