Interviewed by Balqees Alramahi for MBSC Sales Management Project Date: November 12, 2024
Soltan: I'll tell you briefly about my position and the work we do at Panda, and also about the role itself and the specialization. I took a course in category management, but I didn't get an academic degree. There are some universities abroad that teach category management, but not many.
Up until 2007-2010, category management was considered dead. Then there was CMA (Category Management Association) and CMKG (Category Management Knowledge Group). One of them is led by Sue Nichols. They did some re-innovation and started to change many companies' perspectives in the field.
Category management, as we see it in Panda, is managing a category of products in a business unit model. For example, today I'm a senior category manager for beverages. Everything that falls under beverages is with me. I'm in charge of this category from A to Z. Of course, operationally, I'm not in charge of logistics or communication. But I'm in charge of what products Panda is offering and what products we have in the store.
I decide what products we should list and what brands we should capture in the market. If I see an opportunity to capture something - for example, I might find something in a cafe called a drip bag or origami, which is a small bag that you put on top of a cup and pour water on it, like an instant V60 for homemade coffee. When this trend emerged from multiple brands, it was an opportunity we saw in the market.
I do part of the sourcing because inside the country, I'm like a business owner. I own Beverages - I'm in charge. Today, it's like it's my business, my money. I get the product, recruit the product, and deal with it in commercial terms or trade terms. We discuss in detail and agree on trade terms and selling prices. Then there's promo management - we offer promotions and discounts, show it in the store, determine activities like sampling. We agree with the supplier on all of these things.
Soltan: We consider ourselves the focal point, the main point of communication with the supplier on everything. After that, we introduce the supplier to finance and logistics, and they enter all the standard procedures within Panda.
Category management mainly focuses on strategies, plans, and tactics. Of course, there are many strategies, and the definitions differ from one country to another. There are some vague areas where definitions aren't very clear, but the concept is general.
Let me explain why we have strategy, plan, and tactics. For example, in strategy, I might say that I think coffee is more trendy than tea. New generations drink coffee more than tea. In each opportunity, if they are offered tea or coffee, they will likely choose coffee.
Retail, as I view it, is an art of resource management. You have limited resources - spaces, logistic capacity, cash to buy inventory, and employees who work on all these things. I should allocate resources to the best of my ability to bring the highest possible revenues and profit while maintaining this mix. I could make a high profit margin of 50-60%, but end up with only 15 million in total. Or I could sell a billion with a 15% margin.
I focus on coffee because I think it's more trendy, and we have a young population in Saudi Arabia - most are 35 years or less. It's more likely that I will sell coffee than tea, so I give coffee more spaces and attention. If I'm ready to make a margin investment today and reduce profit in my category, I'll do it in coffee, not in tea. Because with coffee, if I reduce the profit margin, I can sell more than if I did the same with tea.
Balqees: So you choose...
Soltan: I call coffee here a destination category.
Balqees: What does destination mean?
Soltan: Destination means I want to be the place to go.
Balqees: Yes, exactly.
Soltan: I want that when you think about coffee, you say "I want to go to Panda." Same for pasta, olive oil - I want Panda to be the destination.
Of course, how do we choose the strategy? First of all, we look at the category's growth financially - how much potential this category has, even if this potential is outside retail. I'll give you an example with coffee. Within retail - all supermarkets and grocery stores - coffee is almost flat, maybe half a percent to one percent growth in volume.
However, where do we see the potential in coffee today? Most people don't want to drink Nescafe Classic, Gold, or 3-in-1 anymore. Even I don't drink it - it's very bad. People are shifting to more premium coffee. Today, there aren't many options in retail for premium coffee.
Soltan: You should be very careful when reading data. Today, when I look at retail data, it might suggest that coffee has no potential since it grows by only one percent a year. However, when we look at broader data - there's a trading company, the main operator of Dunkin' Donuts, which is listed. They published a study in their annual reports for 2021 and 2022 showing the expected growth in coffee was accounting for 10% per year. The coffee market outside of retail is 15-20 times bigger than the retail market.
Balqees: Wow.
Soltan: For example, in retail, I think our sales are about 1 billion. Sales outside of retail, in coffee shops, reach 15-20 billion. Of course, this isn't audited data - it's estimated. The audited numbers are from the big players - Dunkin' Donuts, Starbucks, etc. They're the ones who usually buy and exchange the data. Otherwise, it's forecasted.
Part of this forecast is based on the data published by the Saudi coffee market. They publish weekly reports on expenses in restaurants and cafes. In general, the studies show us very high growth. The number of cafes opening annually shows very high year-on-year growth. I don't have the exact number, but I can share it with you.
Balqees: Yes, please.
Soltan: Yes, I will share it in the presentation. We did this analysis with Nestlé just to see the potential. We brought in small and medium-sized brands that are special. They have things like origami coffee.
Balqees: Can I ask you a question while you turn on the camera? You are talking about sales forecasting, right?
Soltan: It's not considered sales forecasting. I will come back to it.
Balqees: I would like to understand what you are saying about the management. You are identifying the market and collecting data to find a strategy to generate income. In short, what is your function exactly? You are a part of the sales framework - specify and identify market demand by analyzing data to get customer acquisition and to come up with a strategy?
Soltan: Yes, correct. Sales forecasting will come after all this. Today I learned that I have potential for coffee, so I will increase the base, which is the shelf space. If you go to the supermarket, you'll find small dividers, like circles next to each other - we call one circle a base. For example, if I had six bases in coffee, I will increase it by three bases - a 50% increase.
Soltan: Now, of course, I can't say that I will double the sales. We have a big problem with coffee - we don't have a better solution to make you buy from us instead of going to specialty coffee shops like Half Million or Kim's or Caffeine Lab. You want coffee from there because it's more premium, and we don't have those options at all.
All the options we had were from SMEs. These SMEs saw things outside and brought them in, but they don't have the ability to spend on marketing. They can get me a product and sell it to me, but they can't provide a promoter who stays for two days a week explaining to people how to use the drip bag and what's the best way to use it. This is very interesting in retail - explaining to people as if you're selling them a device, showing them it's an option that will save them money and give them the same experience they get in a coffee shop, but at a much lower price.
So, we need big companies to work on this. We sat down with them and showed them our ideas and said, "Look, we need you to spend time, money, and effort here. Get your product - what you're offering today is too commercial for the young generation. People don't like it. Look at what SMEs have done and make products like theirs, but increase the scale."
The big companies can do the marketing activity - they can advertise on outdoor screens, Shahid, Netflix, Twitter, get influencers on Snapchat, TikTok. SMEs can't do all of this.
Balqees: So, you're giving the coffee example in the food category. So this is a sub-category of the food category, if I understand correctly?
Soltan: A sub-category of beverages.
Balqees: Okay. Now, what you're doing is you're designing a strategy for a product to help the sales, right?
Soltan: Exactly, yes. This is part of our work - how to determine the strategy we are working on. I decided that coffee is a destination because I found that out-of-home experience, which we call out-of-home experience in coffee shops, has an opportunity with customers. This is the customer base who goes to coffee shops. I see potential - they have experience, but they're having it out-of-home. I need to recruit this experience to benefit our members.
I can't do it because I'm not a manufacturer - I don't have the R&D. So I need to get a partner. I tell them I've tried certain products and I'm satisfied, and ask what they think. We start to build from there.
Soltan: But the main thing that made me say coffee is for me - because all of this is about effort, weight, and time from my employees and myself - is that I found there is high potential to grow in this category. This is the main reason we decide if a category is a destination.
The second type of category is called routine. Routine means business as usual, consumption as usual - like rice and oil. This is routine; people are used to it. There are no limits; it's almost the same consumption. There's an increase due to population growth, not consumption growth. But coffee is the opposite - there's an increase in consumption and in the number of people per capita.
I decided from the beginning to make coffee a destination because financially, I see growth in the next 5 to 10 years. The second reason is it must align with our overall strategy as a company. One of our slogans relates to healthy living - we've been promoting this for two years with organic products, food-related and diet-related products. We can't choose energy drinks as a destination category because it's perceived as unhealthy. We have coffee, olive oil, pasta, personal care - these are all destination categories that are healthy or normal, in line with the overall strategy of the company.
Balqees: We are not sales experts; we are students trying to understand this. We have a question about special fields in sales. Is what you're doing for coffee called account planning? Is it called account management? Is this something applicable to your field?
Soltan: Very close. That's account management from the vendor side. When I go to Nestlé and talk to the manager...
Balqees: Is what you said with Nestlé key account management?
Soltan: It's part of the seller's process when it comes to sales. I am a buyer in the case of Nestlé.
Balqees: Okay, I got you. I'm just trying to find the concept.
Soltan: It's similar. The people who leave our company often go to Nestlé. It's the same idea - sometimes you're a seller, sometimes you're a buyer. I follow the vendor; they follow the retailer. This is the only difference. They deal with the same ideas, similar terms, but from the opposite side.
Soltan: We decide financially and follow the strategy. We have 4 or 5 main strategies. The first one is the destination category, the second is routine, like rice and oil. Then we have the impulse strategy. Including these plans, we use 4 P's: product placing, product assortment, product pricing, and product promotion.
We handle this through promo tactics and pricing. For example, this happens not only in retailers but also with vendors. Sony, and this is a well-known fact, has been selling PlayStation at a loss for 15 years. The last PlayStation they sold at a profit was PlayStation 2. PlayStation 3, PlayStation 4, and all of these lost money. They earn from the listing fees and from PlayStation games.
Balqees: The rice with the bag is cross-selling?
Soltan: Yes, it's cross-selling. There's another thing called transaction binding.
Balqees: What is transaction binding?
Soltan: If you buy rice, you will have to buy spices. When you make a transaction, you build a transaction on it.
Balqees: You guys put a lot of weight into finding upselling opportunities with cross-selling opportunities. It is key for you, right?
Soltan: Yes, of course. It's key for suppliers. A company like Sony, for example, loses money on each device they sell. They earn from what? They earn from the controllers. Similarly, companies that sell shaving machines earn more from razors.
All of these go into the tactics. We use these tactics to sell a product. How much do I sell? When do I promote it? For example, in winter, I have to promote tea. It differs from region to region. For example, in the Western region, it's summer for 11 months a year - we sell more water than other regions, per capita. In Riyadh, for example, there's a decline in water sales in winter because in cold weather, people don't drink water - they drink tea or coffee.
We have to consider all of this in buying, promotion, and assortment. Basically, category management consists of three things: strategy, then plan. I have a specific strategy, and I make a plan using specific tactics to reach the financial targets that I want to reach.
Balqees: I would like to ask you about the sales operations. You are not taking care of the sales operations - you just put the strategy and everything. Regarding the operation of the sale, is this another team that will take care of it? How to design it? How to launch? Is there another team responsible for the sale operations?
Soltan: Regarding the operations, we have eight departments in the company. We have HR as its own department. We have commercial, which is ours. We have supply chain. We have operations, which are the employees in the branches - the cashier, branch manager, stocker or merchandiser who delivers goods. We also have audits. The rest of the functions are available in any company.
Today, for example, if I bought a certain product, made a listing, approved it on the commercial teams, and signed papers that we will earn 30% from it and sell 10 million this year (equivalent to 3 million Riyals), then I start connecting the vendor to all the existing teams. If they need marketing, like a post on social media, I'm the focal point - they start talking to me, but I will talk to other people. If there's something in marketing, I'll go talk to marketing about printing something or making social media posts.
For example, we had a problem a few months ago with Red Sea Logistics. They had a shortage, so a lot of suppliers had limited stocks. They told me people need to buy now because they won't be able to sell in 2-3 months. So I go to the supply chain and ask them to buy to secure stocks for the next 3 months.
Balqees: Okay. Is it also forecasting? You plan ahead, no?
Soltan: No, the supply chain does the forecasting based on the prices we put. For example, if I want to deliver rice to Abu Kass for 60 Lira and want to sell it for 20,000 Lira, they might say no, it needs to sell for 60,000-70,000 Lira. We agree through internal negotiation on how much to buy because they see the risk on the vendor. This product also has a financial risk because we have limited cash to work with - I have to buy from the vendor and sell to the customer to get my money before I pay the vendor. If I buy too much, I will have a cash flow issue.
Balqees: Is shelf-life maybe a challenge?
Soltan: Yes, but shelf-life is not a big challenge because we and ITEM are the biggest retailers in Saudi Arabia - we have about 50% of the market. Most of our vendors are retailers, and because we're very big, we have the upper hand in working with them. For example, Tamimi is about 1-2% of the market in modern trade hypermarkets, so they don't have the upper hand - they can't talk to vendors like we can.
Balqees: Yes, there are questions about talent management. Do you train them? Is it hard to retain them? What are the challenges you find in recruitment or in keeping them in the team? Are people interested in staying in your team? Do they find growth opportunities in training, in career succession planning? What can you say about this?
Soltan: Retention is near to impossible. Retail is a very fast-moving market because suppliers want someone from inside the retailer - someone who knows the inside and outside of the retailer, someone who knows everything. They're more comfortable bringing someone from the retailer.
Training is not hard because the principles of our work are very easy. It's a bit complicated, but it's easy because anyone can do it. When we recruit, we recruit either industrial engineers or analysts. We need someone good with math and Excel - that's it. If they're good with math and Excel, training them will not be bad.
Retention is very hard because they gain very good skills. Many people leave Panda. This is actually a good thing - compared to other retailers, people here learn more because exposure here is very high. They deal with many functions - we have 14,000 employees and deal with many vendors. This year we will sell 11 billion Riyals. We just got an evaluation from Kantar Marketing that Panda is worth 3 billion Riyals, making it one of the top 20 companies in Saudi Arabia.
When we go to Gulf Food in Dubai or Anuga in Germany, Panda is well known. Until recently, Panda was the biggest buyer in the Middle East. Only Lulu is bigger now because they have more than one country.
Soltan: Recently, we started working with Category Management Knowledge Group (CMKG). We took courses with them and will do a new course because this field is considered technical and isn't taught in universities. We have to get people trained in CMKG or CMA to teach us these things. Most of what they say, we already know, but they give us better tools to do our work according to international standards.
Balqees: Ok, but you don't do anything specific to retain them? The packages are more...
Soltan: I started in 2020. I graduated and immediately started as a buyer, then became an assistant, then an associate, then a manager, and now a senior manager.
Balqees: Mashallah, you have a succession plan within the organization.
Soltan: Yes, because it's difficult to find someone abroad with the same skills. Abroad, from what we hear (though this may not be accurate), there's a difference between category management and buying. Buying is pure trade with no strategy - just tactics, pure trade, sales minus cost. What we do is different - when we see a trend, we grow it. When we see a trend already existing and growing, we move with it. When we see potential to recruit a new customer from abroad to retail, we recruit them.
For example, when we find an opportunity to do a sponsorship with Red Bull's Formula One team, we do it and have the world champion wear a Panda logo. This is category management - we tailor retail literally. Buying business is just buying and selling - anyone can do that.
That's why when people come to us, we struggle to train them on these skills. Today, when someone comes to me, they need six months to get on their feet and a year and a half to two years to be a professional. At the same time, suppliers, especially multinational companies, offer much bigger packages.
Balqees: When we talked with Majed from e-commerce, he told us that they look for people who are agile and who can learn tech quickly. Your approach is totally different - you're offline, so you don't really care for online?
Soltan: The most important thing for us is math and Excel. We have an AI system called Rebionics that reviews prices based on certain strategies and optimizes to reach the highest revenue and profit. But the most important thing in our work is soft skills. A while ago, we did negotiation training with a consultant called Scott. Negotiation is very important because our lives depend on it - every year, we negotiate contracts and prices.
The technical aspect - the calculations and numbers - is easy. It's very limited. What makes a broker and retailer different is their soft skills - how persuasive and convincing they are. A good negotiator doesn't aim for win-lose; they treat the partner as a partner. We find opportunities to reach win-win-win: I win, you win, and the customer wins.
[Interview concludes with discussion of a Korean noodle case study and final thank yous]