← The CPG Guys
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- [00:01]
Narrator/Announcer
For over 50 years, mass market retailers, MMR has been the definitive media authority across key retail channels including discount, grocery club, e commerce and specialty. Now, Retail MediaIQ, MMR's parent company, is building on that legacy by integrating the trusted editorial insights and extensive reach of chain drug review into the MMR platform. At the Same time, Retail MediaIQ is expanding its editorial focus to include the fast moving convenience store channel. The result is a powerful, unified media platform that reflects the full scope of today's retail ecosystem. Backed by decades of expertise, deep industry knowledge and editorial excellence, the new mmr, which debuts in October, will deliver the most comprehensive view of retail and reach the largest, most easiest influential audience of decision makers across the retail and consumer packaged goods sector. The strategic expansion of MMR mirrors the challenging dynamics of the industry and affirms the publication's mission to be the go to source for insights, analysis and access across every retail vertical. Check out the link in the digital liner notes to this episode. To reach mmr, make sure you're subscribing to their newsletter.
- [01:26]
Zach Dennett
Hi, I'm Zach Dennett from CVS Health and you're listening to the CPG Guys Podcast.
- [01:33]
Shree Rajagopalan
Welcome to the CPG Guys Podcast. Your host, Shree Rajagopalan and Peter V.
- [01:40]
Peter V
S Bond explore how brands and retailers.
- [01:43]
Shree Rajagopalan
Engage consumers in an increasingly digitally driven world. And now, here are the CPG Guys.
- [01:53]
Peter V
Hello and welcome to the CPT Guys Podcast. I'm your incorrigible co host, pbsb. My daughter is not a pop star, nor is my wife a podcaster on iHeartRadio, but I do my best to hold ground when compared to the celebrity lifestyle my co host lives. You know him as the patriarch of the Raj family media empire. His daughters, Ri and Lara are legitimate entertainment sensations and his wife Kavita runs her own podcast, Light Camera Conversation. As for Papa Raj, as his daughter's fans refer to him, well, in addition to podcasting, he serves as the Chief Revenue Officer of think. He's also the former CCO at General Mills. Now, SRI can't join us today because he's off to London to accompany his daughter Rhea on an MTV event at Wembley Stadium. More to follow on that. We wish them well in that adventure. Make sure you're subscribing to our podcast on your preferred listening platform, Apple, Spotify or whatever, where you can get our latest episodes and even go back to consume some of the 515 episodes we've already published. It still blows my mind. 515? 15. That's a lot. All right, enough of my my boilerplate Our guest today comes from a Fortune 10 company. You know the one I helped make famous or infamous for the six foot long register receipts. He's here representing the front of store non pharmacy merchandising group. His career has included roles at many familiar companies including General Mills, Venmo, Oliver, Wyman, Jet and Walmart. In 2022 he joined CBS Health where he has led efforts in omnichannel, loyalty, Hispanic formats and last year he assumed the role Vice president of merchandising for consumer health and Wellness. Please join me in welcoming to the podcast Zach Dennett. Greetings, Zach. How you doing?
- [03:33]
Zach Dennett
I'm great. It's a real pleasure to be on this podcast. I've learned so much from you guys over the, over your 515 episodes and so it's a real pleasure to get to talk to you live.
- [03:42]
Peter V
You know, there are two things people say to us when they meet us in person. The first one is, you're a lot taller than we thought you were. And I'm always amazed by that because we're podcast.
- [03:50]
Zach Dennett
How did you.
- [03:51]
Peter V
You only see us on a screen. But the nicest thing people say is is. And I appreciate what you said is we, we do get a lot of comments that people learn a lot from the industry by listening it. That's why we did it. We want it to be educational. We try to make it entertaining. We call it the Mary Poppins approach. A spoonful of sugar helps the medicine go down. Sometimes things we talk about can be a little dry and so we like to make it fun and that helps people learn. So thank you. We're glad that you, you, you like what we've been. I know today's episode will not disappoint. For those people listening to our conversation, we're going to include in the digital show notes of this episode, links to your LinkedIn profile and that of CVS Health so that our audience can learn more about you as we carry on the conversation. So let's get to those questions. We've got some great ones. I'll open up talking a little bit about what you're doing at CVS and stepping into your current role in March of 2024. What's been your primary focus within consumer health and wellness front of store merchandising at CVS Health.
- [04:54]
Zach Dennett
It's a really exciting time at CVS and as you know, well, we've been on this journey and the results are showing that the success is there. So it's working. We are gaining share. The results are showing and so It's a really fun time to be there as we are building momentum and having success. But you asked what's been my focus? Well, first focus is of course the team, because nothing gets done without the colleagues who actually make things work. So primary focus is of course, making sure that the colleagues on the team have what they need to get their. But when we think about the business, there are three things that in consumer healthcare we are focused on. First is assortment and localization. And we are on this march to make sure we have the right products in the store. But of course, that's not a answer that's global. That's an answer that's specific to each store. So we are trying to make sure that we figure out how do we have the assortment that we need localized to the stores that they are. And now of course, that's not something that you can do with the number of stores we have just by hoping it happens. So we are investing heavily in the tech, we are investing heavily in the algorithms and the processes that enable us to localize the right assortment and the right stores. We then are thinking very hard about how do we simplify the pricing and promo to make sure that the customers are getting the value that they expect, especially in these tough times, and focusing on how do we get our everyday prices right. How do we focus on these extra big deals and the new promos that we're working on and optimizing the promos. And then you can have great assortment, you can have wonderful pricing, and if the product that you are looking for is not on the shelf, it doesn't matter at all. So we are spending a lot of time making sure that we have the right on shelf availability and working closely with supply chain and store execution to make sure that every time a customer anywhere in the country goes into the store and looks for a product, they find it where they want it. And as we pull together localization, optimized pricing and in store execution, we start building a store of the community and we start pulling together what we want. Of course, it's never quite that simple. There are also a couple of other areas that we're focused on across my team and delivery marketplaces. So the doordash instacarts and uber eats of the world have been a really interesting growth engine for us. As we think about the customers who want to shop on those areas, how do we make sure we bring the full might of CVS to that? And then finally, the team's doing a lot of interesting work in what we call supplemental benefits. Or Medicare Advantage otchs some people might call it. And what we're seeing is big growth area. CVS is both administrator and a retailer in the network and we are really helping customers get the value that they need. So that's kind of where we've been focused and it's been fun seeing the early results.
- [07:49]
Peter V
That's terrific. I think back when you mentioned omnichannel. I think back to my time at CVS from 2014 to 2017. I think it was about 20, late 2015, early 2016 that the first emergence of curbside appeared. That was kind of the beginning of the omnichannel experience. And as you talked today about the last mile delivery partners that you've built, it really has grown to be a comprehensive experience for consumers. And I think you also. What I also took away from that is CVS is a vertically integrated healthcare company in so many different aspects. The front of store, the pharmacy in the back of the store, the pharmacy benefit management, the traditional caremark business. And then let's not forget the health hubs you have in the store. Wow. That is really about focusing on the consumer and making sure you meet them throughout their entire journey of healthcare. So I can understand why you're doing that. So I want to dig in a little bit because I mentioned in the beginning your background in leading Omnichannel at cvs. CVS really does emphasize a seamless omnichannel experience for its consumers. What have you seen in your time there as being key milestones in merging in store and digital merchandising so that seamless omnichannel experience is realized?
- [09:12]
Zach Dennett
This is a highly important topic and I know from your background you think it's very important and obviously from my background I think it's very important and I got to be on the team as we were scaling BOPIs to buy online pickup in store and then of course we launched the rapid same day delivery with CVS and I've got them to do some of this in non CVS places including when I was at that co founder of Rapid Delivery Start. So what are the overall trends we're seeing? The first is that customers don't shop channels, customers shop combined experiences so customers don't have in their mind I'm an E commerce shopper, I'm a in store shopper. Customers are shopping CVS and it's our job to show up for the customer how they want to be how how they want. And no customer thinks of themselves in a channel. They are just shopping. So let's give you an example on loyalty. You mentioned the, you know, you mentioned at the beginning 80% of coupon redemptions are currently digital. So in store shoppers, but they're 80% of the time they are using a digital experience to redeem their coupon. So that's an incredible omnichannel experience of you're shopping with an app, you're getting value in a physical store. But that is where we are now. The team is really focused on pushing that further. So how do we drive further that integration or for example another example RX attachment we talk about as a customer is buying something at the pharmacy, are they also finding what they need in the front store to solve their problems? And over many decades we've spent a lot of time making sure that that is true in the physical store. But now we have a lot of customers who are becoming digitally engaged in the pharmacy. So that's a whole new question. How do we make sure that the digitally engaged pharmacy customer is also getting the digital help they need for front store merchandising? So there's a big area that we're pushing on on how do we build the the RX attach that we need to align the front store and the pharmacy in the digital world. And then of course we get to delivery marketplaces. So doordash fuel bur eats instacart. One of the. There's a lot of interesting things that you can see there. But one of the things that's struck me is the mental model that customers have as they're shopping on delivery marketplaces. And what we're learning more and more is that customers mental model of do they trust the retailer that they're shopping from? Do they trust the cleanliness, the speed the retailer overall plays a huge role in how they choose which retailer they're going to ask one of the delivery marketplaces to go shop at. So we've been obviously pushing that. And then there's our footprint. We have obviously basically we have a store near basically the vast majority of Americans. How does that enable us to drive delivery marketplace so obviously incredibly exciting space that we are that's fun to play.
- [12:27]
Peter V
CVS has around. You made mention like 80% of people are engaging with digital coupons and they're shopping in physical stores. You have I think at last count about 60 million digitally engaged consumers, part of the extra care program. What are the biggest learnings on how digital influences the in store purchases in in the health and wellness area that you focus on?
- [12:52]
Zach Dennett
Just to be clear, when you say the number of digitally engaged Customers. What I think what you're saying is the number of customers who are digitally engaged with cvs. Yeah. But if you zoom out and ask what percentage of our customers digitally engaged somewhere in their lives, the answer is of course, all of them.
- [13:08]
Peter V
Right, all of them. So I believe, I believe a hundred percent of all purchases are digitally influenced. It's just to what degree? But I thank you for pointing that out because I absolutely agree.
- [13:20]
Zach Dennett
So, but, so first talk about the CVS health app. So what are people using the app for? And then how is it influencing stores? So people are using it for what you would expect. They're using it for the extra care deals, they're using it to check product availability, they're using it to check price comparisons, they're getting product information, they're getting lots of information. And then people also, sometimes, are you not sometimes, frequently are using the app to make a purchase, to do a buy online pickup in store, to do a save day delivery. What's interesting is the team did some tracking and tried to figure out how important is this digitally influenced compared to the actual sales that go through the app. And when you look, take a very conservative approach and you say, I'm just going to count it as digitally influenced. If we can track if someone you know directly logged in, used it and then placed the sale, did a sale in store, the digital influence is three times as as big as the actual sales from the app. Now when you zoom out a little more and realize that some people might be looking at something and then much later checking in and all, you realize that the digital influence from the app is really spectacular. But then that's even understating how digital influenced customers are because customers are influenced by non CVS channels as well. And you guys have talked about this many times, but we need to make sure that the clarity of the message of why is CVS important? Is clear enough that the customers who are hearing the data from other digital channels are still getting the clear message.
- [15:02]
Narrator/Announcer
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- [16:13]
Peter V
Thank you for that. You know, it's killing Sree that he's not here today. I'll tell you why. Because at least Once a week, Sri and I have got our CVS apps open, and after 515 episodes, we know what each other likes to buy. And we'll be scrolling through and I'll say, hey, Sree, did you see this offer? And he's like, what? There's an offer there? And he'll scroll through, wait a minute. I didn't get that offer. Why didn't I get that offer? Like, dude, it's the power of personalization. You know how this. You know how this works. Or he'll get an offer. I'm like, yours is different than mine because we have different purchasing behavior. It's about giving the experience that is right for each of us. So it certainly works in our case. And we love to. We love to talk about it at least once a week.
- [16:56]
Zach Dennett
So that's great to hear. I love that story.
- [16:59]
Peter V
All right, so innovation is the lifeblood of growth. And to that end, as you think about your role in merchandising, bringing new and innovative brands into your stores keeps your consumers excited because it becomes something where they can learn about new products and try them out, and maybe they're right for them. So the question I have is, what qualities do you look for in emerging brands that are seeking to do merchandising partnerships with CVS Health? And how does digital and Omnichannel even play a role in that?
- [17:30]
Zach Dennett
So this is a fun question, because at our heart, everyone on the merchandising team is an item merchant. And we get excited about items, and obviously, we spend a lot of time talking about a lot of other things. But at our heart, we are item merchants. We are trying to figure out what is the best product for our customers and where do we want them. So new items get us really exciting. This is what lights up everyone on the team. So what do we need on a new product? Well, you said innovation, and I think the first thing we'll talk about is we need clear differentiation and real innovation. And innovation, or real innovation could be product formulation. It can be delivery. It can even be a new way of messaging, but it has to Be something unique. Because all too often someone says, hey, I have this great innovation. And actually it's a copy. They've misused the word innovation to mean I'd like to duplicate something else that doesn't get us excited.
- [18:21]
Peter V
But when it's innovative to them. Right, they think it's innovative, but it's not really innovative.
- [18:26]
Zach Dennett
Exactly. Yeah. And we can all think of the items that we've been presented that were called innovation. Like, that's not innovation. But once you get clear differentiation, once you get a product that's solving a customer need, state that in a new way, then we start looking and asking, do you have an existing community? Because I think in the past, many retailers would say, we'll bring in a product and we'll build the community. But as you were talking about digital influence, it really helps right now, as products are launching in a store to already have a digital community and a digital presence. And we are looking for products that have already shown they have a followership. They already have a set of customers who are eager for the product, who are excited about the product. And then when things go right at cvs, they can go right in a big way. And obviously we can work in a small door count, we can figure out how we handle small items. But the idea is to get things that are going to go big. So we also are looking for products that are ready for scale, they are ready for national distribution. They can when it hits and when they can get big, they can get big. So let me give you a couple of examples. Mary Ruth Organics. It's a really interesting founder who's a nutritionist. She saw a gap that her patients were not liking taking pills. So she made this liquid vitamin easy to understand. Focus on transparency and trust resonated well with a whole bunch of consumers. And. And the merchant was excited about it, brought it in, and we're seeing great success. Or another example recently of new emerging brands. Neurogum is a functional gum. And I'm sure you know of it. We saw it very early. The merchant was very excited about this one and actually brought it in probably before it had much of a followership. So we brought it in, we got it in the stores and then a major spike came. It started getting a lot of news and we were a little ahead of the curve, that one. So we started seeing a big spike and that one is trending with younger consumers on the old consumers. Lots of functional benefits. What's fun about Neurogum is I keep getting comments from various store managers saying, hey, I heard that other store has this other flavor, other version. Can I get that as well? So it makes us as item merchants, warms our hearts when we start getting requests. Hey, I need more of that. You did a great job picking that item. And obviously those are only two. We have a continuous stream of new items that the team is always excited about and that brings to the customers what they need, which is the right products to solve the innovative issues.
- [21:08]
Peter V
I love that. It's not just having new and innovative products. It's also about making sure that because it's new and it's innovative, you get behind the launch of it. The goal there is to drive success and make sure that your consumers are becoming aware of it and, and having opportunities to try it. And that's where the, the, the full force of, of the different marketing and advertising mechanisms within the CVS portfolio come to bear. Let me remind our audience today that I'm speaking with Zach Dennett from CVS Health. Okay, so Zach, I kind of made it. We talked a little bit earlier about front of store, back of store, right? So CVS shoppers are coming to your physical stores for their prescription needs, for their over the counter medications and even primary healthcare with the health hubs. How do you work with other business owners within CVS Health, the broader organization, to ensure your shoppers are getting the holistic 360 care that they need? And how do even brands play a role in that? Because there are RX brands, there are OTC brands. I'd love to know how this all comes together in a meaningful way that gives a really great experience for your, for your shoppers.
- [22:24]
Zach Dennett
So across CVS Health, we're all focused on making sure we deliver the best outcomes for the patients or the consumers or the customers. So and where appropriate, we're constantly looking to break down silos to ensure that seamless care delivery across all parts of the business. So for example, across front door pharmacy and MinuteClinic, we're aligning closely on the shopper journeys and making sure that those are consistent. And the front store plays a key role within the enterprise in meeting consumers where they are in their health journey via assortment and convenience. And then brands have a role where brands contribute by offering solutions that complement care. So a incredibly important question you ask and I think one of the real powers of cvs.
- [23:15]
Peter V
So I was in the CVS store in Guilford, Connecticut last week getting my fall flu shot. And as I was there and I got the wonderful. My daughter just loved the band aid because it had the lovely CVS Care mark on it. But they were kind enough to give me a sample of your store brand popcorn. And I thought, what a great little combination. I'm in there for an RX experience. I'm presented with a nice little treat and something that I can try out one of your, your excellent store brands. So I immediately I thought of whether there's a really great connection about how that's happening between the front of store and the back of the store.
- [23:53]
Zach Dennett
And that well market popcorn you have is great. That's one that I've had delicious, I've had many times. So I'm glad you got a chance to try it. And, yeah, and, and you're right. That's a, that's a powerful case. I'm glad your daughter enjoyed the band Aid. And let me know if you need some more popcorn.
- [24:08]
Peter V
I may need it because I got about two bites of the popcorn for my daughter absconded with it and this is mine now, daddy.
- [24:14]
Zach Dennett
All right, Got it. All right, well that's probably a good problem to have. I won't.
- [24:17]
Peter V
It's a high, high grade problem we've had on the podcast your colleague Parbs Dharwal from CBS Media Exchange a couple of times. In fact, we did a LinkedIn live with him over at Cannes this summer when he was over at the Cannes Lions Festival. Would love to know how your merchandiser, merchandisers on your team are interacting with the CVS Media Exchange team to ensure that brands connect with your consumers in the path to purchase.
- [24:43]
Zach Dennett
So Parbs and I share a wall. So, you know, one of the main interactions is I'm constantly banging on the wall asking him to be a little quiet and you know, if you hear in the background then you know what's going on there. But other than sharing a wall, Parbs and I and the teams across are very aligned. So a couple things. First, everything we do is built off of a common understanding of the customer from the extra care. Yeah. So as a result, we are all talking about one constant customer and have an aligned vision of what we're talking about. But the real magic happens when we combine merchandising and CMX and marketing. And let me give you an example. When you think about some of the tent pole events like Big Fall Wellness that we have coming up, one of these big extra big deals focus. Those things do much better when we have Pars and his team driving awareness from the retail media side. When we have CVS marketing amplifying that and then Parv's team amplifying the Marketing and we have merchandising really driving both in store awareness and and great deals. So each of these things are powerful by themselves. When you combine them, you really get the magic. And by magic I mean not a particularly magical thing. The incremental roas that we are seeing on CMX is a great use of brand money. We're really seeing extremely high and very strict measurement conditions. Extremely high incremental roas when we get all of these things working together. So really excited about that. The other thing that works really well is new items and as we are pushing for some of the new products, you know, as we talked about item merchants. So some of the new items that we mentioned are lots and lots of other new items where CMX can work with the brand to make sure customers are aware of the of the brands. That's another place where we've seen really strong returns on the cmx.
- [26:58]
Peter V
Seems to me what you're saying is that CMX is an integral part of beyond just joint business planning. It's joint value creation for the ecosystem. So that's good to hear. My background is in loyalty data, having been the steward of the Extra Care Insights portal for quite a number of years at CVS and prior to that my time at Dunhumby when they were part of Kroger. So my next question is right to the heart of that, what role does behavioral insights via all that rich loyalty data, you have the tens of millions of extra care shoppers where you longitudinally understand what they're buying, when they're buying and what have you. How does that play a role in determining your merchandising strategies for the categories you're responsible for championing, as you well.
- [27:49]
Zach Dennett
Know, and I guess you'll tell me at the end whether we've still pushed the legacy that you were hoping as you were as you were launching this. Everything we do in merchandising is informed through a deep understanding of the customer supported by Extra Insights. Everything. And this connection to the customer is true at all timescales. So on the shortest time scale, what personalized coupon do we give you know, each of you as you were talking about each week and we personalize that the many millions of offers we send out, tailored based on the data we have, then on the longer time scales, all of the decisions in a planogram, from the overall flow of the category to the subcategory placement to the item decisions, are supported with strong customer insights. So making that specific Shakayla, for example, is a merchant on consumer healthcare who's in charge of femcare and after much time interrogating these insights, she talks about her customer as Jennifer, a Gen X mother with children in the household. To hear Shakayla talk about Jennifer's likes, desires and needs, you would think that Jennifer is a close acquaintance of Shakayla rather than an aggregate of customer insights. But the key point is that because Shakayla knows Jennifer well, Shakayla made a bet to increase our focus on menopause. Jennifer also told Shakayla to undergo a big reorganization of the of Pat's planogram. So the inputs needed major analytics and I can tell you that no fancy analytics is needed to see the results, which is that Shakayla is gaining major market share and having great success or and I could keep going on with these Anna Maria is on the Vitamin, is the senior category manager on vitamins and she saw in Loyalty that the CVS vitamin customer, who you might typically think of as older, was actually starting to skew a bit younger. Then we also know that the younger customer prefers gummies, the gummy form factor, which led us to change the aisle, lead the aisles with gummies and bring in more trending products. And now you're going to say, well this sounds similar because Vitamins is seeing double digit share gain. So again, understanding the customer's helping and then you get to the question, and this is probably a question that every merchant on the consumer healthcare team, every merchant in CVS, and probably every merchant you've ever spoken to is trying to answer, which is should I carry item A or item B? So we're constantly asking that question and the loyalty insights have armed the merchants with specific answers to that question. So basically by looking at the history, we're able to algorithmically answer how do customers switch between these products? And if we were to get rid of one of these products, what will customers do? So we're able to look at a switching matrix. The data is obviously not always clairvoyant and we get to add merchandising art on top of it. But it's a really great basis to start to layer on merchandising intuition. And then last one, because I know I'm getting too excited, this will take too long. But the localization that I mentioned at the beginning, how do we figure out how do we get the right assortment in every store? And the right assortment is not a universal answer. It is an answer that is store specific, that uses loyalty insights because the right assortment and you said you were in Guilford, Connecticut, the right assortment in that store is very different than the assortment next to me, which is different again than the assortment on the other side of the country. So we are constantly figuring out what do the local customers want and then we're able to give them. So this is where retail gets fun because we're able to thank you for launching that for many years. We're able to use those rich insights to answer the questions at all levels, at all times.
- [31:44]
Peter V
I loved how you highlighted the principle of substitutability. That's one of my favorite topics. Because your point is what you want to do is ensure that you have products that the consumer shopping that store want to buy. And the last thing you want to do is take a product out that through their purchasing behavior, consumers have told you, no, that's the only product I buy. And if you don't, if you don't have that product, then I'm going to have to go to another store. The way I. The very simple example I've used in the past is the cake mix category, right. If you were to say, I want to eliminate 20% of my SKUs and you were to force rank based on sales, guess what? Every single flavor would be? Chocolate or vanilla. But there's someone who likes orange flavored cake, and that's what they like. They don't like vanilla and they don't like chocolate. And they may only be 5% of shoppers, but that's the only flavor they like. And if you take that off the shelf, they're going to go to another store that sells orange flavored, orange flavored cake. So to your point around substitutability. Yeah. Behavioral insights gets you that question. It helps you understand what products work in, in. Are they complementary, are they substitutable? What is it? And without that behavioral data, you wouldn't, you wouldn't be able to really get to the heart of who those shoppers are in those profiles. People talk about demographics, right? Demographics are contextually relevant, but only after you've created those behavioral segments. I would never start with a demographic breakdown because you, you know, income is never an indication of a propensity to buy. It's only a capacity to buy. So interesting stuff. So I'm really excited you and I, I could talk about, I could talk about this for a whole episode with you, Zach. You're, you're, you're cut from the same cloth as me. So I'm glad you, you. A plus. On the, on the answer to this question I'm giving you, I'm going to.
- [33:41]
Narrator/Announcer
Give you A high, high score on that.
- [33:44]
Peter V
All right. I've read some other statements that you've made and you've noted that younger generations tend to trust influencers over experts. I think intuitively, from my background in user generated content, I can confirm that because. Right. It's always amazed me how a consumer is willing to trust a thousand other people they've never met more than a brand and more than the retailer because they bought the product and they tell you what they think about it. Right. So intuitively I believe that.
- [34:13]
Zach Dennett
Right.
- [34:14]
Peter V
My question to you is, from the standpoint of influencers, how is that affecting your product strategy in this world where TikTok and Instagram can create overnight sensations for brands?
- [34:28]
Zach Dennett
So you're exactly right. People of my generation, which my children generously call old. But you know, our generation, we, we grew up trusting experts. We trusted people who have a Ph.D. or who, you know, were, were trained, schooled on products. And then there's been this generational shift as people are less likely to trust the experts and much more likely to trust what shows up on their social media feeds. And what's interesting about how you observe that is it's the seeing lots of people who are all saying the same thing. Now, of course, we all know the algorithms are curating that, so that's not a mistake, it's just the way it happens. But your brain, the younger generation's brains saying, well, everyone's saying this, it must be the case. And there are, okay, so that's where we are now. Of course, the future is probably not going to look the same, and I would not be surprised if in a couple years you are spending a lot more time talking about how AI is influencing people and how customers are starting to have more and more of their influence come from their chatbots and their companion and their AI companions. So that's a trend that we very much are watching and trying to figure out. But you asked about how do the influencers influence our merchandising strategy? And the answer is speed of trends are changing dramatically and the rate at which a product goes from never heard of to its major spike to back down is becoming faster and faster. And we as merchants, and we as a retailer need to be able to catch those trends early to make sure that when the customer comes in looking for what they want to buy, we are ready to do that. So the good news is that we're doing a good job so far. And the scary news is we can never let off the gas and we need to keep accelerating and we're using some interesting insight tools that we have to enable to that. So for example, what's trending on TikTok is now something that we have access to and we're able to see what are some of the very early blips on what's going on TikTok and is that something that we're interested in? Is that a trend we're doing? We're obviously also paying very careful attention to the conversations that are going on and asking which, which ingredients, which formulations, which uses are starting to spike and making sure that we have both the products and the inventory that we need because some of these trends are so fast that we actually need to increase, you know, override the inventory algorithms because they're not going to be able to keep up with the speed of trends. One thing to keep in mind though, as we think about trust is that across all generations, the pharmacists are some of the most trusted healthcare professionals in America and the CVS customer knows that. The pharmacists in our stores are trained are deeply knowledgeable and happy to help customers with product recommendations, suggestions. So regardless of generations customers appreciate the expertise of our really great.
- [37:47]
Peter V
What you emphasized in terms of understanding the trends and seeing how things are going viral, Shree just re emphasizes to me what SRI and I are always telling to brand marketers and I think it's true to merchants. I don't think you need to be on TikTok and Instagram posting lots of content, but I think you need to be watching what's going on. I think you said that that's exactly what you're doing. You are paying attention to how consumers are talking about the products and health conditions and trying to adjust your, your strategy to accommodate what those trends are. So that's really the one other thing I wanted to say about AI. SRI called me the other day and said that our podcast hosting platform is now offering an AI co host. Should I be, should I be worried about that, Zach? I'm a little nervous.
- [38:40]
Zach Dennett
My view so far is you are doing a great job and are not going to be. But on the other hand, if SRI can't find himself onto the calls and he needs to be on airplane, you might need to reproduce him. So we'll see.
- [38:49]
Peter V
All right, let's close this out. Let's look a little bit towards the future. How do you see CVS's merchandising role evolving over the next three to five years amid all of these changes innovations like instant commerce. We talked about some of your delivery partners and I think that, I mean, particularly for a retailer like cvs, where in health and wellness you deal with a lot of acute conditions and people need immediate relief. So I'd love to know how you're, how you're kind of embracing that in your new role.
- [39:17]
Zach Dennett
First, when you think about it, the strategy is working. And when you look at the results, when you look at the momentum overall, what we are doing in merchandising, what we're doing across the front store is working. We are simplifying value, optimizing promos, we are localizing assortment and we are driving in store service with on shelf availability. So that's not going to change. We will continue to focus on those. But of course, three years is a long time, so some things will change. And some of the things that we're thinking about are we with stores near everyone. What does it mean for stores to continue to be these localized fulfillment hubs that enable the deliveries that more and more people want? And how do we make sure that we are using the boxes we have near everyone in the most efficient way to get products to people? So that's one area to watch. The next one is product innovation. And when you think about product innovation, it kind of is the same as it's been for a very long time. Manufacturer goes away into a tower, dreams up a new product and comes and reveals it to the merchant and says, aha, we figured it out. And you're going to say, no, no, Zach, you're being unfair. They spoke to customers and I'll say, fine, they had a couple of hundred customers in the lab in a, in a research situation or they did some sort of research and then you'll say, no, no. And there's a lot of co creation. And that's right, we have some partners who are doing a great job of co creating with the merchants. But still, when you think about that, all of those are small changes compared to what's being done in some of the digital things. If you were talking to a fully digital business and they were trying to decide, hey, should we change the color of our buy button? There would be no focus group, they would change some small percentage and they would then a couple days later come back with a statistically significant valid answer of which button is better, and then they would scale that out and then they would do that a thousand times. But we never do that in product innovation. All right, so we're now getting to a world where we're much more digital, where we have much more delivery. There are going to be some manufacturers who lean into this and figure out how do you change the product innovation cycle to make it 10 times faster? If trends are going faster, innovation is going to have to be 10 times faster. And that means we're going to be doing micro tests, we're going to be checking new formats, new packaging, new flavors in a super small, rapid iteration way. Not in the lab, but in real life with real customers who are spending real money. And if we can start doing that, I think that's going to make retail a really interesting place. But with that said, the core is not going to change. We'll continue to satisfy customers. We'll continue to keep winning share as we are, with the right assortment, right pricing and right experience for everyone in.
- [42:31]
Peter V
The market to our audience. Thank you for joining us twice each week for our podcast conversations. We greatly appreciate the 39,000 followers on LinkedIn who like and share our content. Please do follow us on your preferred listening platform and we look forward to seeing you in person this fall at one of the many conferences we're attending. Grocery Shop will be a really big one, but you'll probably see us at some other ones around. So if you see us, come on up, say hi, take a selfie with us. We're very approachable, we love to talk to people who listen to our podcast, and our goal here is to both educate and entertain. So my big takeaway today, merchandising is really evolved for the digital age. It's not about simply listening to some pitches from manufacturers, working on trade deals, figuring out what the circular is about. It really is about creating innovative products, reaching consumers where they are in the omnichannel world, making sure that it's immersive and that you're actually solving problems. That, to me, is what CVS should be all about. It sounds like that's exactly where you are these days. Zach. That's a great conversation. I really appreciate. As I said, I could dig into like all of these topics and do five more episodes. We're gonna have to have you back in in short order, but thank you for taking the time today to speak with us. We really appreciate it.
- [43:56]
Zach Dennett
Great. Well, thank you. I appreciate love the conversation. I appreciate everything you guys do to help help everyone in the industry know what's going on. So thanks so much. Real pleasure conversation to our audience.
- [44:06]
Peter V
Thanks again and we look forward to speaking with you on the next episode of the CPG Guys podcast.
- [44:12]
Zach Dennett
Goodbye.
- [44:17]
Peter V
Foreign.
- [44:24]
Shree Rajagopalan
The content in this podcast episode is provided for general informational purposes only. By listening to our episode, you understand that no information contained in this episode should be construed as advice from CPG Guys, LLC or the individual author, hosts, or guests, nor is it intended to be a substitute for research on any subject matter. Reference to any specific product or entity does not constitute an endorsement or recommendation by CPGuys LLC. The views expressed by Guests are their own, and their appearance on the program does not imply an endorsement of them or any entity they represent. The views expressed by CPGuys LLC do not represent the views of their employers or the entity they represent. CBTGuys LLC expressly disclaims any and all liability or responsibility for any direct, indirect, incidental, special, consequential, or other damages arising out of any individual's use of, reference to, or inability to use this podcast or the information we present in this podcast.