We present an edited version of our conversation with Brad Santanna, Head of E-Commerce Sales at The Hershey Company, from the Coresight Research Open for Business webinar held on July 1, 2020. The webinar was hosted by Deborah Weinswig, CEO and Founder of Coresight Research. Brad Santanna, is Head of E-Commerce Sales at The Hershey Company, where he oversees online sales and retailer media strategy to seamlessly meet consumer needs when, where and how they interact with Hershey’s brands. Santanna’s 18+ years of experience at Hershey’s spans sales, marketing, shopper marketing, category management and e-commerce.

Retailer and Supplier Relationships

What changes have you seen in the retailer and supplier relationships from a CPG (consumer packaged goods) perspective? Strong, collaborative relationships are the foundation to those great supplier-customer partnerships. 20 years ago, it was more relationship-based; a couple of years later, it was more fact/insight-based; and today, it is more solution-based. Thinking holistically about the business landscape, not bringing in collaboration could limit you, and with resources becoming more limited, leveraging your entire toolbox to elevate those relationships is very critical. What kinds of solutions are those whom you're speaking to looking for? Understanding consumer sentiment and behavior is a big one. Imagine being in the home exercise-equipment business a few short months ago, and then all of a sudden gyms close, and you have this onset of demand. You have to figure out what your ongoing demand looks like: Is this sustainable; are there new trends I need to be aware of? You're seeing consumers make different decisions, and within the Hershey Company, we are doing a pretty good job of making sure that we not only focus on our category, but even elevate past that to provide that level of expertise and insight to our customers.

Retailer Media Strategies and the Use of Data

In terms of retailer media strategy, where were we at the beginning of the year, where are we now, and where will that go in the future? Over the past couple of years, social media has really stepped in, and now we are getting to a point where retailer media is becoming a bigger part and social is finding unique ways of getting closer in those relationships with the consumer. With retailer media, you have a captive audience that is in shopping mode and is ready to convert in real time. The challenges in some cases are that some of the retailer media capabilities, and even some of the data they provide, are a work in progress—so it may not be as robust as some other media. One of the things that we are continuing to evaluate in The Hershey Company is, rather than having separate budgets and looking at it disparately, we are thinking about the full funnel of that shopper journey—from awareness to consideration to conversion. As a company that plays in confection that has 99% household penetration, you have to be targeted in terms of how you are thinking about spending your media model, because you can reach shoppers in a lot of different areas. So, how do you do it most efficiently and effectively? And because of the evolution of what is happening here, we have to be a lot more mindful of that as new media channels open up. How would you say the conversations with the retailers have changed, and what insights are they seeking from you? From the Hershey perspective, integrating more of the digital signals and behavior into our broader consumer research plan is definitely something we continue to evolve upon. Specific to the retailer, an analogy is when Amazon first got in business, the only thing they sold was books, and then over time, they have continued to bring on and scale up additional categories. If you look at the data from when they first started after they expanded past books, chances are you would say, “Books are our biggest category; we should focus more on books.” But obviously that is not the case. As these retailers ramp up their capabilities and think about things like media and site merchandising, there are inherent consumer behaviors that you are seeing through the data that is coming through. At the same time, we know that there are core consumer behaviors that are happening, regardless of the environment, that maybe have not yet found their way into their digital shopping behavior. Part of our job is to say, “What are you seeing through your data?” but at the same time, “Here is what we know about our core consumer and our core shopper. Let's test and learn some things to see if those behaviors translate online.” [caption id="attachment_112909" align="aligncenter" width="700"] Brad Santanna and Deborah Weisnwig discuss how digital signals can provide insights into consumer behavior[/caption]   A couple of halloweens ago, one of the number-one things purchased with costumes during Halloween was candy, but it was not necessarily thought of or merchandised in a way to incent that behavior and build that basket. So, we brought those insights to this one online retailer and looked at some of their data, and we devised a plan, and we had unbelievable engagement in terms of that campaign during that timeframe. I think it is really about looking at the data and the insight that you can get from the retailer today, but then also thinking about the core essence of what you know about their business and sharing those insights to create a collaborative plan. Are there more insights that would be helpful in the data you have? I think data is the key, but it is a matter of how much data access we have. You are not just getting data for the sake of it; you are trying to drive something that is mutually beneficial and actionable. If you look at the digital household household penetration of grocery, for example, I think to start the year it was somewhere around 3%, and the total category was about $3.2 trillion. Some projections estimate that it could be 10% now. So, in a category like confection, which has 99% household penetration, if I am not translating that penetration online, I get this gap. So, as grocery adoption continues to escalate, if confection penetration does not meet or exceed that, then our whole business falls apart. One of the key metrics that I think is important for any category is whether the level of penetration is keeping pace with the engagement of my core consumer. So, any means that you can use to push your retail partners to really push on this household penetration metric, I think is really important. If you are not clear on how the brick-and-mortar and digital ecosystems interact, the business will gradually erode over time.

Audience Q&A: Omnichannel Consumer Engagement

Have sales during Covid-19 led you to think differently, and how will you realign and readjust as you move forward? It's a little bit of a wave to be candid with you. If you think about demand generation, through some of the research that we have, chocolate has been cited as the number-one comfort food or snack during this time. It's one of those interesting dilemmas where it could simply be a short-term ROI [return on investment]. You have retailers that may have done a better job than some in terms of being in a position to win the shopping trip; you've got brands that may have not been in stock; and you have shoppers that have needs. So, it's a really interesting time to think about brand loyalty and brand acquisition. The big four retailers—Amazon, Kroger, Target and Walmart—have been investing in digital capabilities for years, and they see this as a prime time to take market share from other players. In some cases, they may even be willing to lose a little money for the long-term benefit of getting that digital shopper, which we know is a more valuable shopper; that shopper that spends online actually has a higher basket for us. So, if you are able to capture that physical and digital trip, that is where you build that long-lasting business and that brand loyalty that we are looking for. As a company, we are very pleased to see the performance that we have started to achieve through the digital acceleration [caused by the coronavirus crisis] and our readiness through that. We are also seen as being a comfort snack, and people like to go back to what they know and love in difficult times. I think that is how we are trying to look at it, as more of this long-term plan that has really strong brand and consumer engagement. Can you talk about adjustments of size to meet optimal price points that vary each season? Offsetting shipping costs by bundling product with other goods as part of a basket is vital to ensuring the process is efficient enough to be sustainable. Some of it comes down to the fulfillment model. I think the one that is on a lot of people's minds, especially with Amazon being the largest player, is “ship to home”—but that is expensive for the retailer. You have to say, “I can't sell a $3 item when it cost me $7 to ship and fulfill,” so you have to think about the portfolio a little bit differently. It is an equation we can bring back to the to the retailer. It's like, “I've developed a portfolio at this $15–20 price point.” It still has value, and it still resonates with the shopper and the consumer, but the price point offsets the fixed costs of shipping and fulfillment. Let's think about some other bundling ways that we can drive that total basket up together and make it a more efficient shipping model—and that is where you can really unlock the more solution-based conversation with them. How do you see the future of sales channels—wholesale versus retail—and how does Hershey's think about their own DTC (direct to consumer) channel? We are going to see how ready and capable not only the suppliers are, but also the retailers are, in this environment. There are a number of companies, both in terms of wholesale retail as well as CPGs, that are maybe better leveraged than others in terms of financial flexibility to be able to invest in some of these capabilities. As the larger players have a head start here, it will be interesting to see how maybe some other emerging businesses evolve during this timeframe. I think it depends on what your ultimate objective and strategy is for DTC. I'll just use a very quick example within The Hershey Company. We are probably not going to be the best priced or best way to get a box of Hershey bars, right? There is probably going to be a better way to ship or fulfill or get a better price on that from somewhere else, but if you are looking to get a fresh-from-the-factory product, you are not going to find that anywhere else. So, I think if you are going to stand up DTC, you have to think about that unique value proposition that you can bring that will engage your shopper and consumer and bring them into your ecosystem. It is that balance of how much demand generation or traffic generation am I going to get to my DTC site versus an Amazon that has millions of people visiting it every day. I have to bring something unique and differentiated to make that that shopper and consumer want to visit my my site.