In this conversation, we highlight how our collaboration marked a pivotal moment in S Group's efforts to implement clustered assortment and enhance its assortment processes. This significantly boosted its customer-centric initiatives, setting a promising path for the future. The program's launch resulted in improved customer feedback, increased sales growth, and enhanced margins.

Looking forward, SOK is committed to further investment in AI and user experience analytics, recognizing the significant value these technologies bring. This partnership has positioned S Group to thrive in a competitive market, ensuring continued innovation and customer satisfaction.

Jari Simolin

We really wanted to become the “best” not to just be good anymore. We wanted to become “best”. I think that AI will be a big thing for us in the near future.

Tomas Andersson

Welcome everybody to Helsinki. My name is Tomas Andersson. I work as a partner with Oliver Wyman. I am accompanied here today with Jari Simolin, senior vice president of Strategic Programs at S Group. And we are going to hear a bit today about an important program that you have been running for the last few years of how to improve your assortment processes. But first, could you potentially start by describing a little bit to the audience - who are S Group?

Jari

So, we are S Group, and it consists of 19 regional cooperatives and we as SOK, we take care of the sourcing function and category management, replenishment, logistics et cetera. We do not only work in grocery retail, we have different kinds of operations. We have hotels and restaurants, we have petrol stations, department stores, and banks, but our main business is really the grocery business. The annual turnover of the company and the group is slightly above 15 billion euros. We are the market leader in grocery retail in Finland. Last year our market share was 48.3%. It grew with 1.3% units, so we were very successful last year.

Tomas

Great to hear. You are clearly very successful in the market. What led you to start this new program to become even better?

Jari

Already four or five years ago we thought that we were good, but we did not have too much growth and as we all know, growth is required to be able to compensate for your costs and be very price competitive. And our strategy is to beat everyone in the market in the grocery business when it comes to price, and we even beat the hard discounters. So, you need to have growth because your costs are increasing all the time. And then we thought that we should be more customer-centric, serve different kinds of customers, really cater to them in different ways than we did in the past, but also keep the competitiveness at all times. We really wanted to become “best,” not to be “good” anymore. We wanted to become “best.”

Tomas

So, you created a program around improving your assortments in store, right? Could you describe a little bit how you designed that program? And how did you make it a success?

Jari

We are a multi-chain operator, so we have hypermarkets, supermarkets, convenience stores, et cetera, and it is the same category manager who handles that. The total amount of the assortment is roughly 25,000 products of food in the hypermarket. When you have this complexity, there are a thousand stores, tens of thousands of products, the consumption habits are different. So, we need to be able to manage that. Our market share had been growing all the time, but we wanted to build more fact-based decision making in the company. We thought that we need to get something that really supports us and our people here. How to make things better and how can we make it easier for them? You know that when a single person is doing the analysis and trying to see what is good and what is not good, you can touch only a small part, but if you can have optimization tool or really skilled and advanced analytics, you can make really many big things.

Tomas

So, you are able to optimize 25,000 products instead of a hundred. So, you could to some degree describe this as really using AI and advanced analytics at scale across the entire organization?

Jari

Yeah, across the organization, so meaning all the categories, we have got a hundred categories with all the people. We have 50 category managers. So honestly now when thinking of the past, which is only three years ago, it was very different and thinking that how we today base all our decisions in facts -it is very different.

Tomas

Could you share a bit - you described a bit the complexities here, it is hundreds of categories, it is thousands of stores, 25,000 products. How do you manage that complexity in a project and how do you roll it out?

Jari

Yes, that is a good question. If you want to do a big bang - and that is what we discussed together that time - it does not work like that. And then we had the situation with inflation at the time, and purchase prices were varying a lot. So, there was also extra much tendering all the time. Honestly, we did a pilot first. We had around 20 stores, our convenience stores and supermarkets and of course then we had 20 control stores. We piloted with four categories and there we had clusters, and we optimized the assortment, and we got very good results there. We have an annual plan within where we have different kinds of assortment periods. Then according to our normal time schedule, we started to roll it out. That was also a very good approach because the support team was able to support each and every category manager with his or her own categories. Today, we have already rolled out the last category, so now all categories are rolled out and are either in optimization or in optimization and clustering.

Tomas

So, through the analytics you are able to make better fact-based decisions, but you are also saying that it has changed your way of working a little bit and there is an efficiency dimension to this.

Jari

Yes, the point is that our category managers take care of all the sourcing, of purchasing, of procurement. They do the assortment creation and then they do the pricing. So, they are quite busy with their work. Before the tool, we were working with Excel, a homemade Excel tool, and it was very time consuming in that way. Now I think that we can utilize the category manager's time much more for what really makes sense for a human to do. If there is a trend growing, a human being does not notice that, but the tool recognizes that. I think that has been quite great in the way that we have been able to surprise the consumers with products they did not know they wanted and needed. They have been happy to see those in our offer more widely than we used to have.

Tomas

So Jari, looking back now, what would you say the key achievements are if you look back?

Jari

We wanted to be more customer-focused and customer-oriented, and that we are today. So, actually the feedback we get from the customers, they say that our assortment is better, it matches their demand better, which was actually the aim. On the other hand, we see also quite good sales growth. It can depend on very many things, but I am sure that a big part also comes from that we are more attractive to consumers and I am also extremely happy that we have also been able to grow our margin. Then on the other hand, as I told you, we are an everyday low-price operator, which requires everyday low cost. We still play with the same number of products, so roughly 25,000. Our efficiency and effectiveness have not suffered at all. Let's say the stuff that can be automated is now fully automated, that way even much better than it was ever done manually. So, people are also very happy with the current tool.

Tomas

What you are describing is really a big change for you. How did you manage the change aspect of this?

Jari

We knew that it would be a material change. We know that we have been good, in several areas, but this has not been our strength. So, it is really that find somebody who has done this before, has already learned understanding what can go wrong, what you need to succeed. I was very happy I was able to find you as Oliver Wyman, because I think from the very first meetings already, we understood that this is something, that is your daily business in doing and where you can support us a lot. And I am very happy that we also opened several things during the program that we did not even identify in the beginning. So, there were many things that we realized during the program project. What I also have enjoyed a lot is the aftercare. You are all the time interested in how it is going, what kind of challenges we have I may always give you a call and ask. That helped me somehow and I think we built a very good relationship there. Thank you.

Tomas

Thanks for those kind words. Jari, what can you tell us about the future?

Jari

I need to say that I became a big fan of optimization, big fan of fact-based data, fact-based decision making. I think that AI will be a big thing for us in the near future, and we are sure that we are going to invest further in AI. This has been an excellent start.

Tomas

Thank you Jari. That was interesting to be able to take part of you sharing that journey that you have been through, how you put data and AI into the heart of your category management organization, and I am really keen to see where that takes you going forward. So very, very great thanks from us for spending time with us today. 

Jari

Thank you. 

Tomas

And thank you audience for watching this interview. I hope you enjoyed it and found it interesting.

This transcript was edited for clarity

In this conversation, we highlight how our collaboration marked a pivotal moment in S Group's efforts to implement clustered assortment and enhance its assortment processes. This significantly boosted its customer-centric initiatives, setting a promising path for the future. The program's launch resulted in improved customer feedback, increased sales growth, and enhanced margins.

Looking forward, SOK is committed to further investment in AI and user experience analytics, recognizing the significant value these technologies bring. This partnership has positioned S Group to thrive in a competitive market, ensuring continued innovation and customer satisfaction.

Jari Simolin

We really wanted to become the “best” not to just be good anymore. We wanted to become “best”. I think that AI will be a big thing for us in the near future.

Tomas Andersson

Welcome everybody to Helsinki. My name is Tomas Andersson. I work as a partner with Oliver Wyman. I am accompanied here today with Jari Simolin, senior vice president of Strategic Programs at S Group. And we are going to hear a bit today about an important program that you have been running for the last few years of how to improve your assortment processes. But first, could you potentially start by describing a little bit to the audience - who are S Group?

Jari

So, we are S Group, and it consists of 19 regional cooperatives and we as SOK, we take care of the sourcing function and category management, replenishment, logistics et cetera. We do not only work in grocery retail, we have different kinds of operations. We have hotels and restaurants, we have petrol stations, department stores, and banks, but our main business is really the grocery business. The annual turnover of the company and the group is slightly above 15 billion euros. We are the market leader in grocery retail in Finland. Last year our market share was 48.3%. It grew with 1.3% units, so we were very successful last year.

Tomas

Great to hear. You are clearly very successful in the market. What led you to start this new program to become even better?

Jari

Already four or five years ago we thought that we were good, but we did not have too much growth and as we all know, growth is required to be able to compensate for your costs and be very price competitive. And our strategy is to beat everyone in the market in the grocery business when it comes to price, and we even beat the hard discounters. So, you need to have growth because your costs are increasing all the time. And then we thought that we should be more customer-centric, serve different kinds of customers, really cater to them in different ways than we did in the past, but also keep the competitiveness at all times. We really wanted to become “best,” not to be “good” anymore. We wanted to become “best.”

Tomas

So, you created a program around improving your assortments in store, right? Could you describe a little bit how you designed that program? And how did you make it a success?

Jari

We are a multi-chain operator, so we have hypermarkets, supermarkets, convenience stores, et cetera, and it is the same category manager who handles that. The total amount of the assortment is roughly 25,000 products of food in the hypermarket. When you have this complexity, there are a thousand stores, tens of thousands of products, the consumption habits are different. So, we need to be able to manage that. Our market share had been growing all the time, but we wanted to build more fact-based decision making in the company. We thought that we need to get something that really supports us and our people here. How to make things better and how can we make it easier for them? You know that when a single person is doing the analysis and trying to see what is good and what is not good, you can touch only a small part, but if you can have optimization tool or really skilled and advanced analytics, you can make really many big things.

Tomas

So, you are able to optimize 25,000 products instead of a hundred. So, you could to some degree describe this as really using AI and advanced analytics at scale across the entire organization?

Jari

Yeah, across the organization, so meaning all the categories, we have got a hundred categories with all the people. We have 50 category managers. So honestly now when thinking of the past, which is only three years ago, it was very different and thinking that how we today base all our decisions in facts -it is very different.

Tomas

Could you share a bit - you described a bit the complexities here, it is hundreds of categories, it is thousands of stores, 25,000 products. How do you manage that complexity in a project and how do you roll it out?

Jari

Yes, that is a good question. If you want to do a big bang - and that is what we discussed together that time - it does not work like that. And then we had the situation with inflation at the time, and purchase prices were varying a lot. So, there was also extra much tendering all the time. Honestly, we did a pilot first. We had around 20 stores, our convenience stores and supermarkets and of course then we had 20 control stores. We piloted with four categories and there we had clusters, and we optimized the assortment, and we got very good results there. We have an annual plan within where we have different kinds of assortment periods. Then according to our normal time schedule, we started to roll it out. That was also a very good approach because the support team was able to support each and every category manager with his or her own categories. Today, we have already rolled out the last category, so now all categories are rolled out and are either in optimization or in optimization and clustering.

Tomas

So, through the analytics you are able to make better fact-based decisions, but you are also saying that it has changed your way of working a little bit and there is an efficiency dimension to this.

Jari

Yes, the point is that our category managers take care of all the sourcing, of purchasing, of procurement. They do the assortment creation and then they do the pricing. So, they are quite busy with their work. Before the tool, we were working with Excel, a homemade Excel tool, and it was very time consuming in that way. Now I think that we can utilize the category manager's time much more for what really makes sense for a human to do. If there is a trend growing, a human being does not notice that, but the tool recognizes that. I think that has been quite great in the way that we have been able to surprise the consumers with products they did not know they wanted and needed. They have been happy to see those in our offer more widely than we used to have.

Tomas

So Jari, looking back now, what would you say the key achievements are if you look back?

Jari

We wanted to be more customer-focused and customer-oriented, and that we are today. So, actually the feedback we get from the customers, they say that our assortment is better, it matches their demand better, which was actually the aim. On the other hand, we see also quite good sales growth. It can depend on very many things, but I am sure that a big part also comes from that we are more attractive to consumers and I am also extremely happy that we have also been able to grow our margin. Then on the other hand, as I told you, we are an everyday low-price operator, which requires everyday low cost. We still play with the same number of products, so roughly 25,000. Our efficiency and effectiveness have not suffered at all. Let's say the stuff that can be automated is now fully automated, that way even much better than it was ever done manually. So, people are also very happy with the current tool.

Tomas

What you are describing is really a big change for you. How did you manage the change aspect of this?

Jari

We knew that it would be a material change. We know that we have been good, in several areas, but this has not been our strength. So, it is really that find somebody who has done this before, has already learned understanding what can go wrong, what you need to succeed. I was very happy I was able to find you as Oliver Wyman, because I think from the very first meetings already, we understood that this is something, that is your daily business in doing and where you can support us a lot. And I am very happy that we also opened several things during the program that we did not even identify in the beginning. So, there were many things that we realized during the program project. What I also have enjoyed a lot is the aftercare. You are all the time interested in how it is going, what kind of challenges we have I may always give you a call and ask. That helped me somehow and I think we built a very good relationship there. Thank you.

Tomas

Thanks for those kind words. Jari, what can you tell us about the future?

Jari

I need to say that I became a big fan of optimization, big fan of fact-based data, fact-based decision making. I think that AI will be a big thing for us in the near future, and we are sure that we are going to invest further in AI. This has been an excellent start.

Tomas

Thank you Jari. That was interesting to be able to take part of you sharing that journey that you have been through, how you put data and AI into the heart of your category management organization, and I am really keen to see where that takes you going forward. So very, very great thanks from us for spending time with us today. 

Jari

Thank you. 

Tomas

And thank you audience for watching this interview. I hope you enjoyed it and found it interesting.

This transcript was edited for clarity

This video touches on the key elements in SOK's journey in transforming S Group's product assortment from the perspective of category management. The introduction of an assortment optimization and clustering tool has shifted the company towards a more customer-centric approach in their assortment, significantly enhancing the customer experience and overall effectiveness of deciding the assortment for each store.  

The tool's advanced analytics have been instrumental in making SOK more adaptable in their assortment planning. It has empowered agile decision-making through scenario simulations, marking a significant transformation from Excel to this powerful AI-driven tool. This shift has enriched their understanding of customer preferences, enabling their category managers, like Mikko Laukkanen, S Group's category manager for beer, to make more informed decisions.  

Heidi Salmi

Advanced analytics have completely changed how we work. We can know our customers even better because we have now cluster assortments and individual assortments in its store.

Denise van Wijk

Hi everyone. My name is Denise van Wijk, a principal in Oliver Wyman's retail consumer goods practice. Today we are in Helsinki, Finland, where I am joined by Heidi Salmi, category director of Fresh at S Group. S Group is Finland's largest grocery retailer, and over the last few years, Oliver Wyman and S Group have been collaborating to upgrade S Group's assortment capabilities. Today we are here with Heidi to hear a little bit more about the journey that you underwent. Thank you very much for having us today and allowing us the pleasure to speak about this journey. Maybe can you tell us a little bit more about yourself and your responsibilities at SOK before we get started?

Heidi

Sure, Denise. So, my name is Heidi Salmi and I work as a category director of Fresh in SOK Finland, and I lead a team of 10 highly skilled professionals. And our main responsibilities are procurement, negotiating with suppliers, doing demand driven assortments, as well as retail pricing.

Denise

Can you tell us a little bit more about your role in the assortment management process?

Heidi

My responsibility now, together with my colleagues, is to ensure that the process goes as planned, both strategically and operationally.

Denise

Can you tell us a bit more about how the implementation of the assortment optimization and clustering tool has transformed the way S Group makes decisions on assortments?

Heidi

It has changed our approach and way of thinking completely. Actually, before we were quite volume and unit-driven when we did our assortments and now, we are also a bit more value and margin oriented. That is definitely the first thing. And the second thing is of course, the user experience. Definitely our category managers, our category coordinators can really focus on the key strategic decisions while the tool sort of does the rest.

Denise

It is excellent that you are mentioning the customer experience. Can you tell us a bit more about that? Especially how category managers and assortment coordinators are helped by the tool?

Heidi

It took time to really deep dive into the tool for sure. So, it was sort of a change management project or even a challenge, but now that the tool is really familiar to them, and there are the clear process points that either coordinator do sort of a pre assortment work and then of course the category manager, he or she actually starts with an unconstrained assortment with AOC tool and then he or she puts the products on tender using actually the volumes from the tool. And then when the negotiation is done, he or she can really lock the products, he or she can make the strategic decisions and then sort of finalize the assortment.

Denise  

Aside from making more well-informed and data-driven decisions, how has the tool impacted your processes and approach to assortment management?

Heidi

Actually, advanced analytics has completely changed how we work at the moment. So, we have become more efficient, we have become more adaptable to changes in market, whether it is due to covid, due to inflation, due to geopolitical situation as we all are facing now. We are now able to simulate different scenarios before we make really the final decisions. So, it s really agile, it is really fast. We can go back and or forth to simulate the best possible result.

Denise

And you do need that flexibility and that agility in these times, right. Just the last two years are a perfect example of that.

Heidi

Exactly, exactly. Yes.

Denise  

There has been a big change in your organization with regards to implementing a new process, adopting a new tool. How has this overall change journey and this transformation impacted S Group as an organization more broadly? And if there would be one key lesson you would like to share, what would that be?

Heidi

Yeah, that s a really good question, Denise. This has completely changed how we think about assortments and actually we can know our customers even better because we have now cluster assortments and individual assortments in each store. I would highlight one thing, and that is change management because this whole process required a lot of time, a lot of effort, a lot of organization management skills because actually we completely changed our way of working regarding to assortment. You are not doing the whole assortment from scratch anymore because the tool gives you a really good basis and there are really good optimization drivers behind the mathematics or AI.

Denise  

So, is it fair to say that the category managers and the coordinators can now focus on the decisions that really matter and where it makes a difference for you to win in the market?

Heidi  

I would definitely say so. Our category managers can really focus now more on strategic choices instead of adjusting every single product in their places. Of course, the first reset is always the most time consuming, but then of course when you do the following reset, it gets smoother, it gets faster, and it gets more strategic, more tactical from the category manager's point of view.

Denise  

And would you have any examples of how this works in practice?

Heidi  

Actually, we have our category manager, Mikko, who could explain the whole process to us. 

Mikko Laukkanen

My name is Mikko Laukkanen. I work as a category manager for beer for S Group in Finland. My main responsibilities are purchasing the beer products, negotiations with suppliers, building the beer assortment, and pricing the products. Beer is one of our biggest categories in terms of sales as well as in the size of the assortment and its complexity. Currently, we offer almost 500 different beer products in our stores. The complexity of the category is further increased by the variety of consumer packs, not only in terms of different can or bottle sizes, but also in the large variety of multi-packs. To manage this extensive and complex portfolio, we need to have the right tools in place. Managing the full complexity of the assortment solely with Excel is not feasible. The assortment optimization and clustering tool, AOC, has introduced a clear process for building the assortment. So, previously the model of building the assortment was based mainly on the unit sales of the products, but AOC tool enables us to use other too, such as focus on additional sales of the product, value or margin. In collaboration with Oliver Wyman, we have also created store clusters with differences in assortment based on the sales of the existing assortment.

In the beer category, the clusters are usually built on the sales differences between lager beers and specialty beers. With the cluster assortment, we can create a better assortment for the customers of each specific store.

Denise

Heidi, of course, we have been talking a lot about the change in the organization, the updated processes, new ways of making decisions. Have there been any key transformative moments that come to mind that you would like to share with us?

Heidi  

The market share has been growing many months in a row, that we are really happy about. And of course, it was really a big moment last year when we implemented the AOC tool across all our categories where we intended to implement it. It was really a big milestone for us. We are winning the market at the moment, so of course those things give me a smile and I get the idea that we are doing something right. We are going really in a right direction with this. So, I am really happy about it.

Denise  

I am very glad we have been able to work on that journey together and hearing about these results and the overall positivity around the story is absolutely fantastic. Could you share a little bit about what it was like working with Oliver Wyman, the team that was on the ground here in Finland?

Heidi  

It was really collaborative from the start. As I said earlier, we started in 2021. We did a pilot together. Then we really checked the results. We deep dived where we can be even better, how we can smoothen the process together. You were always there. Sometimes it was almost a 24/7 collaboration together, but that makes that really nice together.

Denise  

Excellent and I really enjoyed being here, being part of the team. Every time I come to the building here still it feels like coming home.

Heidi

It is really nice to hear that because we really felt that you are part of our SOK team. As I said this was really a change management process. It took a lot of time and effort to make our category managers, our category coordinators trust that this change must be done and that we would get better results after implementing AOC.

Denise  

What is up next in the near future? Anything else that you can share?

Heidi  

We are going to implement more clusters to gain better results. We are not there yet because most of our categories are still on optimization level, so that is definitely the goal number one.

Denise  

Excellent. Thank you and is great hearing your feedback, having this conversation with you. Of course, we have worked together a lot over the last few years with having this moment to reflect and jointly almost have some memories coming back to those times has been great. I would really like to thank you for your time today and thank you all for watching as well.

This transcript has been edited for clarity.

This video touches on the key elements in SOK's journey in transforming S Group's product assortment from the perspective of category management. The introduction of an assortment optimization and clustering tool has shifted the company towards a more customer-centric approach in their assortment, significantly enhancing the customer experience and overall effectiveness of deciding the assortment for each store.  

The tool's advanced analytics have been instrumental in making SOK more adaptable in their assortment planning. It has empowered agile decision-making through scenario simulations, marking a significant transformation from Excel to this powerful AI-driven tool. This shift has enriched their understanding of customer preferences, enabling their category managers, like Mikko Laukkanen, S Group's category manager for beer, to make more informed decisions.  

Heidi Salmi

Advanced analytics have completely changed how we work. We can know our customers even better because we have now cluster assortments and individual assortments in its store.

Denise van Wijk

Hi everyone. My name is Denise van Wijk, a principal in Oliver Wyman's retail consumer goods practice. Today we are in Helsinki, Finland, where I am joined by Heidi Salmi, category director of Fresh at S Group. S Group is Finland's largest grocery retailer, and over the last few years, Oliver Wyman and S Group have been collaborating to upgrade S Group's assortment capabilities. Today we are here with Heidi to hear a little bit more about the journey that you underwent. Thank you very much for having us today and allowing us the pleasure to speak about this journey. Maybe can you tell us a little bit more about yourself and your responsibilities at SOK before we get started?

Heidi

Sure, Denise. So, my name is Heidi Salmi and I work as a category director of Fresh in SOK Finland, and I lead a team of 10 highly skilled professionals. And our main responsibilities are procurement, negotiating with suppliers, doing demand driven assortments, as well as retail pricing.

Denise

Can you tell us a little bit more about your role in the assortment management process?

Heidi

My responsibility now, together with my colleagues, is to ensure that the process goes as planned, both strategically and operationally.

Denise

Can you tell us a bit more about how the implementation of the assortment optimization and clustering tool has transformed the way S Group makes decisions on assortments?

Heidi

It has changed our approach and way of thinking completely. Actually, before we were quite volume and unit-driven when we did our assortments and now, we are also a bit more value and margin oriented. That is definitely the first thing. And the second thing is of course, the user experience. Definitely our category managers, our category coordinators can really focus on the key strategic decisions while the tool sort of does the rest.

Denise

It is excellent that you are mentioning the customer experience. Can you tell us a bit more about that? Especially how category managers and assortment coordinators are helped by the tool?

Heidi

It took time to really deep dive into the tool for sure. So, it was sort of a change management project or even a challenge, but now that the tool is really familiar to them, and there are the clear process points that either coordinator do sort of a pre assortment work and then of course the category manager, he or she actually starts with an unconstrained assortment with AOC tool and then he or she puts the products on tender using actually the volumes from the tool. And then when the negotiation is done, he or she can really lock the products, he or she can make the strategic decisions and then sort of finalize the assortment.

Denise  

Aside from making more well-informed and data-driven decisions, how has the tool impacted your processes and approach to assortment management?

Heidi

Actually, advanced analytics has completely changed how we work at the moment. So, we have become more efficient, we have become more adaptable to changes in market, whether it is due to covid, due to inflation, due to geopolitical situation as we all are facing now. We are now able to simulate different scenarios before we make really the final decisions. So, it s really agile, it is really fast. We can go back and or forth to simulate the best possible result.

Denise

And you do need that flexibility and that agility in these times, right. Just the last two years are a perfect example of that.

Heidi

Exactly, exactly. Yes.

Denise  

There has been a big change in your organization with regards to implementing a new process, adopting a new tool. How has this overall change journey and this transformation impacted S Group as an organization more broadly? And if there would be one key lesson you would like to share, what would that be?

Heidi

Yeah, that s a really good question, Denise. This has completely changed how we think about assortments and actually we can know our customers even better because we have now cluster assortments and individual assortments in each store. I would highlight one thing, and that is change management because this whole process required a lot of time, a lot of effort, a lot of organization management skills because actually we completely changed our way of working regarding to assortment. You are not doing the whole assortment from scratch anymore because the tool gives you a really good basis and there are really good optimization drivers behind the mathematics or AI.

Denise  

So, is it fair to say that the category managers and the coordinators can now focus on the decisions that really matter and where it makes a difference for you to win in the market?

Heidi  

I would definitely say so. Our category managers can really focus now more on strategic choices instead of adjusting every single product in their places. Of course, the first reset is always the most time consuming, but then of course when you do the following reset, it gets smoother, it gets faster, and it gets more strategic, more tactical from the category manager's point of view.

Denise  

And would you have any examples of how this works in practice?

Heidi  

Actually, we have our category manager, Mikko, who could explain the whole process to us. 

Mikko Laukkanen

My name is Mikko Laukkanen. I work as a category manager for beer for S Group in Finland. My main responsibilities are purchasing the beer products, negotiations with suppliers, building the beer assortment, and pricing the products. Beer is one of our biggest categories in terms of sales as well as in the size of the assortment and its complexity. Currently, we offer almost 500 different beer products in our stores. The complexity of the category is further increased by the variety of consumer packs, not only in terms of different can or bottle sizes, but also in the large variety of multi-packs. To manage this extensive and complex portfolio, we need to have the right tools in place. Managing the full complexity of the assortment solely with Excel is not feasible. The assortment optimization and clustering tool, AOC, has introduced a clear process for building the assortment. So, previously the model of building the assortment was based mainly on the unit sales of the products, but AOC tool enables us to use other too, such as focus on additional sales of the product, value or margin. In collaboration with Oliver Wyman, we have also created store clusters with differences in assortment based on the sales of the existing assortment.

In the beer category, the clusters are usually built on the sales differences between lager beers and specialty beers. With the cluster assortment, we can create a better assortment for the customers of each specific store.

Denise

Heidi, of course, we have been talking a lot about the change in the organization, the updated processes, new ways of making decisions. Have there been any key transformative moments that come to mind that you would like to share with us?

Heidi  

The market share has been growing many months in a row, that we are really happy about. And of course, it was really a big moment last year when we implemented the AOC tool across all our categories where we intended to implement it. It was really a big milestone for us. We are winning the market at the moment, so of course those things give me a smile and I get the idea that we are doing something right. We are going really in a right direction with this. So, I am really happy about it.

Denise  

I am very glad we have been able to work on that journey together and hearing about these results and the overall positivity around the story is absolutely fantastic. Could you share a little bit about what it was like working with Oliver Wyman, the team that was on the ground here in Finland?

Heidi  

It was really collaborative from the start. As I said earlier, we started in 2021. We did a pilot together. Then we really checked the results. We deep dived where we can be even better, how we can smoothen the process together. You were always there. Sometimes it was almost a 24/7 collaboration together, but that makes that really nice together.

Denise  

Excellent and I really enjoyed being here, being part of the team. Every time I come to the building here still it feels like coming home.

Heidi

It is really nice to hear that because we really felt that you are part of our SOK team. As I said this was really a change management process. It took a lot of time and effort to make our category managers, our category coordinators trust that this change must be done and that we would get better results after implementing AOC.

Denise  

What is up next in the near future? Anything else that you can share?

Heidi  

We are going to implement more clusters to gain better results. We are not there yet because most of our categories are still on optimization level, so that is definitely the goal number one.

Denise  

Excellent. Thank you and is great hearing your feedback, having this conversation with you. Of course, we have worked together a lot over the last few years with having this moment to reflect and jointly almost have some memories coming back to those times has been great. I would really like to thank you for your time today and thank you all for watching as well.

This transcript has been edited for clarity.