Case pack quantity's effect on retail market share

Abstract

PurposeThe purpose of this study is to investigate the impact of a key logistics and distribution variable, case pack quantity, on a consumer packaged goods (CPG) manufacturing firm's performance. The paper builds theory with respect to case pack quantity's dichotomous impact on the retail shelf replenishment process and subsequent impact on market share depending on product rate‐of‐sale (ROS).Design/methodology/approachThe study empirically tests the case pack quantity phenomenon using monthly in‐store data collected over a two year time period, market share data and data provided by a leading US CPG manufacturer in the ready‐to‐eat cereal category. Regression analysis is used to determine if case pack quantity significantly impacts firm market share.FindingsAccording to compelling theoretical and empirical evidence, the number of units per retail shipping container (case pack quantity) has a significant impact on retail market share. The evidence indicates that the effect of case pack quantity on market share depends upon the ROS of a given stock‐keeping unit (SKU). For faster selling SKUs, larger case packs should increase market share. For slower selling SKUs, larger case pack quantities reduce market share because of additional stockouts at the retail level, resulting from execution problems caused by the larger case pack quantities.Practical implicationsGiven the study's findings, CPG manufacturing firms must align case pack quantities with SKU ROS to positively affect the shelf replenishment process.Originality/valueThe paper demonstrates that case pack quality has a significant impact on retail market share.