THE PEPSICO CHALLENGE

Most people who shop inside a store rarely take the time to consider why stores look the way they do. For example, why do some retailers use tables to display certain types of apparel, but they use mannequins and racks with hangers for displaying other types of apparel? How do grocery retailers decide where to put products on their shelves? The process for answering these questions is macro and micro space planning.

According to RELEX, both macro and micro space planning are essential for retail success, but it’s crucial to understand the distinction and prioritize accordingly: 

• Macro space planning focuses on the overall store layout and space allocation for different departments and categories. 
• Micro space planning deals with the placement of individual products within specific shelf space or a specific section via planograms.

Retail planograms are visual plans that guide store associates on product placement and shelf quantities. They ensure an organized and functional store layout, helping maximize sales and improve customer satisfaction. 

Effective planograms are crucial to successful category management. Optimized planograms align product placement with sales data and consumer behavior to address unique sales patterns and demand fluctuations, boosting efficiency. Strategic product placement, especially on a store-by-store basis, helps retailers meet consumer needs and drive sales, improving product availability and supporting broader category management goals. 

Macro and micro planning software is sold by Blue Yonder and several other software companies. Blue Yonder sells a myriad of software solutions for space planning but relies primarily on software from the company, Intactix, founded in 1989, and acquired by Blue Yonder in 2000. My biggest complaint about Blue Yonder is that most of the software they sell was developed over 25 to 40 years ago. I have encouraged Blue Yonder to update their software portfolio.

The Brutal Truth

I live near Plano, TX, home of Frito-Lay and PepsiCo. I know lots of people who work at PepsiCo, and I speak frequently with my contacts and confidential sources from the company. All of the conversations that I have are off-the-record in order to protect the identity of the individuals I speak with.

Several weeks ago, a senior-level source at PepsiCo reached out to me to say, "A major grocery retailer is in the process of selecting a new software platform for their space planning and category management. PepsiCo is trying to convince the retailer to contract us (PepsiCo) to create and manage all of their planograms." (Note: I will refer to the retailer as X.)

I didn't want to offend my source by pointing out that I think their planogram capabilities are in the Stone Age. Instead I asked: Do you think PepsiCo will be selected? "No," my source replied. "We're up against 345 Global , and we know they have the best software but we are going to try." I thanked her for letting me know about what was going on and I ended the conversation.

I think highly of PepsiCo, but I can't imagine any grocery retailer contracting PepsiCo to manage their macro and micro space planning needs. PepsiCo uses Blue Yonder's retail planning and category management software which is old, limited, and obsolete in my opinion. PepsiCo has built a few of their own tools to try and close the gaps with Blue Yonder's software but the results have been "dismal" according to sources. Buying old software doesn't make sense to me but apparently it does to PepsiCo.

Some of the individuals that I speak with at PepsiCo, work for Global Business Services (GBS) -- it's their team members who are trying to convince X to select PepsiCo. A GBS team member told me a few months ago, "We have created the best planogram software in the world," after reading a post I'd written where I mentioned that based on my research, I believe 345 Global's platform should be ranked number one across multiple categories including micro and macro space planning. Did PepsiCo create the best planogram solution in the world? No. Not even close.

PepsiCo relies on a large number of resources in India who perform a tremendous amount of manual work related to planograms. My favorite quote comes from a PepsiCo resource on the GBS team who told me, "We have to perform all kinds of crazy ass workarounds to compensate for the holes in our software to build planograms. It's a nightmare at times. We have tons of people in India working on planograms." Ouch!

I'm also not a fan of PepsiCo's planogram services because GBS team members I've spoken with treat macro and micro space planning as something that is transactional. I vehemently disagree. Macro and micro space planning should be considered strategic.

345 Global - Simply The Best

I became aware of 345 Global after an individual from, InContext Solutions , contacted me and recommended that I write an article about space planning. I knew very little about the topic. I asked who had the best solution on the market, and they replied, "I think our software is very good. However, if I'm being honest, there is a company called 345 Global that is doing some really interesting things in this space. I have to say that I think they'll end up with the best platform." I chose to research 345 Global and not write about InContext, or any of the other macro and micro space planning companies on the market. I first wanted to research the best solution.

I contacted 345 Global and they gave me access to their company and software, but I was restricted regarding what information I could share and write about. I agreed to their demands.

I was able to research 345 Global's competitors by attending multiple conferences where I received demos of their software. I also interviewed current and former executives and/or associates from each company. I asked representatives from each company about 345 Global, and I repeatedly heard the same phrase: "345 Global is building something very special."

I watched 345 Global team members, including CEO Mark Edwards, speaking about macro and micro space planning, planograms, shopper insights, and shopper engagement at the GroceryShop conference earlier this year. According to Edwards:

"We believe planograms are actually live-a-grams, and they should be considered strategic and not transactional. We designed our industry leading platform to provide a competitive advantage and exceptional value to retailers.

Our platform consists of the following layers:

eQ for Shopper Engagement

iQ the Insights Engine

sQ for Space Planning

vQ the Visual Catalog

345’s Digital Twin Stores create accurate layouts, making category management and merchandising implementation smooth and intuitive. Any store updates, fixture layouts, or product placements are immediately reflected in 345’s cloud-based vQ database.

345’s web-based merchandising solution, rPLAN, is the only cloud solution in the industry. It replaces 25-year-old technology ripe for disruption and is designed for agility and ease of use, whether working on single planograms or multiple store clusters simultaneously.

sQ automatically creates store and product layouts in the cloud to achieve optimal configurations with minimal effort. As our machine learning technology advances, the future of space planning will require fewer highly trained specialists for efficiency and scalability.

We provide our customers with a science-based, best in class technology platform engineered to accelerate their growth, revenue, and profits. The long-term value of a partnership with 345 Global can't be matched by any other software company."

I'm not an expert on macro and micro space planning, category management, or shelf optimization. I spoke with people who are, and who have also evaluated 345 Global's software, and software from 345 Global's competitors. I spoke with over 100 executives, managers, directors and associates who work in retail focused on macro and micro space planning, shelf optimization, marketing, and merchandising. I paid careful attention to everything they told me.

According to a former executive from one of the leading macro and micro space planning vendors on the market, "345 Global is going to own this market. No one can touch them. They'll eventually put everyone out of the data, content, and macro/micro planning business." By "everyone," he said he is referring to Blue Yonder , HIVERY , RELEX Solutions , Trax Retail , InContext Solutions and Syndigo . Multiple industry sources have stated to me that 345 Global's platform can replace the macro and micro space planning, content, and data software of every company that I listed. That's astounding.

As 345 Global converts retailers to use their platform, their market share and revenue will grow substantially. Note to investors: Contact Mark Edwards.

A source at Gartner stated to me, "Blue Yonder is going to wish in a year or two that they'd acquired 345 Global. 345 Global reminds me of Microsoft when they put every typewriter company out of business." That's an interesting comparison.

I interviewed sources from Google and Meta, who have evaluated 345 Global's platform. I was told, "345 Global built a gaming platform on steroids for retail. We could never duplicate their platform. It's the most advanced software platform on the market that I've ever seen."

I spoke with a Chief Merchandising Officer from a major retailer who is responsible for merchandising and all store planning. She stated to me, "I was blown away by what I saw. 345 Global's platform is simply the best."

I'm not picking on PepsiCo -- I want PepsiCo to be successful at whatever they do. However, I'm amazed that PepsiCo refuses to accept the fact they've invested millions of dollars of capital, and they aren't close to having the best planogram/space planning software on the market. It doesn't have to be this way, PepsiCo.

I challenge PepsiCo to do something that is very hard but necessary to do -- set aside egos; be honest; and pivot. In my opinion, if the consensus is that 345 Global has the best macro and micro space planning platform on the market, PepsiCo should license 345 Global's software or they should acquire 345 Global, and run it as a separate company.

Another option is that PepsiCo can select 345 Global to be their strategic partner, and 345 Global can take over all planogram services for PepsiCo and their customers. This move would significantly increase PepsiCo's credibility for providing macro and micro space planning.

The goal of PepsiCo must be to provide their business customers with the best macro, micro, and digital twin solution available. Period. I encourage PepsiCo to contact 345 Global's CEO, Mark Edwards , and discuss options for how they can work together. Dave Dohnalik Debra Logan-Rabb

I also encourage PepsiCo to assess an acquisition of Instacart . Acquiring Instacart will provide PepsiCo with a tremendous amount of consumer data, and provide them with the ability to strengthen their relationships with grocery retailers. It's an interesting option to consider. A combined Instacart and 345 Global would be a game-changer for PepsiCo. Dr. Athina Kanioura

A partnership with Wiliot should also be explored by PepsiCo. Ashin Parikh

As for 345 Global, the world is their oyster. They came out of stealth mode in September 2024, to reveal that Walmart is a customer -- that's huge. The news that Walmart is a customer of 345 Global is driving the majority of retailers and tech companies like Google , to do business with 345 Global and/or form strategic partnerships.

345 Global has the potential of turning their platform into an e-commerce solution to become the leader in Virtual Reality retail. You can read about the concept here.

In addition to PepsiCo, I believe NielsenIQ should assess investing in or acquiring 345 Global. Personally, I think NIQ and 345 Global are a perfect fit. James Peck Curtis Miller

Conclusion

I'm not convinced that PepsiCo should even be in the planogram and category strategy business. On many levels, there appears to be a conflict of interest between a manufacturer of products and retailers that stock and sell their products. However, with the right controls, I believe it can be done.

PepsiCo must change their strategy. There is too much cost and complexity within PepsiCo's current planogram strategy and GBS organization, and the software being utilized by PepsiCo, severely lacks the capabilities of 345 Global's software. Licensing software from 345 Global or acquiring 345 Global, will allow PepsiCo to legitimately provide retailers with best-in-class macro and micro space planning, shopper insights, shopper engagement, and a digital catalog. This cannot be disputed.

I understand how hard the team from PepsiCo has worked. However, hard work isn't enough. PepsiCo must have the best solution. Now is the time to pivot.

Think BIG, PepsiCo. If I didn't respect and admire PepsiCo, I wouldn't have written this article.

I truly wish everyone at PepsiCo and 345 Global the best.

Special thanks to the team from 345 Global who have given me access to their software and company as I conducted research. I also want to thank the individuals from the different macro and micro space planning companies who gave me a demo of their software and for answering my questions. I do not own stock in any of the companies I list in this article.