Effects of category management on producer-retailer relationships

The relationships between retailers and producers are considered for understanding the determinants of quality, variety and prices. In the food sector, some issues have been extensively studied: impacts of private labels, supply contracts, price transmission. Despite an increasing role, the implementation of “Category management” (CM) has been less studied. CM belongs to a set of methods based on the concepts of Efficient Consumer Response and Supply Chain Management which have been widely implemented by large retailers and thus have changed the relationships among actors in the food chain. As a part of this evolution, Category Captain’s concept (CC) involves a commitment between a retailer and one of the suppliers who receives decision-making power over the product category. Usually, the major of the food suppliers plays the CC’s role in partnership with the retailers. In practices, CC raises many questions. What effects on the sales and prices? Is it beneficial for all the stakeholders, including the consumers? What are their consequences on the non captain suppliers? We propose a vertical relationship model considering that the retailer is the chain’s leader (Stackelberg game). We compare a non-cooperative game (no CC) to a cooperative game (one supplier as CC). We analyse under which conditions CC improves the profit of each stakeholder, as well as the consumers’ surplus. We show that the cooperative game is always a “win, win, win” game for stakeholders (but not necessary for consumers) if the two suppliers offer similar products. If products are different, we define the parameters relationships under which CC is beneficial for stakeholders and consumers.