The Competitive Consequences of Using a Category Captain

Many retailers designate a national brand manufacturer as a "category captain" to help manage the entire category. The category captain is involved in decisions that a¤ect not only its own brands, but also those of its rivals. We examine how engaging a self-interested category captain a¤ects the category captain, the retailer and the rival manufacturer, when the category captain is responsible for providing retail service that can enhance demand (e.g., shelf-space design and allocation or managing end-of-aisle displays). We further examine when and why a retailer may rely on only one manufacturer as a category captain, even when more than one manufacturer can provide such service. We also examine characteristics that might make one manufacturer a more likely candidate for category captaincy than its rival. We analyze a setting where two manufacturers supply to a single retailer, and the retailer may engage one or both manufacturers to provide retail service. Even in the absence of competition for category captaincy, we …nd that the category captain may still provide a service that enhances demand for all brands in the category. Moreover, even when the category captain’s service depletes demand for the rival’s brand, the rival manufacturer and the retailer may still bene…t. When there is competition for category captaincy, we …nd that not only does the category captain provide a higher level of service, but also the service is less biased towards its own brand. Therefore, we …nd that the retailer may prefer the category captain arrangement over engaging both manufacturers jointly to provide service. Our …ndings may help explain why, despite concerns about the lack of category captain objectivity, this practice of relying on only one manufacturer has ‡ourished, and why there is limited evidence of harm to rival manufacturers. (