Providing consumers with the best line-up of food products has always been a challenge for retailers who understand that choice is a key driver for getting shoppers into stores or buying online. However, a desire to make the shopping experience simpler has led to smaller store formats and the need to cut waste and cost in the supply chain means that retailers are now reducing the number of products they stock.
With an overabundance of FMCG products, this has meant that manufacturers face a much tougher time to keep their products stocked.
Recent analysis we conducted on the number of products available per store across all major FMCG retailers in Europe shows a decline in the last year in every country except Germany.
It’s not just national brands facing the chop however. Even retailer’s private label products, according to our most recent report on Private Label in Western Economies, are reducing their market share across Europe – private label market share measured by pack sales also dropped by 0.5 points to 47.4% last year.
A radical new approach to the way that food manufacturers work with retailers on range planning is required.
Taking a more proactive role in range planning
It is not uncommon for product managers to be on the back foot with retailers, proving the value of their products and essentially fighting for shelf space. This approach looks at products in isolation as retailers review what to cut by the sales figures of individual products and then reduce range based on cutting the bottom 10% of products based on sales value.
However, retailers will never know if those products delivering the lowest revenues by value are actually a critical part of the basket for shoppers.
The impact of delisting any single product may vary store to store, but if it could mean losing a shopper’s entire shopping basket spend – i.e. more than the sales of that product alone – then that is not a sensible strategy.
We believe that food manufacturers should be assessing range based on the importance of key product attributes to shoppers.
You need to look at the category as a dynamic product mix using expert analytics and predictive modelling techniques that can assess trillions of data points instantaneously. From this analysis it will be much easier to see the impact of de-ranging, ensuring that both the retailer and the manufacturer maximise revenue through the suggested assortment. At the same time, it makes the shopper’s basket decision simpler and more efficient, further helping maintain shopper satisfaction and loyalty.
Take Tiger Brands for example, one of South Africa’s leading consumer goods firms with products across a number of food and drink categories including South Africa’s favourite jam, Hugo’s. It worked with IRI’s office in South Africa on an analysis of how the shopper focused product attributes (such as flavour, size and format for example) drive sales for its products and the whole category.
The analysis is fairly granular looking at individual stores and the product mix available for the category by specific stores.
Tiger Brands was able to isolate those sales that are incremental (i.e. as a result of unique product attributes such as brand, flavour, pack type, and therefore unlikely to be transferred to another product in the category if it is unavailable), giving it a fast understanding of whether shoppers would transfer their spend to another brand or not.
Tiger Brands determined that a reduction of its jam product range by 37% would drive 1.1% value growth for the retailers. It was able to share this insight with retailers.
You can also use the insight gained from such an exercise to identify the growth opportunities – including revenue potential from new product launches – or optmise your product range and make its distribution and supply chain more efficient and merchandising less complicated.
Assortments will continue, as they must, to shrink. It really is time for food brands to step up and play a strategic role working with retailers to make decisions that meet the needs of the shopper. With big data and analytics technologies food manufacturers can turn the assortment challenge into a positive growth opportunity.