Reducing stock outs in stores

Due to the sheer volume of out of stocks we’ve seen on shelves in the last few weeks across several supermarkets, we’ve decided to focus on how FMCG sales people can reduce out of stocks of their brands at their customers’ stores.

Breakfast category

This is a common sight at most grocery stores now. Popular brands and flavours out of stock on shelves and in retailer warehouses. And when customers switch brands as a result, this is highly likely to result in loss of share. How can this be prevented? Keep the consumer in mind when discussing orders with buyers. What are your consumers doing now? How do you/your family eat breakfast now? On the go or at home? How can this impact sales of your brand and should you be discussing larger orders as a result?

Milk alternatives, sugar & sweeteners

These are the shelves you never expect to see low on stock (except during panic buying) in the normal course of events. We take it for granted that your local store always has milk/milk alternatives, sugar and honey. However, since consumer habits underwent a radical change during the pandemic, more people make coffee/tea/their beverage of choice at home now instead of making/buying at work or on the go. This has driven a higher rate of sale of this category. Sales people working for brands within this category should take into account how many of these out of home consumption occasions have been replaced by at-home consumption. And their brands share of those occasions.

Condiments & Carbs

These are photographs from 3 different stores. You may wonder if these are stock photographs from 2020, but these were from different supermarkets just this last weekend (8/9 May). While some of you may attribute some of this to Brexit (Olive Oil & Pasta), the rice, frying oil and Asian condiments are not imported or packaged in the EU and so Brexit should not have an impact. When selling brands/SKUs in this category to customers, consider how consumers have been eating during the pandemic. Are they expected to continue this behaviour or will lockdowns easing have an impact?

Confectionery & snacks

Confectionery and snacks have seen varying impacts during the past year. While brands in the mint and gum category have seen a drop in demand, the remainder of the category has seen a significant rise party due to stress eating and partly due to substituting holidays for treats. As lockdowns ease this is the one category that is likely to see a swing in demand. Consider consumer motivations and drivers for this category when discussing orders. More social occasions = more mint/gum sales. More social occasions = drop in sales of snacks as well. However, home/office working also has a significant impact on sales of snacks. The quantum of change for each brand depends on the brands, their consumption occasions and how many industries/companies decide on a return to work vs continuing remote work.

Beverages

Non-alcoholic & alcoholic beverage brands have experienced stock outs over the past few weeks/months. While some of this may be attributable to supply chain constraints around aluminium cans, why are the same products in bottles not available in greater quantity? Why not use the empty space for the same brand in other formats/packaging? For brands not constrained by this, why limit sales to pre-pandemic levels? Consider how your target consumer has changed his/her way of consumption over the past year and how likely it is to change.

The pandemic has forced us all to behave and consume products differently over the past year. This has now become a habit and habits do not change easily. So if you are a sales person selling FMCG products that are not in any of the above, think of the impact of the last year on the brand/product. Has the consumption occasion changed? If so, how has it changed? For example, consumers buy and use more cleaning products and personal hygiene products now than they did before the pandemic. This is now an ingrained consumer behaviour that is unlikely to change in the medium term.

Not unless there is another significant event that forces us to behave differently.

12+ months after Covid fuelled panic buying

More than a year after Covid fuelled stockpiling of necessities and grocery staples, we still see empty supermarket shelves.

Many assume this is because of an increased focus on online sales by the large grocers, especially in the US, as evidenced by this article in Insight Grocery Business in March 2021. We’ve also seen similar instances in the UK, but in the UK, we’ve blamed these stock-outs on Brexit. There have been recent articles on similar instances in the Middle East & in several EU countries too.

An increased focus on online shouldn’t lead to empty shelves in store. Especially as those who pick stock for online orders through external providers pick products off the shelf currently. This is especially so if orders are placed on Instacart (US), Uber eats or Deliveroo (UK). And Brexit shouldn’t cause stock outs of brands made in the UK using materials sourced in the UK.

So what is really going on?

As we mentioned in our previous article on the 2021 Easter egg shortage in the UK, supermarkets, and brands that sell into supermarkets, typically use last year’s sales volumes as baseline for current year orders.

Buyers have exercised some judgement this year by not ordering sanitisers, cleaning products, kitchen cupboard products (pasta, rice, flour, canned vegetables etc), cleaning products & toilet paper in line with last year’s sales, when consumers were stockpiling in anticipation of supermarkets running out of these staples due to lockdowns. However, they did not exercise the same judgement when they ordered other brands/products (confectionery, small format beverages etc). Even less so when it came to the beer, wine & spirits inventory in store.

Despite increased sales across confectionery and beverages during the later stages of the pandemic, supermarket orders were placed for similar sales volumes as last year during the same time.

So now you see stock-outs across categories and markets.

The only thing in common across categories and markets is the impact of covid on consumer behaviour and choices.

As supermarkets still order on the basis of previous year volumes, they’ve had to exercise their judgement when placing these orders. This is difficult when everything the buyer knows about consumption habits has changed, after more than a year of living under pandemic conditions/lockdowns.

A google search on habits and how long it takes to form a habit runs the gamut from 14 days to 54 days, with the most cited number being 21 days. A study by the University College of London found that it takes 66 days for a habit to form. If the new behaviours were easy, it took 20 days (the example they cite is drinking a glass of water after breakfast every day) and, based on how disruptive the new habits were, ranged to 254 days.

Many of us have lived in lockdowns/pandemic conditions for more than 254 days. Depending on where we live, this has ranged between 75 days and 270 days. Enough time for new habits to form.

Add in significant variations in weather due to climate change, and (almost permanent) changes to how and where we work and/or study. No wonder retailers/FMCG companies are struggling!

If you’d like to understand how best to leverage data to arrive at optimal order volumes for your supermarkets/brands, email me on veena@salesbeat.co

Easter eggs – the stock out no one expected in 2021

The news outlets and consumers all agree on one thing. Easter eggs were out of stock for Easter 2021.

There were several angry and disappointed customers tweeting about the shortage and news outlets are also talking about this.

It certainly wasn’t caused by people stockpiling Easter eggs. Some speculated that this was caused because people did not buy them early enough. According to an article in The Guardian, Asda said it had seen a surge in hot cross buns, individual chocolate bunnies and even novelty bunny ears, while sales of Easter crafting, decorations and games were up a whopping 207% year on year.


They are using 2020 to compare 2021 with. The Easter Egg orders for 2021 were made based on 2020 sales. Now what do you think is wrong with this statement?

In March 2020, everyone was going into lockdowns, vs April 2021, when lockdowns were easing. When UK retailers were placing orders for Easter eggs in late 2020, lockdowns had eased to a large extent and was in the period just before the next lockdown.

So why did retailers use 2020 orders as baseline for 2021? They anticipated an increase vs 2020, but the increase was not enough to account for normal consumption rates pre-covid.

For those who know this industry, it wouldn’t come as a surprise. Retailer orders are based on or pegged to previous year sales, not based on expected consumer demand. However, consumers do not replicate consumption habits year on year.

Retailers and the brands that sell into retailers need to be more data driven when they place orders during these fast changing times. Consumer preferences and the factors that influence them change on an almost daily basis these days. Expecting consumers to mirror previous year sales and pegging their consumption to previous year sales plus an uplift results in the two extremes – under stocking (lost revenues/sales and angry consumers) or overstocking (cost of the working capital involved).

To learn more about how to use data to predict consumer preferences and order volumes, email me on veena@salesbeat.co

What should the sector expect over 2021 with lockdowns easing?

Over 2020, we saw significant increase in food & beverage sales and cleaning products.

Sales in the make up and hair care sectors was lacklustre.

This was driven by lockdowns causing consumers to stay at home. As they were not able to go out to a restaurant, they shopped at grocery stores for different foods and beverages. Due to the very same driver, sales of make-up and hair care brands decreased significantly.

Increased sales of cleaning products in 2020 was driven by an increased consciousness of hygiene due to the pandemic.

As we look at 2021, with successful vaccination campaigns and with lockdowns easing, we expect make up and hair care sales to increase in anticipation of and due to social activity. As restaurants, bars and cafes opening up, we expect grocery sales of food & beverages to decline slightly. But the sector is expected to retain a major share of the gains from last year as people cautiously venture out as lockdowns ease.

The one sector we expect will retain the increased sales from 2020 is the cleaning products sector. As people go out and enjoy the return to normal, to keep safe, we expect consumers to buy and use more cleaning products than they used to pre-covid.

If you’d like to learn more and understand how individual categories may be impacted by the easing of lockdowns, email me on veena@salesbeat.co

A timely example of VUCA

A ~1min video on how to sell more effectively in these times

This week started off hot for those of us in the UK, for March that is. Monday temperatures reached 22degrees and Tuesday was the warmest day in March that UK has seen in 53 years (Sky News) at 24 degrees.

Would you have expected this for March in the UK?

As weather influences beverage sales quite significantly, I decided to check out a few supermarkets on Monday to see how they were doing. Monday was also the day lockdowns eased.

I saw more people at the beer & wine section in the supermarket than I have seen in a while now! When asked about whether they were buying for Easter or for immediate consumption, all of them said that they were buying for immediate consumption. Some of them were going to the park, so they had some fruit and snacks as well and a few were buying for dinner on their patio at home.

Rosés and White wines are already going out of stock/out of stock in the chilled section

As you can see, brands and products were already starting to go out of stock and some already were. Tuesday was also a warm day and we expect that availability of brands would have decreased even more by end of day Tuesday. The manager of a wine store that I walked into, said that she sold more White wines, Rose wines & Sparkling wine/Champagne on a Monday than ever before.

We expect quite a few brands and products would have gone out of stock by end of day Tuesday and there was quite a bit of revenue ‘left on the table’.

This is a classic example of VUCA, when demand for Beer, Wines, Water, non-alcoholic beverages & ready to drink beverages increased significantly when compared to March in previous years.

Applying the framework we described in our previous blog, sales teams for FMCG companies should be monitoring weather forecasts and playing close attention to variances from ‘normal’ weather for the month so they can adjust sales volumes accordingly.

In the absence of a sales prediction model, optimal volume levels will be a matter of trial and error. But paying attention to these fluctuations would go a long way toward preventing the significant loss of sales we see now.

If you’d like to discuss how a sales prediction model can help or understand what factors influence each FMCG category, feel free to email me on veena@salesbeat.co

FMCG sales in a VUCA world

Vuca – volatile, uncertain, complex and ambiguous.

The acronym is perfect for our world of today. But… it was first used by the United States Army War College in 1987 when developing the curriculum for 1988.

We are all faced with the individual elements of VUCA at some point in life or the other. But when faced with them all at the same time, they can be formidable. Harvard Business Review published a framework in 2014 to deal with this.

Volatility: Change is constant. Accept it and give people(yourself) the space and freedom to think creatively and focus their(your) efforts.

Uncertainty: How do you mitigate uncertainty? By gathering as much data as possible. Invest in collecting information and interpreting it.

Complexity: Build capability and break it down into smaller and discreet actionable tasks. By breaking it down into smaller chunks, you respond on a more timely basis than you would if you were to wait to get clarity. Desmond Tutu once said, ‘There’s only one way to eat an elephant, a bite at a time.’*

Ambiguity: Form a hypothesis based on available information. Adopt a test & learn approach. Test various solutions, learn & iterate.

In the VUCA world that FMCG sales people sell in these days, the same principles can be applied as below:

If you’d like to understand how to derive optimal volumes to sell in these VUCA times, email me on veena@salesbeat.co.

The complex relationship between FMCG sales & data

The prevailing and most common business model in this industry is B2B2C. So while those of us in the tech industry can focus on just one user/customer, this industry has two separate customers.

The Customer: When referring to customers, industry professionals are normally talking about supermarkets, wholesalers, retailers, convenience stores and distributors.

The Consumer: The end user who ‘consumes’ the brand/product.

Both customer and consumer level data are integral to this industry. Understanding how consumers make purchasing decisions (at scale) can be challenging due to the influence of so many different factors on consumers. The results then need to be converted into what it means at a B2B level. This requires an understanding of how people shop and where.

The data needs to be collected and reviewed for sales insights as often as the ordering frequency, so sales people can use this data to discuss orders, promotions, listings and placement with buyers/decision makers. Then, the decision makers at retailers, supermarkets, wholesalers, distributors, convenience stores etc (you get where I am going with this!) need to be convinced that you have arrived at the right conclusion.

This is one of the reasons why direct to consumer brands have been so successful over the past few years with internet becoming the ‘new’ channel. You can now market (instagram, direct emails campaigns, facebook, twitter etc) and sell your brand on the same channel, and increasingly through the same medium (e.g. instagram). In fact, with Millennials and Gen Z now forming a significant percentage of consumers, with a significant internet footprint, companies should be using this data to understand and gauge consumer demand.

With both these generations so used to instant gratification, we do not rule out the possibility that physical retail will co-exist with e-commerce. At the end of 2020, e-commerce was 21% of all sales, up 44% from 2019 and is still expected to grow.

With the B2B2C model surviving into the foreseeable future, companies will need to understand the consumers who buy their brands and what drives them to be able to sell effectively into the aggregators (supermarkets, convenience stores, wholesalers, distributors, online stores etc). Especially so, as social media, climate change (heatwave one day, storm another, cold waves in places where winters are mild etc) and widespread information availability is influencing consumer demand and purchase intent in unexpected ways.

If you’d like to understand how to better use external data points to sell more effectively, email me on veena@salesbeat.co.

Sustainability & FMCG sales

“We do not consider the purpose of this company to be returning money to shareholders. There is a broader purpose.” – Emmanuel Faber, former CEO & Chairman, Danone

It is hard to miss the news that Emmanuel Faber has stepped down as Danone’s CEO & Chairman. Leading shareholders argue that Danone has underperformed in recent years.

Faber became CEO of Danone in 2014 and has overseen a strategy of diversifying into high growing segments such as plant based foods. Under his stewardship, Danone started the process of getting every part of its nearly $30bn business B-Corp certified – not an easy task. According to their website, nearly 50% of Danone’s global sales are now B-Corp certified and aim to be 100% certified by 2025.

An excerpt from B-Corporation.net reads:
‘Certified B Corporations are businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose. B Corps are accelerating a global culture shift to redefine success in business and build a more inclusive and sustainable economy.’

Essentially, business as a force for good

But does this have to come at the cost of shareholder returns? After all, aren’t consumers looking for more sustainable brands to buy? We live in times when past choices are impacting how we live going forward and this has given rise to a new generation of consumers for whom sustainability is key – in every aspect of their life.

They seek brands and choices that fight climate change, plastic pollution and inequalities in the world. Gone are the days when ‘value for money’ and ‘does what it says on the tin’ were primary consumer requirements.

A study published by Harvard Business Review established that 50% of the growth in the CPG industry came from products that were marketed as sustainable.

So why did Danone’s sales NOT benefit from their initiatives?

One of the key reasons for Faber’s departure was that Danone’s financial performance was not consistent with its asset base.

In 2020, lockdowns impacted sales (6.6% decline vs prior year), primarily since its bottled water brands (down $1bn vs PY) have a significance presence in the on-trade (restaurants, pubs, clubs, bars, cafés etc), which suffered during 2020 lockdowns. But even before 2020, Danone revenues were declining YoY since 2018 (2.78% decline in 2018 vs 2017 and 4.73% decline in 2019 vs 2018).

Why did Danone’s purpose led mission not drive better sales? Is this not what consumers wanted?

To answer this question, we need to ask how many consumers knew that Danone was a purpose led business? Most people I checked this with were unaware of this. The ones who did know, are those of us in this industry.

Communication to shareholders AND to CONSUMERS is key

There is a lot of material on Danone’s website targeting investors to convince them of the value a B-corp certification brings to the business. Several corporate and trade articles that talk about their certification and focus on business as a force for good.

Till very recently, the primary purpose of companies was to create shareholder value. So unless shareholders are convinced of the long term value generated by these actions – a business/industry that lives on for generations to come, and building communities and businesses which drive future economic value – they are likely to vote with their feet.

But equally key is to communicate this to consumers.

Unless consumers know that Danone’s brands are from a purpose led company, how can they factor this into their decision making when they do their grocery runs? Danone did this right on retailer e-commerce websites.

Activia with Oats & Walnut on Tesco

But we now know that Millennials & Gen Z prefer grocery shopping at stores. And there is nothing on-shelf, in store, currently.

There is no doubt that companies should walk the talk when it comes to sustainability and not just issue press releases or social media posts around this, without taking actual actions. However, when companies are doing this right, they should shout out loud about it. There are very few key differentiating factors these days and very few topics which generate as much consumer passion as sustainability does.

By ensuring that these initiatives are communicated to consumers regularly, there is no reason why purpose led businesses cannot outperform competition in the short and long term.

We’ve used Danone as an example to illustrate how larger & more established FMCG companies fail to communicate key initiatives, (positively) impacting consumer decision making, with their consumer base. Most large and established FMCG companies are guilty of this.

They communicate these initiatives via back of pack labelling. While this works for brands like Ben & Jerry’s (now Unilever) as they’ve always been mission driven, when brands adopt a purpose driven approach after years of not being purpose driven, they need to communicate this to consumers via on-shelf messaging. Else, how will they know at the point of purchase?

They usually just compare brands on shelf and if there is no communication on shelf, this is a missed opportunity.

If you have any questions on how corporate or company initiatives can be used to drive sales, email me on veena@salesbeat.co

The long tail is becoming mainstream

While it has long been recognised and accepted that with newer generations gaining purchasing power, the long tail becomes even longer. However, what was unforeseen was that the long tail may become mainstream.

There was a Medium article nearly 4 years ago by Willy Braun on this. Willy talks about how the long tail can gain traction (he draws an interesting parallel between Lady Gaga’s initial audience (niche) and her audience now (mainstream).

So it is with the long tail. In his article on Medium, Willy makes a reference to an interesting study by Anita Elberse. She found that viewers watched movies in niche segments due to availability and access, and due to their interest in Cinema. These viewers also watched mainstream/blockbuster movies. Willy concluded that so it is with consumer preferences; that it is availability that influences whether consumers partake of the long tail.

As Willy suggested in 2017, what were considered niche a few years ago – free from, high protein, ethnic flavours, sustainably sourced, plant based etc, while not mainstream, are not part of the long tail anymore due to availability… and the concept of mainstream does not exist within its old definition either!


Breakfast cereal revival – a pandemic boost?

2o20 has been a very interesting year for breakfast cereals.

The breakfast cereal aisle is the one aisle I skip when I do my weekly grocery shopping. Not because I don’t eat breakfast, but because this segment had too much and too little choice all at the same time. That may sound contradictory.

The choice this aisle offered was purely contained to flavour. You had the usual suspects – vanilla, strawberry & chocolate and then other flavours like coconut, banana & berry. Consumers had too much choice (a minimum of 60 options at the average large format supermarket) and the paradox of choice struck.

People started eating less cereal for breakfast. They were also eating more breakfast bars and picking up breakfast to go from cafes. This was a double whammy for the industry as consumers wanted healthier choices as well – less added (natural or otherwise) sugar in their cereals, more fibre, more proteins etc – which the industry was not prepared for and this impacted breakfast cereal perception & consumption and resultantly, sales. According to a Forbes article in Aug 2019, the average US consumer has eaten 14 fewer bowls of cereal over the last 28 years and according to an article by Kerry in October 2019, US retail sales of cereal was expected to decline by 6% between 2017 & 2022.

In February 2020, before the pandemic brought the world to its knees, CNBC ran an article on the breakfast cereal sector and General Mills’ plan to revitalise this category in the US, the current largest breakfast cereal market . The article started off with a summary of key takeaways and the first was:

‘U.S. cereal sales have gone stale in recent years as consumer tastes change.’

Sales volume was in decline for the at-home breakfast cereal sector when the pandemic hit. But then, people started working from home, children started schooling from home and breakfast at home became a regular routine. With professionals still working (albeit from home; so, no time for a hot breakfast!), cafes still under lockdowns and takeaway breakfast joints competing for who has the longest queue, breakfast cereals saved the day for all the moms, dads and working professionals out there.

So the pandemic saved the breakfast cereal industry. It was almost as if the pandemic compelled this industry to listen to what their consumers were asking for (clue: no more flavour variations!) This last year saw an almost unprecedented pace of innovation in this sector. Instead of offering a plethora of yet more flavours, brands instead focussed on creating options along the ‘health spectrum’ spanning from indulgent to healthy.

While the new normal may see a drop in at home cereal consumption compared to that in 2020/early ’21, with kids going back to school, the drop may not be as steep as working from home is here to stay… and breakfast cereal also makes a great snack!

So what prompted this blog today? Weetabix just announced indulgent variants of their fibre rich cereal with Chocolate Melts Duo.