L’Oreal & Modiface: no more messy in-store trials

On 16 March 2018, L’Oreal announced their acquisition of ModiFace, an Augmented Reality (AR) company known as the leading provider of AR technology for the beauty sector. L’Oreal had been working with ModiFace on a project basis for 7 years before this announcement was made.

Early months

A year into the acquisition, by early 2019, they had developed several hundreds of solutions, nearly one project a day, according to an interview by The Drum, of Lubomira Rochet, the Global Chief Digital Officer. According to Lubomira, they had launched 120 of those projects by the end of the first 12 months as they had observed that engagement times double and conversion rates triple with the AR feature on their website/app.

Amongst these solutions were a diagnostic tool capable of predicting and addressing visual signs of ageing to make product recommendations and a virtual shade selector tool to make hair colour recommendations. They were also testing the technology for consumers to virtually try out cosmetics from the comfort of their homes in early 2019.

Just in time for the chaos 2020 brought the beauty sector.

Lockdowns & L’Oreal

L’Oreal went into partnership with Google. Consumers seeking lipstick or eyeshadow brands by L’Oreal could use the ModiFace solution to try on any shade virtually before they bought the shade they wanted.

Through a similar partnership with Facebook, they saw a five fold increase in usage of their virtual make-up tools and the conversion rate from ad to sales was three times higher with the virtual try on tool. It was particularly effective for hair colour, due to salon closures during the pandemic.

202o results

When the results for financial year ended 31 December 2020 were announced, Jean Paul Agon, L’Oreal’s then CEO, said, ‘….sales achieved in e-commerce rose sharply by +62%, across all Divisions and all regions, reaching the record level of 26.6% of the total Group’s sales for the year.

Despite declines in sales of Professional, Luxe and Consumer product ranges, sales of their Active range grew by 13% that year. Also, there was a remarkable difference in sales across regions. Asia Pacific, which has always been a technology friendly region with high adoption rates for new tech, saw an increase in sales of 1.5%, despite the pandemic.

Beyond 2020

In 2021, L’Oreal recorded a sales increase vs 2020 of 16%, with e-commerce claiming nearly 30% of sales. By this time, L’Oreal revenues had recovered to nearly the same revenues as 2019… due to their almost prescient investment in technology.

Recent regulations in the FMCG sector

Increasingly, consumers are demanding products which minimise harm to, or have a positive effect on, the environment. As a result, there has been a proliferation of brands and products which claim to meet that demand. Thus, there have been an increasing number of regulations in the FMCG sector addressing health and environmental impacts , especially food & beverages in the last 2 or so years. And still more to come.

Two of the key ones are around the plastic straw ban, in place in several countries and pending in several more, and around HFSS (high in fat, sugar and salt).

HFSS regulations

Legislation around HFSS (to be implemented from October 2022) in the UK has been the topic of discussion for a few months now. Companies have been scrambling to reduce the fat, salt and sugar content in foods to avoid being subject to advertising and promotional restrictions.

Brands that fall under the HFSS category will face restrictions on how they can advertise their products and also what promotional mechanics they can use. For example, volume promotions like ‘Buy one get one free’, ‘Half price’ and ‘Buy 2 get one free’ will no longer be allowed for this category. Also, they will no longer be able to display them in shelves at end of aisle, check out or near the entrance. Europe has also mandated restrictions(but not as stringent as those in the UK) on HFSS products in its ‘Farm to fork’ strategy.

A report by Access to Nutrition Initiative shows that in the UK, 71% of sales at the largest food & beverage companies here are generated by brands that fall into the ‘unhealthy’ category. So it goes without saying that there is expected to be a significant impact on revenues of these companies. To the extent that The Kelloggs Company is taking the UK Government to court over the HFSS regulations.

According to IRI, a big data and analytics company in the sector, the changes place £1.1bn of sales at risk in the UK. This number raises the question of how much of the packaged/processed foods we buy fall into the HFSS category.

Expected loss of sales by category. Source: Barclays IRI research

There are several ‘healthy’ low fat products that also fall into this category. This is because, very often, with low fat brands, they are reformulated with hidden sugars to improve the flavour. Case in point is low fat or no fat natural yogurt. As they are not flavoured, you assume the yogurt has no sugar as it does not taste sweet. However, there are ‘hidden’ sugars to make it taste better without the added fat. How can hidden sugars make food taste better? Probably the subject of a separate blog.

Some companies like PepsiCo (Walkers snacks business unit in particular) have been proactive and launched HFSS compliant versions of their most popular flavours and SKUs.

Others like Mondelez (confectionery), have decided to stay the course. As all companies and brands in the confectionery sector face the same regulations, they expect that they may even benefit from the strong established brands they have in their portfolio. They feel they are less likely to lose share to new entrants due to the new regulations.

Plastic straw ban

Another piece of (impending) regulation that has a major impact on the FMCG sector is the one around plastic straws.

According to a BBC report in 2020, when England banned single-use plastic straws, stirrers and cotton buds, an estimated 4.7 billion plastic straws, 316 million plastic stirrers and 1.8 billion plastic-stemmed cotton buds were used in England every year.

Scotland has new laws around single use plastics, including straws coming into place in 2022.

Source: www.zerowastescotland.org.uk

Canada is aiming to ban single use plastics including straws by end of 2022 and China has also banned plastic straw use and sale in restaurants.

While there is no federal ban of single use plastic straws in the US, cities that have a plastic straw ban in place include Miami Beach in Florida, Seattle in Washington and Malibu in California. India is now implementing a strict nation-wide ban on single use plastic straws.

While a ban on single use plastic straw may feel daunting for several companies, what we need to remember is that paper straws preceded plastic ones. And natural rye grass straws preceded paper ones.

The earliest known use of straws is by the Sumerians in Mesopotamia. They used straws to drink beer that they brewed in large vats (too heavy to lift and pass around or pour into smaller containers). So they drank from long straws together.

In 1888, Marvin Stone filed a patent for drinking straws made of manila paper and in 1937, Joseph Friedman creates the worlds first bendable straw by inserting a screw in the straw and winding floss around the thread of the screw to create grooves. Upon removing the screw, the straw could now bend.

It was only in the 1960s that plastic straws replaced paper straws. But by 2020, an estimated 500million single use plastic straws were being used every day. In Europe, 25.3billion single use plastic straws were being used every year.

So what alternatives are available?

Paper straws – We used them once before and the technology exists. However these do have a large environmental footprint when compared to re-usable alternatives.

Bamboo straws – These are becoming increasingly popular and several start-ups are now making and selling bamboo straws. (Side note: If anyone is looking for bamboo straw suppliers, feel free to contact us and we can put you in touch with a few)

Metal straws – Metal straws are now more popular than bamboo ones, as consumers can clean and use them again.

Re-usable plastic straws – While these reduce the number of plastic straws thrown away, this is still plastic and we are just ‘kicking the can down the lane’.

While banning single use plastic straws are a great step toward reducing plastic pollution, FMCG companies should also view this as meeting consumer demand as on average, 8 in 10 consumers are looking to reduce plastic consumption.

For those interested, below is a video by the National Geographic on the history of plastic use globally.

What else do you think FMCG companies should do to reduce single use plastic? Do you think there should be more done to make packaged food & beverages healthier? Send us your thoughts by commenting on the blog or on our posts on social media.

Unilever – how the marketing team returned Pot Noodles to sales growth

This case study looks at how understanding your consumers and your consumers’ motivations better, helps you keep your brand in growth.

Pot Noodle has been a supermarket staple aimed at 16-24 year olds. The brand became iconic in the ’90s when Gen X (aka slacker/MTV generation) embraced the brand for its ease of use. According to Marketing Society, ‘These were the kids who were proud to sit around in their undies on the sofa watching Men Behaving Badly and playing on their PlayStations. The ease and convenience of Pot Noodle made it the perfect food for this infamous 90s lifestyle, and the brand became emblematic of slacker culture.’

The team had been using music themed ads for this target segment. In the noughties, the Pot Noodle team launched a new ad campaign, ‘Why try harder’, which according to Marketing Society, featured a man marrying a footballer in order to live the easy life and another pretending to be a towel so people would carry him to the beach every day. While the ad was in keeping with the generation they had previously targeted, the 16-24 year old of the millennial generation had different values from the previous one. So the brand started losing share to others in the same category. The irony was that the category was in growth and Pot Noodle was underperforming vs the remainder of the brands in the category.

What was causing this?

This generation, the Millennials, had grown up watching their peers become tech billionaires and global peace envoys. According to a 2014 survey, 79% said career success was important to them, 76% wanted to achieve more than their parents and 55% planned to start their own business. In complete contrast to the ‘slacker’ image portrayed by the Pot Noodle ads, this generation was probably the most ambitious one yet.

So why was the rest of the category in growth?

It wasn’t that the rest of the category was in decline as well. In fact the category grew by c. 2% (value) between 2013 and 2014, but Pot Noodle’s market share dropped by c. 5% (value) during the same period.

When the marketing team behind Pot Noodle at Unilever dug deeper into this, by spending time with people in this generation, they found that convenience was still a highly valued selling point for this category. They found that this generation valued convenience not because they were lazy, but because they were ambitious and driven. Spending less time putting together snacks & meals gave them more time to focus on their career.

This was a generation that was defined by the financial crisis in 2008. They knew that unless they focussed completely on their careers, they would not be able to enjoy the same quality of living as the previous generations did.

So they bought and consumed instant meals/snacks to make more time for work.

However, the ‘slacker’ image portrayed by Pot Noodle was not in line with the ethos of this new generation.

A different portrayal of the same benefit

While the fact remained that both generations valued convenience, the reason for why they valued this convenience had changed.

While Gen X valued the minimum effort that went into putting a snack/meal together, Millennials valued the time it saved them, that they could use to focus on their careers.

So the Unilever marketing team launched their ‘You can make it’ campaign.

Re-launch of the Pot Noodle brand in September 2015

They used the 3 months of December 2015, to completely re-launch the brand. Given they were now targeting a generation of digital natives, the campaign focussed heavily on digital channels. The campaign kicked off with the story of a young man who dreamed of success in the Boxing ring.

You can make it

They also ran mobile and online ads around this theme, ‘You can make it’. They went beyond just running ads however, they launched partnerships with online youth sites to back entrepreneurs. They launched music careers, funded & launched launched inventions through their on pack competition and handed out c. 100k samples at Universities.

Turnaround of the brand

The campaign resonated with this generation and completely turned around the brand performance in stores.

#youcanmakeit generated a whopping 29 million impressions during the campaign period, with the majority of the users aged 16-24 (Pot Noodle target age).

The ad changed the way Pot Noodle was perceived by people. Pot Noodle went from being a guilty pleasure to one that gave its consumers more time to focus on success.

Major media outlets and youth influencers praised the positive message about gender choices that the Boxer spot delivered and were supportive of the message behind the ad. During the campaign period positive reports of Pot Noodle in the press outweighed negative ones by a factor of 10 to 1.

This change in perception had a major impact on sales, market share and penetration.

By understanding their target consumer/shopper segment better through data, the team behind Pot Noodle was able to reverse and even grow the brand. Sales value increased by 3.6% and nearly 364k NEW households bought the brand. Pot Noodle not only reversed their decline but became the fastest growing brand in this category.

Internet and its influence on sales

On 12 March 1989, Sir Tim Berners-Lee submitted his proposal for the World Wide Web.

Sir Berners-Lee proposed a way of structuring and linking all the information (like a web) available on CERN’s computer network that made it quick and easy to access. This concept of a ‘web of information’ would ultimately become the World Wide Web.

The launch of the Mosaic browser in 1993 opened up the web to a new audience of non-academics. By 1995, the internet and the World Wide Web were established phenomena. In 1995, the Internet had less than 40 million users globally. In contrast, Facebook had 2.9billion monthly active users in January 2022.

While in its early days, the internet was structured on the basis of decentralisation (think p2p file sharing sites like Napster), these days, most use the internet for social media (Twitter, Instagram, TikTok etc), entertainment (think Netflix, Spotify) and for updates on current events, whether fake or not.

Why are we blogging about the internet today?

The internet has had an outsized impact on sales and predictability of sales since inception. While its early (negative) impact was on sales of music, books and movies, due to sites like Napster and Bittorrent, its later impact was on sales of consumer goods, both every day and luxury. This is largely due to social media.

Current events(‘news’) have always influenced our buying decisions. Prior to the advent of the internet, this was restricted to watching the news once a day or to the daily newspaper. So the influence was sporadic. These days, there are several websites (some legitimate, some not), that people can go to for their current events update. This has made the world a lot smaller and influences choices.

Influencers

Influencer marketing has been around since Roman times, when gladiators endorsed products (Source: Forbes.com). According to Forbes.com, the first well known influencer collaboration was when Thomas Wedgwood made a tea set in 1760 for the wife of King George III and marketed his brand as having ‘royal approval’.

In the early 2000s, mommy bloggers were the influencers sought out by various brands to popularise and talk about their products. But the term ‘influencer marketing’ was popularised by social media.

Social media

Of all the websites and apps on the internet, social media has the biggest impact on sales. This is not just owing to the influencers on the internet and what they post, but also due to what regular people like you and me post. With content now going ‘viral’, it is viewed not by 100s of thousands of people, but a few million or billions of people.

In June 2021, Musk tweeted a heartbreak emoji and a Linkin Park referenced meme while talking about Bitcoin. The result: The price of Bitcoin dipped 3.6%.

Another, rather infamous twitter post, was by Weetabix and Heinz. The post was polarising enough that other brands, retailers and even foreign embassies got in on it. Within just a week of posting this, Weetabix sales was up by 15% in Sainsbury’s alone (Source: The Grocer)

Increased information on brands/companies

As information has become the new currency of today, any actions taken by companies are fodder for news, which eventually makes its way to social media.

With Gen Z & Millennials now forming the bulk of shoppers and given how their views on purpose have influenced how Gen X and Baby boomers think about consumption choices as well, this increased availability of information has the power to change brand preferences, based on the information on decisions taken by these companies.

Following the start of the conflict in Ukraine, when Unilever, Pepsi & Coca Cola did not initially pause Russian operations, consumer responses influences sales enough that they then decided to pause operations in the country.

How can sales people predict changes in preferences and prepare for it?

  • Make it a point to stay updated on current events through legitimate sources.
  • Check social media sites regularly to keep an eye on what posts are trending.
  • If your view or preference has been impacted by a particular event, news or a social media post, you can be sure that there are several more whose preference has changed as well.
  • Join different social groups and ensure you regularly talk to people across different generations. Each generation reacts differently (or does not react).

People have always been influenced by the opinions of others. This has been so since times immemorial. Technology has magnified this and will continue to do so as people search for human connection on the internet instead of ‘in real life’.

Amul – how they grew during the pandemic through their (inadvertent) use of data

Amul is a household name in India. For those who have not lived in India, Amul is a dairy brand in India. Amul is possibly the biggest FMCG brand in India by revenue – $5.3billion in 2020 according to Global Dairy Top 20 report by Rabobank.

The organisation behind this brand is Gujarat Co-operative Milk Marketing Federation.

The structure of this co-op has been the subject of several research projects and movies, as the purpose of the co-op is to minimise profits. The co-op sells dairy products to customers and consumers at the lowest possible prices and pays its farmers the highest possible price for the milk and maintains skinny to zero profit margins. They sell the Amul brand through their own retail outlets and also through supermarkets, convenience stores and kirana stores (bodega stores/independents)

Amul’s unique structure is not the reason for our case study. Today we explore how Amul was able to foresee the consequences of the pandemic and pivot in time to meet demand.

Learning from others’ experiences

As the MD for Amul, R S Sodhi, had been tracking the spread of infections in China, he already had a plan for how to amend operations within Amul facilities and offices to curb the spread of infection. He immediately put this plan in place.

‘I remember, on March 17, we looked at different aspects of our operations like precautions, social distancing, sanitisation, invoicing and warehousing and figured how to have a robust IT backbone to carry out our operations smoothly. Anticipating disruption, we started stocking up products in our 77 warehouses, transporting much more than what we normally would. At the head office, we split the team into two, working in two sets.’ said Sodhi, the MD of Amul.

Social distancing norms were introduced in village societies beginning 17 March along with new sanitisation protocols.

Amul’s MD predicted consumer reaction based on his family’s reaction

According to an interview of the the MD, when Prime Minister Modi announced lockdowns in March 2020, his wife encouraged him to go out and stock up on essentials and this included milk, yogurt, butter and paneer.

He realised that millions of other households would be doing the same thing and that there would be concerns around availability.

The next day he sent out a 2min phone recording to all their stakeholders, customers and farmers, and re-assured them regarding continued operations.

Predicted changes in consumer behaviour based on previous curfews and lockdowns

Gujarat, as many of you may know, has had curfews and lockdowns imposed previously, in the 1980s/1990s. R S Sodhi knew that his consumers would behave in similar ways as they did during those times, with the new nationwide lockdowns. So he diverted production to consumer focussed SKUs. Instead of packaging milk, yogurt, butter, ghee and paneer in bulk for the on-trade, he increased production of shelf ready SKUs to be sold through their retail outlets and stores.

Agile decision making

As ice creams are sold primarily through the on-trade in India, Sodhi knew that there would be a weakening of demand for Ice-creams. He also knew that school and office closures meant that demand for at-home consumption of milk (including flavoured milk), yogurt, butter, ghee and paneer would increase. So they diverted production from Ice-creams to packaged milk (incl. flavoured milk), yogurt, paneer, butter & ghee.

Increased investment in the business at a time when everyone else chose not to

When most other companies were pausing further investment into their businesses, Amul chose to go the other way. They increased employee salaries by 40-50% on average, increased margin distribution and increased advertising activity. They also invested in plant hygiene and social distancing initiatives. When they realised that people were watching a lot more TV, especially old re-runs, they re-ran Amul ads from those times taking advantage of the nostalgia element.

Their policy to never turn a farmer away paid off

During this time, several other milk co-operatives and unions were struggling with infections and absenteeism, causing them to shut down their plants. This, in turn, impacted the farmers who supplied these plants as they could no longer sell their milk. GCMMF(the co-op behind the brand, Amul) has a policy to never turn a farmer away. This meant that the co-op always had a steady supply of milk.

So what did/does this mean for Amul?

During a time when several other FMCG companies were struggling to keep their supply chains and sales going, Amul was well set up for supply chain and sales shocks. There wasn’t ever a single instance of Amul going out of stock in stores or at their outlets.

As they were still running their ads on TV and continuing with their marketing activities, they were able to not just retain market share, but also grow share exponentially.

Despite the pandemic and the resulting loss of sales through the on-trade, Amul posted a 2% growth in revenues for the YE 2020/21. Their consumer focussed SKUs grew by 8% and was offset by the significant decline in sales in the on-trade sector in 2020/21. For YE 2021/22, they’re expecting an 18% growth in sales.

Sources: Economic Times, Live Mint, ICMR Case Study – Unlocking in the lockdown

DtC scaling – strategies to mitigate risks

There is no doubt that the pandemic accelerated growth for several e-commerce FMCG/CPG (FMCG = Fast Moving Consumer Goods; CPG = Consumer Packaged Goods) brands. However, scaling DtC (Direct to consumer) brands online is far more expensive than scaling through supermarkets.

According to Statista, 80% of sales are still happening in store. Whether that is ‘buy online, pick up in store’ or ‘buy in store’. Also, conversion rates in supermarkets range from 20% – 40% vs online conversion rates of 3% on average.

Also, as more established companies and brands enter the DtC & e-commerce space, they push up the cost of customer acquisition due to their deep pockets. According to Statista, the cost per click on Facebook in Q4 2019 was $0.81. In November 2021, this was $1.22. Compare this to supermarkets or convenience stores where significantly more consumers walk by the shelf (an impression) at no incremental cost.

So what do DtC brands need to be aware of when entering the brick & mortar space?

  • Lack of proximity to shoppers & consumers: A key advantage that DtC brands have that has allowed for accelerated initial growth vs brands by large FMCG companies is that the teams behind the DtC brands are closer to their consumers. They leverage the data from their own DtC website to understand shopper behaviour, consumption patterns and preferences, which they use to fuel their supply chain. Also, they get valuable product feedback through reviews on their platform that they leverage to improve their brand.

    Large companies/brands, in contrast, are typically at least one step removed from their consumers as they sell through retailers. So the retailers are usually the ones who get the data on shopper preferences and consumer preferences. This may not always be passed on to the ‘brand owners’.

    When entering the brick & mortar space through supermarkets & convenience stores, DtC brands face the same risk. DtC brands can mitigate this by building a strong community for the brand as this encourages brand loyalty and feedback. Also, this can be mitigated, partially, by maintaining an online presence while also selling through brick & mortar stores to remain close to their consumers and shoppers.
  • Supply chain unpredictability: As mentioned in the previous point, DtC companies are able to leverage the data on their e-commerce portals to forecast sales. However, when selling through 3rd party aggregators (supermarkets, convenience stores and discounters), they are dependent on their customers sharing this data, which is not always common. This makes it difficult to predict sales as they then do this on the basis of historical orders placed by customers. So when they receive unexpectedly large orders, they are at times pressurised into fulfilling customer orders at the cost of going out of stock on their online stores. This may result in alienating loyal consumers who have been buying the brand since launch.

    This can be mitigated by taking a data driven approach to sales. DtC brands should consider making data sharing a key part of the negotiations during the listing process. This can help anticipate spikes in demand from customers that they can be better prepared for.
  • Inability to influence order volumes: As the size of revenues that DtC brands generate at aggregators is a fraction of the revenues that large and well established brands generate, sales teams at DtC brands are less able to influence order decisions made by ordering teams at these aggregators. So in situations when these aggregators should be holding more of the brands in stock at warehouses due to higher expected demand, DtC brands most often are not able to influence order volumes which results in stock outs at stores, losing them sales and market share.

    Conversely, aggregators may order significantly higher volumes than they should, which results in overstocking at their warehouses. While this sounds like a good outcome for DtC companies as they generate better revenues, it puts them at risk of an eventual delist if they do not sell the stock fast enough or, if some or all of the stock expires/is damaged while in the warehouse. This can be lethal for small companies.

    DtC companies should consider hiring seasoned sales people who have established relationships with customers. This may help with influencing order volumes placed by replenishment teams. Alternatively, DtC companies should consider ‘owning’ inventory management at retailers to the extent that a sale is recognised only when the brand is sold to the consumer.

    Given how this may ease working capital for the retailer, they maybe more willing to concede/collaborate on other areas like data.

If you have any questions or would like more information on the above, please leave a comment or contact me on veena@salesbeat.co

Walmart and Procter & Gamble

We referenced this collaboration in a previous blog and received a lot of questions about it. So we decided to dedicate a ‘case study’ to this collaboration.

In the late 1980s Walmart was P & G’s fifth largest customer and Mike Graen had been charged with the responsibility of improving the commercials for Walmart by P & G. He did this through collaboration and by using data and the right systems.

So what were these changes?

P & G decided to place a team at Walmart to work closely with the Walmart teams. They started with placing c. 20 people from different functions at the Walmart HQ. The team had access to inventory levels, store-level sales data, and all the data points from when P&G shipped a product/case to Walmart, to when it was sold to a consumer.

The benefit of sharing information was to improve forecasting and reduce the bullwhip effect (Bullwhip effect – uncertainty in demand grows with information that is available at higher nodes in the supply chain). This created a more efficient supply chain network and improved merchandising at stores. When analysing POS data, a more accurate forecast of demand is generated than when analysing shipment data to retailers.

This ensured that products were on shelf and in the warehouse when shoppers came in to buy it, eliminating overstocking and understocking. It made it easier for P & G to plan their production runs and warehouse stock reducing their costs. This ensured that there were no out of stocks on shelf or in the warehouse and that write offs driven by overstocking were eliminated, increasing revenues for both and reducing costs.

The ‘father’ of the Walmart/P & G partnership, Tom Muccio, said in an interview with Valuecreator “During my time as leader of P&G global customer teams, we always tried to ensure that both sides were living up to the principle of “co-determination”. In other words, no party would take a decision that could harm the other’s position without prior consultation of the partner. A case in point were the notorious “Dear vendor…” letters, which we quickly eliminated, as they did not make sense in a Level 5 relationship anymore. Another principle was to advise the customer on the best product portfolio neutrally and not just to hard-sell our products. As a result, we often ended up advising Walmart on how to deal with other suppliers in the best possible way. Sometimes, this was not beneficial to us but created a massive basis of trust. And lastly, we paid great attention to the principle of equality in our team culture. Irrespective of the hierarchy, all members of the team had the same small offices, and the corner offices were turned into meeting rooms. Such symbolic measures reinforced the teamwork culture and were also in line with the way Walmart’s culture worked.”

So what was the impact of this close collaboration?

Before these changes, the most P & G knew of sales at Walmart, was that a purchase order had come through which needed to be fulfilled. Within 8 months of the new relationship, they were able to improve profitability by $50million and P & G’s sales to Walmart went from $350 million annually to $13 billion at its peak in 2013; $11 billion in 2021.

John Nash, a pioneer in Game Theory captures this collaboration best, ‘The best for the group comes when everyone in the group does what’s best for himself (applies to all genders & entities) AND the group.’

Given the obvious benefits of collaboration and sharing data, it is a surprise that more companies do not have collaborative relationships with their retailers.

 

Convenience stores – a key battleground for brands

15 years ago, the key battleground for brands was discounters. Aldi, Lidl and Iceland were growing rapidly and FMCG companies were looking at how they can gain share in these channels. Convenience was an important channel, but the entire channel usually got the same level of attention as a large supermarket chain did.

According to IRI, the convenience channel in the US grew by 7.7% in Q3, 2021. According to NielsenIQ, in the UK, the channel grew by 3.3% in the 4 weeks to 11 September 2021 vs supermarkets, which grew by 0.6% during the same period.

In mid to late 2020 and all of 2021, convenience stores were the go to channel for shoppers for regular ‘top-up’ shopping. This was because of two key reasons:

  1. While large supermarkets were suffering from empty shelves and stock-outs, most convenience stores, especially the independents, were well stocked.
  2. The stores were small enough that the consumer could come in, shop and leave the store in a fraction of the time – an important consideration during the pandemic. Speed of service was the key differentiator for convenience stores vs traditional retail during this time.

Convenience stores have a history of providing local products to the communities they serve. These retailers typically have stores that are smaller in footprint, thereby providing grab-and-go solutions to their customer base.

Typically each store owner or manager places orders with suppliers or wholesalers, and as they work closely with/also help with the tilling, they know what consumers in their neighbourhood are looking for. This meant that, in 2021, convenience stores had the right levels of stock of the right brands and products, while supermarkets had run out of stock as they were expecting sales similar to previous year sales and convenience stores had adapted to the way people shopped and what they shopped for post 2020.

So what are some of the watch outs for sales people and how can they grow sales at convenience stores?

  1. Partner with wholesalers and distributors for sales – Instead of selling to wholesalers who then sell into convenience stores, consider partnerships with your wholesaler for direct sales into smaller stores. Then treat all the convenience stores in one postcode or region the same as one customer. Visit them often to take orders and liaise with your wholesaler/distributor to ensure the order is delivered.
  2. Be prepared to switch up SKUs sold at the convenience store you sell to – As the store owner is closer to your consumers, they are more likely to change the range they sell frequently to provide their shoppers with what they are looking for.
  3. Develop relationships with the stores that helps you sell directly, no matter what technology they adopt – As the format grows, the stores are likely to adopt technology and more centralised buying (wherever one company owns the stores) to keep costs low. This is likely to result in store owners/managers not understanding their consumers as well as they used to. And may order the wrong quantities or the wrong products. Sales people who manage convenience stores should consider working closely with the store managers and encourage orders on a store level rather than at a centralised warehouse level/buying group level.
  4. Help keep prices competitive – In 2022, with rising inflation and costs, convenience stores will find it challenging to maintain marketshare as they would need to pass on at least part of the cost increases. Work with store owners and managers to keep in-store prices competitive or comparable vs supermarkets.
  5. Invest your time to understand shoppers and consumers around these stores better – Spend time at these stores and in their neighbourhoods to understand the people who shop there, what they buy, when they shop and how they live. Work closely with the store owners on re-order volumes, optimal in-store stock levels and promotions ideal for each store.

By working closely with convenience stores, your brand and your sales grows at par with the growth of the channel. Then it is up to the marketing & shopper marketing team to ensure you gain share from competition and grow ahead of the growth of the channel.

Pantene/Walgreens collaboration to increase sales of Pantene SKUs

In 2013, more than 300 new haircare products were introduced in the U.S. and Pantene was struggling to stay relevant. Consumers were quick to switch to competition and the brand’s key retail partner, Walgreens, was losing confidence. Pantene needed to turn around brand performance at Walgreens to retain distribution, and increase penetration and retention without needed to develop new products under the Pantene brand.

Pantene’s target consumers were women in their late 30s to mid 40s who ‘enjoyed the confidence’ when they looked good. Pantene knew that one of the triggers for shopping for hair care is a ‘bad hair day’ caused by changes in humidity.

As neither women nor Pantene could influence weather, Pantene collaborated with Walgreens to provide daily ‘haircasts’ for women, telling them what to expect of their hair everyday, which Pantene product could help and which nearest Walgreens had it in stock. The daily haircasts were based on forecast humidity levels every day. Pantene and Walgreens used a multi channel approach for this campaign, leveraging social media, digital, mobile and in-store marketing.

Just by tracking humidity levels and making relevant recommendations to manage hair during days with high/medium/low humidity and ensuring that the closest Walgreens always had the relevant products in stock, Pantene was able to successfully out-compete the 300 other new brands and products that had been taking share from Pantene and achieved:

  • a 7% decline in sales vs prior year to a 24% increase in sales vs prior year
  • 10% uplift in sales vs plan for the year

In addition, Walgreens experienced an additional 4% uplift in sales for their haircare category as a whole.

If you are interested in learning more, Mobile Marketing Association has published a case study on this.

Diversity, Equity & Inclusion – the topic du jour

Much has been written about Diversity & Inclusion in the FMCG sector. It has to be said that the FMCG sector is possibly one of the more diverse sectors I’ve seen to date. However, this varies significantly from one region to region and from company to company. Today’s blog explores what some of the best in class companies, for diversity, do differently.

Senior and middle management who are advocates of diversity

It is not enough that companies have senior management who are supportive of diversity in the workplace. Middle management also need to be advocates of this. At the end of the day, middle management are the senior management of tomorrow. Also, middle management make the active hiring decisions of today.

Colour/gender blind hiring practices

Companies should encourage applicants to apply with CVs that do not mention names or gender details and with no photographs. While it is common practice in most countries to not note gender in CVs and to not put photographs in, it is equally common practice to look up applicants on LinkedIn. So more companies should consider asking candidates to apply without names by allocating serial codes to applicants. Companies should consider communicating through an app/platform that shields the applicants’ email (which can give clues to their name).

A workplace welcoming of flexible working

I have been lucky to previously work in companies that were supportive of flexible and remote working. While certain managers were more supportive of this than others, I learned that working from home does not need to impact the quality of output and sometimes, it helps generate better work in less time than expected! So companies should not shy away from implementing flexible working.

It has been widely noted that flexible working promotes diversity, equity and inclusion in the workplace. “Workplace flexibility can be mutually beneficial to an organization and its personnel, and is recognized to help achieve gender parity,” said Fatou Haidara, Managing Director of the UNIDO (United Nations Industrial Development Organisation) Directorate of Corporate Management and Operations.

Flexible working does not have to mean working from home permanently. In fact, that can be a deterrent too in case their home life is chaotic. Flexible working simply means allowing your employees to work from home when they need to and from an office during other times. Also, it may include different hours. It maybe that some people work 10 hours on 4 days and just do a 4 day work week, some do the regular 8 hour, 5 day work week and others, somewhere in between the two.

I keep hearing that it is difficult to find female applicants for certain roles, especially when it comes to technology and sales. But I’ve never had a problem finding great female talent for technology or sales roles in any of my previous roles or at salesBeat.

The key is to signal how open and supportive your team or company is to people from different backgrounds or to neuro diverse people.