Demand planning vs sales intelligence

This blog is about why sales intelligence and demand planning outputs are different from each other. They add value to two very different stakeholder groups.

If you ever do a search/have done a search on Google for sales intelligence for FMCG companies, you’ll find several academic articles on how AI can benefit sales teams in FMCG companies, along with links to several companies that provide AI driven sales intelligence to any other sector than FMCG.

And if you search for demand planning solutions there are an abundance of them, those that use AI and include seasonality, holidays etc to provide forecasts. Ironically demand planning is not used by sales teams. In fact, one of its input factors is a sales forecast from the sales team!

So who uses Demand planning software?

The supply or production planning teams typically use demand planning software to ensure there is enough stock of the final product produced, so that they can fulfil orders and meet demand. Typically, the annual sales plan drawn up by the sales team is one of the inputs into the demand planning software/application. According to an article by Gartner (Aug 2019),  demand planning is typically used by the Sales & Operations Planning team (S & OP team) and focuses on a tactical horizon from 3-24 months.

Demand planning and how it feeds into the S & OP process

The primary goal of demand planning is to ensure availability of stock on the supply side. The process results in a plan that feeds into the Sales & Operations Planning meeting that agrees on the stock that needs to be maintained at a company warehouse level to be able to meet demand for the period being planned.

Now here is why demand planning is not the same as sales intelligence. Have you ever planned your grocery list 3 months in advance? Also, have you ever known a supply team to influence a buyer’s decisions?

Sales intelligence in FMCG

Even a few years ago, sales intelligence in FMCG would have been complex and time taking. Insights teams would look at similar information as marketers do when considering innovations or ad campaigns. However, due to the sheer volume of information, and the time it takes to process the information and gain insights, this happens only for new product development or for market entry initiatives.

Due to recent advances in AI, it is now possible to build applications that process the same quantum of information on a daily basis to provide valuable insights to sales teams, helping them take advantage of opportunities that were never identified by the strategy team or by the demand planning application.

Sales intelligence cycle

Sales intelligence apps are used by sales teams who actively sell into customers.

By empowering sales teams with information on what consumers want and are likely to buy in the next 4-6 weeks or even days, sales teams can ensure 100% in-store availability of the brands they sell. Providing timely sales intelligence helps sales teams take advantage of opportunistic upsides that are in line with long term strategy, leading to increased revenues of up to 40%.

To learn more about FMCG sales intelligence software/platforms, email me on veena@salesbeat.co

Reducing stock outs of personal care & hygiene brands in store

Last week, we focussed on how to reduce stock outs of food & beverage brands in stores. This week we are focussing on personal care & home care brands.

You may think that personal care & home care brands are immune to these fluctuations as consumer buying behaviour is a result of frequency of use and this remains more or less consistent. However as we saw in 2020, consistency & predictability are of the past. Climate change and the pandemic have forced us to behave in ways we have never imagined. These changes in behaviours and their unpredictability have caused brands to go out of stock in stores as companies and sales people rely on out dated information to inform them of consumer demand.

So how do you go about understanding optimal orders for personal care & hygiene brands? For a start, lets look at some of the key drivers of sales for the different categories:

Skin care brands

If you are a salesperson working for a company selling skin care brands, frequency of use is key to understanding demand. Frequency of use is driven by habit, nature of work, if they are office based, home based or site based etc. Now look at how covid/lockdowns have impacted this. How are people interacting with these brands/products at home and how are they expected to interact with offices/restaurants opening up? How have closures of spas impacted sales of skin care products and brands?

Hair care and colour

This shelf is deceptive. While the shelves look relatively full, several colours have gone out of stock. And when it comes to hair colour, consumers are usually reluctant to switch brands, hair types or colour!

Here is one time when historical sales is a good starting point. If you can get hold of store level depletions data across all colours and brands in store, you can get an understanding of the rough split of past demand for various colours. Now look at the drivers – how your target consumer uses your brand and the associated occasions – at home, work, social etc, and then apply how these occasions have changed during current times and its impact on sales.

Personal hygiene

Personal hygiene brands have been impacted by covid & by lockdowns. We separate the two as both these elements, while linked, drive different behaviours in consumers. While the pandemic itself has driven an increased consciousness of personal hygiene and keeping immediate surroundings clean/disinfected, lockdowns have led to a more relaxed stance toward personal hygiene at home.

While previously, the average consumer would have taken a shower at work after a run, the very same consumer now doesn’t think twice about changing into work clothes to attend a meeting immediately after the run and shower only at the end of his/her work day. Think of how else covid and lockdowns have impacted consumer behaviour directly associated with your brand.

Vitamins and supplements

Here’s another category that has been directly impacted by the pandemic. Consumers are more concerned about their immunity now and this has in turn benefitted the vitamins and supplements category. To understand the increase in demand for specific vitamins/supplements within this space, consider what the consumer uses the vitamin/supplement for, consumption occasion, consumer age etc

Diapers/Nappies

Here’s another category like hair colour where consumers are unlikely to switch brands and they definitely will not switch sizes! But you can get an understanding of demand by looking at number of births for a start and then at whether day care/play-schools are open or closed.

Now that you know the key drivers and you have your consumer persona from the marketing team, put them together to get an understanding of consumer demand and depletions in store. And before you ask me, these are real photographs taken just last weekend.

If you’d like to discuss any of the drivers of categories in more detail, feel free to 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

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.

The rise and rise of the values/purpose driven consumer

This post talks about the importance of using data to create brands that consumers want. The post also includes a video summarising the content.

For more details, read on!

A basic tenet of branding is that consumers will not buy brands that do not align with their values. Millennials and Gen Z have given new meaning to this.

A study by IBM found that 40% of all consumers, are purpose driven consumers. These consumers have a global presence with the majority, in Europe, South East Asia and Latin America. To this group, the values represented by brands drive their purchasing decision and they are more willing to change their habits to reduce environmental impact than are value (not to be confused with values) driven and product driven consumers.

Then there is the brand driven consumer (majority in India, parts of the Middle East & Latin America) which makes up 13% of all consumers globally. This group stands out in that while the brand is key, this group is even more willing to change habits to ensure sustainability and reduce environmental impact than are values driven consumers. So 53% of consumers are sustainability & values focussed than 10 years ago when value & product driven brands were predominant.

Leading FMCG brands that were also Certified B-Corp, grew by 21% on average in 2017 compared to a national average of 3% across their respective sectors. (B Corp 2018)

It is clear that to drive growth and gain share, FMCG companies need to adopt AND live values that reflect those of their target consumers.

This makes data paramount for FMCG brands. Data on what consumers want, on consumer values, on the channels they frequent and on the boundaries of operation. Brands need to be developed in line with what customers want, like tech companies do with users, rather than how FMCG companies of old developed brands and then told their customers that the brands were what they wanted.