What should the sector expect over 2021 with lockdowns easing?

This blog is about how lockdown easing is expected to impact sales in different sectors.

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

The FMCG industry & data

The fast moving consumer goods industry needs data driven decision making in every function on a daily basis to ensure a sustainable advantage vs competition. However, this industry is very sporadic in its use of data.

Historical internal data is the driving force in the FMCG industry. This industry and external data have a contentious relationship. While they use (external) data driven insights to craft marketing & category strategies and to develop new products and brands, their use for (external) data in day to day operations and in sales has been less than optimal.

It is the complex nature of how external data impacts the business, which makes it hard to adopt on a day to day basis in the industry. Today, let us look at data driven insights for supply chain and production.

This process happens primarily through regular risk management meetings/updates by the supply/production planning team. These updates/meetings happen on a periodic basis and are reviewed then for impact on the business and for any action that needs to be taken.

However, we are living the perfect storm – a time when climate change, pandemics, access to information and easy cross border travel are all influencing not just what consumers want but what goes into making what consumers want and how they buy/access it.

It is key, now more than ever, that companies in this industry use external data, that monitors supply chain risks, regulatory compliance and sustainable alternatives to current sources, in everyday decisions much like tech companies do, so they can achieve the same agility in business that the tech industry does and the FMCG industry aspires to.

Fast moving consumer goods/consumer packaged goods, Covid 19 and lockdowns

There are several conflicting opinions on which consumer packaged goods (CPG) brands will emerge stronger after this pandemic – those that are start-ups or those backed by large companies. While direct to consumer (DTC) brands are thriving, large brands, especially those in the personal care, home care and hygiene sector, are indeed seeing a spike in demand due to their credibility. This has led to empty shelves at supermarkets, where some of these brands have run out of stock. 

As most large companies rely on just in time manufacturing (or as close to it as possible) to keep their working capital efficient, they are currently working on alternative plans to source and manufacture their products. And this will delay them, more than this will delay start-ups.

While start-ups are also facing the same problem, they do not need to adhere to the same processes for approval of new suppliers as do the large corporates behind large brands. This pandemic will be a true test for large CPG companies who have been focussing on driving agility in their organisations.

So, on the supply side, start-ups are likely to have their suppliers lined up vs the large companies.

On the sales side, CPG companies seem to have furloughed most of their sales teams during the epidemic, regardless of whether they are start-ups or well-established large companies. However, we have noted that these companies have retained a skeletal sales team, usually senior commercial/sales directors.

At start-ups, these senior salespeople have as strong a relationship with buyers as do their teams. However, at large companies, senior directors have evolved into more people managers than active salespeople. This, combined with a start-up’s natural agility, has resulted in most start-ups maintaining their relationships with buyers at supermarkets while remaining relevant to consumers through social media. 

Large companies, however, have less contact with buyers and their social media strategy has not changed significantly from before lockdowns.

Once lockdown lifts, there will be a race to the finish line with brands in fierce competition with each other to make their annual targets, or finish as close to annual targets as possible. It will be critical to ensure that all orders are captured and that there are no disruptions in supply chain. Any and all feedback on brands from buyers will need to be acted on according to consumer priority and communication between sales, marketing, supply and finance will be key. 

You may be thinking that it sounds like large companies will need to start operating like start-ups and you’d be right in thinking that!

Much like the brands that won after wartime (the ones that remained relevant and available to consumers during those times), the brands that win after lockdowns end will be those that maintain a presence at stores, maintain their relationships with buyers, and maintain or even increase their presence on social media. 

Top reasons why Food & beverage start-ups and NPDs fail (continued)

So last week we spoke about what could go wrong with new product launches and we are continuing that theme this week. You’d be surprised how many things can trip you up close to launch date, after launch or even well after launch.

  1. Bad customer experiences: Your customer has been very specific about the configuration of the cases and pallets of your brand. But unfortunately, your manufacturer has not heeded instructions and delivered your first order the way they have always done things, which is quite at odds with your customer requirements. They do this a second time. They get this sorted out the third time, but by then your customer has made a note of this. The next time something goes wrong, they delist you. 
  1. Bad consumer experiences: Your first two weeks of launch have gone great. Your brand has been flying off the shelves. You know the third week may not be great, as your first two weeks have gone splendidly. Your fourth week should go well. But it doesn’t. Your sales drops. Your fifth week sees almost no sales and in the sixth week, the category manager tells you that unless your sales rebound, they are considering delisting your brand in favour of a competitors. So what went wrong? Your brand obviously fills a gap, but consumers just did not come back to buy more. It became difficult to drive trial too. Did you look at whether you were getting bad word of mouth? Did you get feedback from any of your consumers from the first two week? Anything can go viral these days and all you need is one or two people who dislike the product to start a social media campaign. Maybe someone got a bad batch or just did not like the taste.
  1. Weather and seasonality: ‘The weather, really?’ you are thinking. Yes, the weather and the season play a very important role in the success of seasonal or weather dependent foods. For example, the best time to launch an ice-cream or frozen dessert brand is during the summer, when your consumers will be open to trying new brands and products. During winter, if a consumer is buying ice cream, he/she already has a favourite and she/he’ll go for that brand/flavour. The same goes for beer in winter and mulled wine, mince pies and winter soups in wummer. Any of you who launched your ice cream brand during unseasonably cold summers will know what I am talking about!

Top reasons why Food & beverage start-ups and NPDs fail

So the stars have aligned and you are ready to launch that new food brand that you’ve been developing for the last 6 months. You have the funding, you have found the right manufacturer with the right licenses and you have a national listing. What could possibly go wrong?

Congratulations, you have a national listing!
  1. Consumers don’t want it: Now you are thinking about the sampling sessions you/your agency held when everyone loved your product and brand. Well, it turns out that unless the product is that bad, your sample group will tell you what you want to hear. After all, you are paying them to be part of the group and they feel obligated to give you the answers you want to hear. Consider speaking to random people at your corner grocers outside of their stores to get honest feedback about your product. Or speak to your kids, they’ll be honest!
  1. Cultural nuances: Brand names, packaging and the right ingredients are so critical to the success of your food product. They can make or break your brand if not done right. Did you get enough feedback from your target consumers in the target market? Did you check whether the ingredients raise any red flags for your consumer group? What about the brand name? Does your brand name mean anything different to your target consumers than to you? More on this subject in a later post.
  1. Pricing is all wrong for the customer segment: Your brand/product is targeting a very specific segment of consumers. It could either be too expensive for the consumer to buy or too cheap for the target segment. Keep in mind that for certain products, price also acts as a signal for quality. So when you work up the pricing, take into account what your consumers should be paying for it. Do your homework and look into what competition is doing and what similar products or even complementary products are priced at for those consumer segments. Then work back the numbers to your selling price to the customer, taking into account retailer/customer margin, warehousing costs, logistics costs and any additional costs the retailer/customer needs to bear. 

Stay tuned for more next week!