Amid coronavirus crisis FMCG companies forced to shed slow-moving products

Topics Coronavirus | Health crisis | FMCG

75-77 per cent of stock-keeping units across categories, says Nielsen, contribute less than 2 per cent to sales, with the trend visible in segments such as soft drinks, biscuits, and chocolates
The Covid-19 pandemic is forcing fast-moving consumer goods (FMCG) companies to discard underperforming products even more, as consumers streamline their budgets, market researcher NielsenIQ said in a new report on Monday.


The study, which analysed the domestic FMCG market, among other countries, said that of the 1,059 brands launched monthly in India, only 10 per cent witness sufficient visibility and distribution.


So, retailers prioritise shelf space for high-performing brands and packs.


Almost 75-77 per cent of stock-keeping units (SKUs) across categories, said Nielsen, contribute less than two per cent of sales, with the trend visible in segments such as soft drinks, biscuits, chocolates to sanitary napkins, shampoos and toilet soaps.


“There has been a proliferation of brands over the years as manufacturers compete to launch new products. Finding and maintaining an optimal assortment has always been a challenge. But the pandemic has elevated this test to a new level,” said Didem Sekerel Erdogan, senior vice-president and analytics leader, Asia Pacific, Eastern Europe, Middle East and Africa, NielsenIQ.


Companies say that the need for an optimum assortment has also increased in the last one year owing to rapidly changing demand trends, triggered by the pandemic.


"The focus on essentials, including hygiene and health care products, has grown in the last one year. This is pushing companies to look at these categories closely and prioritise those products that have strong demand. For food companies, the strategy is to keep the attention on popular brands," Sumit Malhotra, director, Bajaj Consumer Care, said.


Companies such as Parle Products, Britannia and Nestle, for instance, have channelised their attention to products that are in high demand such as Parle-G biscuits, Good Day cookies and Maggi noodles, respectively. The trend has been especially strong when lockdown restrictions have been severe across states like Maharashtra, which has increased curbs in the last few weeks.


On Monday, the Karnataka government said that it would be imposing a 14-day closedown. States such as Gujarat, Madhya Pradesh, Uttar Pradesh, Punjab and Chhattisgarh have already put in place local-level curbs to bring down their caseloads.


Varun Berry, managing director, Britannia, said the company has stocked its distributors adequately, implemented a new dealer management system and is ensuring timely product availability to consumers and trade.


"Moreover, the brand mix is being prioritised to meet distinct requirements across regions in the country, backed by appropriate inventory management at our depots and factories," he said.


Nielsen said shedding underperforming packs and brands has its advantages. Distribution, packaging and supply-chain costs, for instance, can be reduced. The money saved can be ploughed back into new product development.


"By correctly identifying which SKUs to retire and keep, not only can manufacturers focus on production and supply chain efforts on incremental brands, but they can also eliminate waste, increase profitability and reinvest profits into new product development. This is a win-win for all," said Vijay Udasi, head of analytics, NielsenIQ India and Indonesia.

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