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FMCG companies need to rationalize their product assortments as Covid pandemic hits consumer sentiment

Meenakshi Verma Ambwani New Delhi | Updated on April 27, 2021

Speed of re-calibration of business strategy will be fundamental for consumer products companies in the changed set-up.   -  REUTERS

Only 10 per cent out of an average of 1,059 brands that are launched monthly in India get sufficient distribution, as per the NielsenIQ report

FMCG companies will need to reassess and rationalize their product assortments to reduce supply chain, raw materials and packaging costs, at a time when pandemic-hit consumers are streamlining their budgets, according to the latest report released by NielsenIQ

The report stated that an average of 1,059 brands are launched monthly in India but only 10 per cent of these products get sufficient distribution. “In India, a whopping 77 per cent of stock keeping units (SKUs) in the Carbonated Soft Drinks category contribute to less than 2 per cent of overall category sales - pointing to the glut in non-performing products and variants that exist within just this one category alone,” the NielsenIQ report pointed out.

Similar trends were witnessed in categories such as sanitary napkins, chocolates, shampoos, soaps and biscuits as FMCG manufacturers struggle to manage their supply chains. ”Looking at the most under-performing categories in emerging and developing markets, on average, 75 per cent of SKUs contribute to less than 2 per cent of category sales.,” the report added.

“Over the years, there has been a proliferation of brands, products, and SKUs in the marketplace as manufacturers compete to satiate consumers’ appetite for new variations, products and experiences. Finding and maintaining an optimal assortment has always been a challenge. The Covid-19 pandemic, as well as intensifying competition, have elevated this test to a new level,” said Didem Sekerel Erdogan, Senior Vice President and Analytics Leader, Asia Pacific and Eastern Europe, Middle East and Africa (APAC & EEMEA), NielsenIQ.

Rationalisation of SKUs becomes even more important as pandemic-hit shoppers are becoming discerning about their spending and are increasingly favouring smaller traditional store formats over large-format modern trade stores. With restrictions back in several cities, consumers are also preferring hyper-local players, e-commerce, as well as tele-calling the local retailers for home delivery.

Vijay Udasi, Head of Analytics, NielsenIQ India and Indonesia says: “The challenge for manufacturers and retailers is to ensure that the products and brands in their portfolio cater to consumers at all ends of the economic spectrum, while also remaining cost-efficient and eliminating wastage.”

“By correctly identifying which SKUs to retire and keep, not only can manufacturers focus production and supply chain efforts on incremental brands and SKUs, but they can also eliminate waste, increase profitability and reinvest profits into new product development, which will ultimately capture new shoppers,” he added.

Published on April 26, 2021

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