Twists in the tale

Life can be sim­pli­fied for both sides if ven­dors and re­tail­ers re­visit their terms of trade.

Progressive Grocer (India) - - Memory Lane -

The foods cat­e­gory within FMCG has been the cen­tre of a lot of ac­tion in re­cent times. The kind of in­no­va­tion seen in pack­ag­ing (Maggi), tastes (in snacks), and even com­plete prod­uct cat­e­gories has been mind-bog­gling.

What is heart­en­ing is that both the cus­tomer and the con­sumer have taken to most of th­ese in the most pos­i­tive ways. How­ever, along with the op­por­tu­nity comes a cer­tain set of chal­lenges. Let us take a look at some of them:

Di­verse tastes – the ex­is­tence of var­ied eat­ing habits and pref­er­ences in In­dia makes it a chal­leng­ing but lu­cra­tive ter­rain for ven­dors and re­tail­ers alike. While con­sump­tion of milk and milk based prod­ucts is ex­tremely high in north­ern states, it is rice which takes the cake in south­ern parts of the coun­try. Such vari­a­tions call for re­tail­ers to be ex­tremely nim­ble-footed and alive to the lo­cal de­mands. At the end of the day, for a cus­tomer, a na­tional re­tailer is only as good as the range and avail­abil­ity it of­fers at a daily next-door.

Pref­er­ence for home-cooked food – this one can be a night­mare for “ready-to-eat” food mak­ers!! The In­dian cus­tomer, as op­posed to his coun­ter­part from more de­vel­oped na­tions, still prefers home-cooked fresh food and avoids ready to eat and pack­aged of­fer­ings. Over the years, di­etary pat­terns and poor elec­tric­ity sup­ply have re­sulted in th­ese pref­er­ences. Fur­ther, there is also re­sis­tance to pay­ing a mon­e­tary pre­mium for the pack­ag­ing and brand.

Low ac­cep­tance of pri­vate la­bels – even though pri­vate la­bels have been around for 4-5 years, they are still an evolv­ing con­cept. While the po­ten­tial for prof­its to re­tail­ers is huge, strong loy­al­ties in foods cat­e­gory might act as a de­ter­rent. Pos­si­ble so­lu­tion for re­tail­ers: a) For each cat­e­gory, be­gin with a sin­gle fac­ing in the cat­e­gory shelves and keep in­creas­ing the same over ev­ery three months. b) Re­tain eye-level shelves for pri­vate la­bels The chances of suc­cess in pri­vate la­bels are higher in case of non-food prod­ucts where the cus­tomer might be will­ing to com­pro­mise the qual­ity-an­gle for a bet­ter price, pack­ag­ing or pro­mo­tion. Re­tail­ers of­ten back their pri­vate la­bel of­fer­ings in foods with ag­gres­sive pro­mo­tions like a 2+1 on cheese. How­ever, here again there is lim­i­ta­tion on how much of a food prod­uct like corn­flakes, cheese, etc. can be stored in a house­hold with­out com­pro­mis­ing the fresh­ness.

In­creas­ing im­por­tance of prod­uct knowl­edge – the foods cat­e­gory has been at the fore­front of in­no­va­tion, which has led to emer­gence of new con­cepts in pack­ag­ing and la­belling.this has fur­ther led to the need for store staff to be on top of the fea­tures of prod­ucts placed un­der his purview. Lack of ad­e­quate knowl­edge can lead to dis­sat­is­fied cus­tomers – a pure vege­tar­ian might feel of­fended if handed a chicken in­stant noo­dles pack (even if by mis­take!).

Strong loy­al­ties – as com­pared to non-foods, sub-cat­e­gories within the foods cat­e­gory are

In­creas­ing im­por­tance of prod­uct knowl­edge – the foods cat­e­gory has been at the fore­front of in­no­va­tion, which has led to emer­gence of new con­cepts in pack­ag­ing and la­belling.

char­ac­terised by ex­tremely strong loy­al­ties and hence, new en­trants face trial re­sis­tance. Two clas­sic ex­am­ples are tea and baby food. Loy­al­ties to tea are so strong that cus­tomers would not even want to go for “in-store sam­pling” as it might spoil their taste. Sim­i­larly, in the case of baby foods, one would stick to the tried and trusted of­fer­ings in­stead of ex­per­i­ment­ing with some of the new launches or the ex­ist­ing “also-rans” in the mar­ket.

Cat­e­gories where cus­tomers are will­ing to ex­per­i­ment are more im­pulse-driven, like choco­lates, con­fec­tionery, bis­cuits and chips/snacks. The sheer va­ri­ety and flavours at­tracts cus­tomers of all ages, espe­cially kids.

A 2+1 or a ‘Rs 10 off’ might work won­ders at at­tract­ing new cus­tomers to a newly-launched toi­let cleaner, but not so much in the case of but­ter.

Shelf life – all food prod­ucts carry a “best-be­fore” or ex­piry date. The time pe­riod from man­u­fac­tur­ing date to the ex­piry date sig­ni­fies the shelf life of each prod­uct. One of the key chal­lenges for food re­tail­ers is to en­sure fresh­est pos­si­ble stocks on the shelves and hence, each chain has a re­main­ing-shelf-life norm for food prod­ucts, which ranges from 50 to 80 per­cent fresh­ness. On the flip­side, it also af­fects fill rates at times, as fresh stocks of some of the SKUS that are pop­u­lar in mod­ern trade may not be read­ily avail­able as they are not pop­u­lar in gen­eral trade. Pos­si­ble so­lu­tions that can be looked at in­clude: a) Re­tail­ers ac­cept­ing di­rect store de­liv­er­ies

(espe­cially for hy­per/su­per for­mats) b) Ven­dors keep­ing sep­a­rate stocks for mod­ern trade c) Adopt­ing a flow-through sys­tem of in­ven­tory man­age­ment, which means stocks are not stored at the re­tailer’s ware­house and in­stead, dis­patched to the stores in­stantly Fur­ther, it makes life eas­ier for both ven­dors and re­tail­ers if the clause of shelf life norm is in­cor­po­rated in the terms-of-trade or agree­ment.

Low fill rates – it has been ob­served in at least two mid-sized re­tail chains that the fill rates of­fered by food ven­dors are sig­nif­i­cantly lower as com­pared to non-foods ven­dors. We have al­ready cov­ered the case of shelf life norms, which is one of the im­por­tant rea­sons for low fill rates, ear­lier.

Pil­fer­age – food prod­ucts such as choco­lates, con­fec­tionery, in­stant pop­corn, etc., are prone to pil­fer­age at cash coun­ters. This is a world­wide phe­nom­e­non and there is pre­cious lit­tle that can be done here, be­sides hav­ing ef­fec­tive dis­play units.

De­spite th­ese chal­lenges, the foods cat­e­gory re­mains ex­cit­ing enough to lead the next phase of growth in or­gan­ised re­tail.

Cat­e­gories where cus­tomers are will­ing to ex­per­i­ment are more im­pulsedriven, like choco­lates, con­fec­tionery, bis­cuits and chips/ snacks. The sheer va­ri­ety and flavours at­tracts cus­tomers of all ages, espe­cially kids.

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