Tuesday, July 11, 2006

Tracking Freshness ... a Concern

Have you even checked the expiry date of the product you consume everyday. Most of you dont do ... I must bet. But is it the responsibility of consumers?

Now think of a scenario - "Total removal of expired stocks from retailers by all the companies". Then the consumers will never bother to check the expiry dates. Now the next question arise is that whether the companies track the outdated stocks. I have personally seen many expired products in the markets, which the retailer keep selling. This is unethical at the part of both retailers and more on the organization.

There should ideally be a supervisor to track the outlets in different markets for the freshness. Now lets look at how this problem arise. The main reason is the inefficient estimate of the stock at the wholesalers and the retailer level. So in a utopian state of perfect estimates, there wont be any damage. But that will always happen. So the companies role should be to come up right estimates if not perfect, which will increase the fressness level of products.

Its not only business ... but something else as well !!

Monday, July 10, 2006

Market Research/ data Analytics in FMCG

Many of you reading this blog may have read the first few chapters of Kotler - Marketing Management, mentioning the importance of need for the consumer. There are mainly two types of needs:
  1. Unfulfilled Needs
  2. Unidentified Needs

Now take a snacks business where players like Haldiram, Frito-Lays and many other local brands are present. Lets Analyze. Are they able to satisfy the needs of the consumer. Remember one thing guys - Till this materialistic world exist, the needs will never be fulfilled. So marketers need to innovate and do lots of data crunching to identify NEEDS.

Lets take the example of Kurkure. They did a market research where they got the insight that people want something extra from just Kurkure. They must have analyzed the eating habits of consumers and found that they like eating with some onions, ketchup/ lemon or something else which add something new. Also that indian consumers like chats, rajcachoris and other chatka-bhatka stuff. So Kurkure invented - "KURKURE SHAKE"

But sometimes even the day-to-day data in an organization can give wonderful insights. On the basis of data, one can get general consumer insights - how their consumer behavior is changing. There can be some switching happening within the brand portfolio of an organization with some changes either in price points, value propositions etc. Lets take the example of MARUTI - 800 and Alto. The data clearly show that after the lauch of Alto, the sales of 800 has dropped. The reasons are:

  1. AC is more effective
  2. Change from the normal routine
  3. The value for an extra charge of money is more
  4. Imagery created via different advertisements

Now coming to FMCG example - there is GBytes of data from the bottom most level to the country level. You have data points at the retailer and the wholesaler level. HLL can easily analyze the performance of Liril vs Lux by effeciently analyzing the data. But what is happening is that Indian FMCG companies are not upto the mark in analyze this google of data.

I have one recommendation for every fmcg company to have a dedicated team in every branch to work on data analytics and come up with implementable insights to fulfill the NEEDS.

May the needs get fulfilled !!

Saturday, July 08, 2006

Merchandising ... Mantra to increase visibility

Just remember the last time you visited a Mall, nearby Grocery outlet and local Convenience shops (Panwaris). Some products catches the eye of consumers - as they are in the vicinity of eye contact and others in the nook which are never observed.

Lets take different situations where merchandizing will increase the visibilty and then the Brand Salience.

  1. Brands near billing counter: People who go to Big Bazaar must have noticed that Lays/ Bytes Packets are kept near the billing counter before they have finalized the other brands. Now, its not only display but the schemes on the Brands - 1 Lays Rs. 20 packet with buy of 3 Packs of Lays. It comes out to be Rs. 15 packet. Most of the consumers will put 4 of Lays in their basket.
  2. Brands in one product categories: Lets take the example of Biscuits in Big Bazaar again. There is different height for different brands on the rack. Kids prefer Sunfeast Cream biscuits - which make ITC to place their cream variant a little lower (around 3 to 4 feet) and Seet N Salt a little higher (5 to 5.5 feet). But every brand cannot command a position on the shelf or a place in general in a Mall or any outlet per se. It all depends on the Relationship and financial capacity of the respective company. Britannia may have a higher say than PriyaGold biscuits. But once you get the right area for your brand you are all set for higher visibilty and definately higher topline.
  3. Frontal Attack: Just think of a situation - A consumer entering a mall and the first thing which he observe is a good looking retail display - a stacking unit to keep cigarettes. Here smokers will get an opportunity to buy ITC cigarettes brands and at the same time it will reinforce the image of ITCs Brands. Other big international player - Malbaro has also set up these displays in different malls.
  4. Company Area: Big FMCG companies like P&G, ITC, Nestle who have the financial muscle take the whole area in a strategic location inside a mall to display all the Brands. Just think of a space where Aashirwad Aata & Namak, Sunfeast Biscuits and Mangaldeep Agarbattis are kept. People loyal to ITC products will directly go to that area and buy.

There can be many more creative use of merchandizing to increase the visibility.

Thursday, July 06, 2006

ROLE of IT in FMCG Organization

Just think of a situation: "Delivery of right stock to wholesaler/ distributor once/ twice a week"

Lets not go into National level delivery and try our hands with State first. Lets take Uttar Pradesh with number of Wholesalers/ Distributors (WDs)

We all know that India market in general is heterogenous and also the states. Even a city like Lucknow will have diverse people with different disposable incomes, lifestyles etc. Lets divide into Lucknow city into different small markets. Some market will smoke Wills Classic and others are extremely loyal to CAPSTON.

So its not toy handling to first of all estimate the demand for different regions. Lets assume even if you the right estimates for all markets for the next month (which actually is idealistic), how will you decide how much to deliver to different WDs every next few days. Lets go to some basics:

1. WD has a constraint of stock capacity which make him impossible to stock for the whole month, also it may lead to expiry of the products.
2. WD dont have the financial capacity to buy stock for a month, which make him appropriate to stock for few days.

SO there are huge calcuations required to come up with a DELIVERY SCHEDULE for a particular month. Here comes the ROLE OF IT - Information Technology. ITC has done it right by implementing SAP R/3. Let me mention few of its benefits:
  1. Provide real time Stock on Hand
  2. Brand wise pipeline is maintained
  3. Analyze the data to get the trends in the sales and other variables

Now think of a situation 5 years back when there was no IT and all this written above was done manually, must have been a nightmare for all these guys to come up with right Deliveries to the WDs.

But i must mention here one thing that FMCG companeis have still not fully leveraged IT to futher benefit in terms of operational efficiencies. There is a huge scope left. Do you guys have ideas?

Tuesday, July 04, 2006

Role of Distribution in launching new Brands

As mentioned in the last few posts, distribution is the key in FMCG sector. So lets start with some stats.
  • ITC cover 2 million outlets directly and 4 m indirectly
  • HLL cover 3 to 3.5 million outlets indirectly
  • India has 6 million outlets

Does this presence of ITC and HLL will help them to launch new Brands? Lets look at some points:

  1. Brand ITC/ HLL
  2. Established relationship of with the outlets
  3. Outlets dependent on the companies for other brands in Demand in Market
  4. Attractive Trade Promotions
  5. Retail Outlets also need a variety, be it biscuits or soap, to satisfy different needs of the consumers

A combo of Branding Expertise and Distribution Capabilities is required.

Lets take few examples:

  1. STAR Cigarette: With ITC's deep penetration and right relationship with the outlet owners, they were able to launch a new brand in Bingo category. Just think of the numerous rules & regulations in tobacco industry which make any cigarette company almost impossible to lauch a new name. But nothing is impossible with ITC
  2. Sweet N Salt: With ITC's umbrella biscuit brand - Sunfeast and deep touch in the market, ITC was successful in launching a new brand few weeks ago - Sunfeast Sweet N Salt

So all FMCG companies out there build Distribution Expertise !!

Product/ Brand reaching the end consumer

Just think of Rs. 1800 crore confectionary market in India.

Now think of any grocery and convenience outlet in your vicinity. Do you see one of Mint-O, candyman etc. You guys must be thinking how they reach the end outlet. I must tell you - ITS NOT EASY. Covering millions of outlets everyday/ weekly is a monumental task.

Let me give you some insights. There are different levels in the supply chain which make the stock reach the end consumer. They are:

1) Factory: Production is done in few factories in India.
2) Warehouse service provider: Using all the fundas of Supply Chain Management - mainly operation optimization - or route optimization. So there are number of WSPs at strategic locations. I am not going deep into it.
3) Wholesalers/ Distributers: Now every section/ circle will have different distributors. This guy must have the financial capacity to buy the stock from the company without any credit and must have the manpower to sell the stock in a particular market.
4) Secondary Wholesalers/ Distributors/ Retailers: They have warehouse space to cover the smaller towns nearby ... to lessen the task of WDs.

So either the Sales Guys of WD or the SWD will send the product/ brands to the retailers which is the closest point to consumer in the supply chain.

The stock can take around 3 to 4 weeks to reach to the retailer from the production @ Factory.

Monday, July 03, 2006

Role of People skills in FMCG sector

Just think of a fresh graduate, 23 years old, entering into FMCG company like ITC, HLL, Nestle etc. What type of responsibilities can you expect? Most of us think that in sales in FMCG, its going to the outlets under the sun, sweat out etc. Thats not wrong !!

Its just for a induction period mainly, because any manager should be sensitized with the working of different people in the hierarchy as mentioned in my last post - "Hierarchy in FMCG organization". Its approximate half a year. But once you learn the hard realities, you have to manage the above mentioned people.

Lets take a role of a manager at the entry level. He has around 4 circle heads, with each of them having 4 section heads. That means around 20 people. Apart from that you a huge sales force of around 500 people and 100 supervisor (Figures are mentioned just to give you an idea).

Dont you require people skills?

Hierarchy in a FMCG Organization

All the people who are interested in FMCG sector know one important thing - "Distribution is the key". But the big question here is that - "How the hell my products reach the grocery and the convenience guys?"

Let me give you some insights on that. Lets start with person lowest in the hierarchy.

  1. Sales Guy: The basis role of this person is to make sure that the company's product portfolio react the G & C retail outlets. So he may either use a cycle or a bike or a van normally for grocery. This guy has the highest touchpoint with the retailers in his route. Normally the salesman will have fixed route and even know the names of the retailers. He know the exact demand for the next visit. He is the guy with maximum insights.
  2. Supervisor: This guy will make sure that the sales guys are working properly. He will train and motive the Sales guys.
  3. Section Head: In a particular state, there will be different districts and group of districts will make a sector. So some employees of the FMCG organization will head that section. They also have to interact with the distributors/ wholesalers and check for the demand for next month and accrdingly design delivery schedules.
  4. Area head: Now group of sections will make a Area, which will be headed by a Area Head.
  5. State Head: Looks for the sales of the whole state

And the hierarchy keeps growing to District Head, Country Head - Sales / Marketing.