Brands escape from multiples with wider intelligence
Many CPG brands are missing a key revenue opportunity by focussing their efforts on multiples such as supermarket chains where returns are diminishing in the tougher economic climate, while there are increasing sales opportunities in the convenience marketplace, according to Marcus Vallance, CEO for UK-based sales consultancy SalesOut.
While most major supermarket chains are going all-out to convert customers to their own label goods, CPG brands may find better allies in independent retailers where accurate sales insights can often be gathered more easily and quickly to help identify missed opportunities, Vallance warns.
With the large multiples currently weighting their promotional activities in favour of their own labels, brand suppliers are left with a painful dilemma. They can't afford to jeopardise their position in all-powerful national retail outlets by kicking back but, at the same time, they know they are chasing ever-diminishing returns if they continue to depend so heavily on this kind of high-profile distribution channel. Even on the internet, shoppers are being pushed by supermarkets into 'clicking here to see cheaper options' for items and categories they have previously purchased.
So how can the brands protect their market share and sustain their profits? According to Vallance, this can't easily be achieved by continually driving down their own prices because a price war risks devaluing the brand while steadily chipping away at margins. So the only real option is to boost sales elsewhere.
Until now, the vast, diverse, and complex independent retail sector (as well as the often neglected but substantial independent catering sector) have held mixed prospects for the big brands. While there is no question about the scale of the market opportunity (the independent retail sector comprises over 50,000 store locations in the UK, and there are over 250,000 independent catering establishments such as cafes and hotels), the challenge lies in knowing how to target these sectors both cost-efficiently and profitably.
The main problem so far has been a lack of sales intelligence. Where sales and trend analysis statistics abound in the multiple sector, comparable insights have traditionally been absent in both the independent retail and catering sectors. This lack of visibility has left brand suppliers and wholesalers very much in the dark when assessing where product categories and specific brands are selling well and, perhaps more importantly, where opportunities are being missed.
These companies' only option has been to deploy local field sales teams to trawl the market, randomly making appointments and trying to boost sales with blanket promotions. By adding heavily to the cost of sale, this has hampered brands' ability to generate any significant profits from the sector.
But, at last, a greater degree of light now shines into the black hole of sales data (something which has always existed but has never been collected or analysed on a wide scale in the independent retail market). Recognising the difficulties of capturing EPOS data from thousands upon thousands of outlets, wholesalers have been incentivised by SalesOut to capture and share information about actual shipments to stores. In return for providing this data, the wholesalers are given access to broader trend data, allowing them to identify opportunities they have been missing.
This intelligence is now also being extended to the brand suppliers, meaning that both parties now have a broader and more holistic view of what is and isn't selling throughout the independent market, and allowing them to take action as a result. For example, a brand provider may have previously assumed that an increase of 3% in sales of a particular label of beer over a given period was impressive. But these metrics take on a whole new meaning when it is discovered that total beer sales across the independent sector have increased by 7% during the same period.
"With consumer shopping habits shifting rapidly, largely driven by worries about the recession, it may be dangerous to assume that trends being witnessed in the multiples sector also apply to the independent market," said Vallance. "The availability of real statistics and their interpretation into actionable insights offers brand suppliers and wholesalers a powerful tool, allowing them to analyse the independent sector by outlet type, location, and consumption of product category and brand. Armed with this detail, they can hone their marketing and sales activities, and measure and exploit specific opportunities. Promotions can be tailored, and better strategy decisions can be taken."
Even a major brand such as Coca-Cola or Pepsi could potentially benefit from this approach. Despite the fact that the brand may be selling several million products in the independent market it may not have full visibility into where its products end up after entering the wholesaler's depot. But a centralised system of intelligence can provide finer detail, even down to determining which fish-and-chip shops or newsagents warrant a fridge to stock the brand's products or, for another example, which profitable outlets are failing to stock the full range of diet drinks.
This approach offers a welcome lifeline to brands as they strive to create new sales opportunities and reduce their dependence on multiples as the recession deepens. And, for wholesalers, the insight provided lays the groundwork for stronger and more profitable relationships with CPG suppliers.
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