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RGM: The path to purchase

Introduction:

RGM has become a forgotten discipline. An over-dependence on market data has to lead to a decline in expert portfolio revenue management. With the CPG market under threat, 2020 has seen a real shakedown for retailing. It’s been coming for over 4 years, but until now the industry had managed the change discretely. No-one planned for the Covid-19 tsunami that arrived in March 2020. COVID-19 changed everything.

The Side Bar:

The impact of COVID-19 was harsh. The global supply chain collapsed in 10 days. Just-in-Time had been found out. Today, passenger aircraft are being made obsolete, oil tankers are floating around the oceans full to the brim as there is nowhere else to store the excess oil the world no longer needs. Cruise liners are being sent to the breakers yard. Globally there is too much capacity and not enough demand. It took 3 months for the world to stop.

The Events:

In the UK shoppers were confronted with empty supermarket shelves leading to panic buying and ultimately rationing. A society that had been used to the abundance of choice, overnight were reminded about the fragility of the supply chain. As we enter August 2020 the fightback has begun but at a price.

The Behaviour:

The consumer has changed the equilibrium of the supply chain. The point of purchase has changed for the foreseeable. During the lockdown, households became used to the delivery van from the supermarket arriving once a week. In five months, the share of grocery online increased from 10% in March to 25% in July.

The Change:

With the easing of lockdown analysis of grocery buying has confirmed that there are now two groups of shoppers in the UK:

Group 1: Households that have not suffered financially during the crisis

Group 2: Households that have been adversely affected by the crisis.

(source: Nielsen)

The Trend:

Cutting the range instore has made the supply chain simpler. Buyers are reviewing their range and identifying whether a SKU is essential, preferred or a duplicate.

Channel Factors

The channel is under threat as online grows and social distancing controls reduce in-store footfall. With the increase in Direct to Consumer solutions, an acceptance of online shopping across all ages, combined with the fear of shopper safety in-store, on-line grocery shopping will be a significant disruptor for the supermarket for a long time to come.

In addition, as we leave the EU in January, these supply chain issues will only increase for the shopper, the supplier and retailer. Sourcing range will become more complex in some cases, leading to reduced choice and potentially increase prices for the shopper.

Priorities:

Managing and developing brand revenue and profitability by focussing and investing in opportunities to increase consumption is now a priority for many. Increasing sales and delivering productive customer support initiatives will require innovation and a return to disciplined ROI evaluation for brands.

Revenue Growth Management:

In recent years an over-reliance on NPD and data has moved the focus away from RGM and portfolio management to an overdependence on activation and promotion.

RGM is an opportunity to trim or refocus the underperforming SKUs in an overstretched portfolio. Continued range extension may not be the long-term solution the customer is seeking. Trusted brands might be just what the shopper is looking for now.

As many suppliers have discovered, some brands that have fallen from favour have become the pandemic shopping basket staple, whilst products at the forefront of consumer trends (pre-pandemic) have lost their way.

Conclusion:

With reduced footfall instore, shopper activation, range, price, promotion, NPD are all being displaced by the convenience of online. Supermarkets are promoting their own label offerings but need the branded goods to attract the shopper in to store. This requires a collaborative approach to category management, post-COVID.

The supplier is fighting the double-headed beast of reduced price and an increased cost. This could reduce the number of suppliers within a category.


Who are Big River Solutions?

  1. We are Big River Solutions a global Category Marketing consultancy based in the UK specialising in driving commercial excellence.
  2. Our focus is on helping our clients grow through connecting their categories and brands to their target consumers, shoppers and customers. Creating Category’s for Growth is our expertise.
  3. We help develop rigorous and commercially integrated strategic and tactical growth plans for categories and brands based on knowledge, insight, vision and a deep understanding of market drivers.
  4. We help convert plans into action through innovation and engagement that drives positive behaviour changes in target consumers, shoppers and customers and delivers expected results.
  5. We help develop and embed commercial capabilities required to gain and sustain competitive advantage through organisation and people.

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