KUALA LUMPUR: Given the changes in consumer behaviour led by the Covid-19 pandemic, fast moving consumer goods (FMCG) manufacturers should reassess their product portfolio to meet the changing needs of pandemic-hit consumers and record profitable growth.
NielsenIQ senior vice-president and analytics leader for Asia Pacific and Eastern Europe, Middle East and Africa Didem Sekerel Erdogan says manufacturers profit margins become thinner as they invest in production and in-store shelf space for products that do not have incremental value.
“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, ” he added.
According to NielsenIQ study, 76% of stock keeping units (SKUs) in the laundry detergent segment contribute to less than 2% of overall category sales, reflecting an oversupply in non-performing products within one category alone.
Moreover, the study also showed that an average of seven items are launched daily in the country, while 30% of innovations do not get support to realise their full potential.
However, the top three categories with the most underperforming SKUs in Malaysia are laundry detergents, health food drinks and chocolates.
Meanwhile, Bain & Company studies also echoed similar views, showing that a 10% to 20% SKU reduction could save production costs, reduction in supply chain costs and lower inventory up to 10% each as well as up to 5% optimisation in raw materials and packaging costs.
As such, NielsenIQ Malaysia managing director Luca De Nard said the challenge for manufacturers is to ensure products in their portfolio cater to customers of all kinds as well as remain cost-efficient and eliminate 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.
“This is a win for the shopper, win for the manufacturer and a win for the retailer, ” he added.
Besides that, NeilsenIQ noted that the key three trends in pandemic hit-customers are moving towards smaller formats and away from large format stores such as hypermarkets.
It said that financially impact customers are streamlining their budgets and show more concerns over where, what and how they purchase products.