More Cash but Few Spends by Sunil Sir

8/7/2019 More Cash but Few Spends by Sunil Sir

http://slidepdf.com/reader/full/more-cash-but-few-spends-by-sunil-sir 1/27

1

More Cash But Few Spends

Question staring at FMCG

companies :

How does one grow

consumption?



2

Background

People are buying , demand obviously there

:but consumption not going up. Top line stagnating

Salaries are going up- yet no growth in

conventional consumption of products !...

Result - With focus on efficiency-a decent

bottom line ±but a poor top line.



3

Company Scenario-Then..

Managed good penetration Multi price points

More outlets ±better service«

All the above worked earlier «not now !



4

Company Scenario- today«

My Brand available in every possible retail shop

Yet demand not growing«

Sales are not happening !



5

Reason : Outlets driven Sale

New outlets coming up ± does not mean demand isgrowing.

1990 :12000 outlets in Chennai

1998 :16000

Deeper examination shows: Original 10000 outletsgrowing at 5%: Head office seeing 20% growth

«.due to additional stocks in new outlets ! New small shops not growing«

Reason : Sales shift to large retail formats!



6

Stocks : Large vs small retail outlets

Large outlets like Food world have better

inventory planning - stock up less ! Small outlets carry more inventory than small

outlets.

In the interim : Channel stocks increased

Leading to ambitious growth targets of 20%.. Effectively therefore : there was only a

demand shift ± but no real growth !!!



7

Growth strategy of Gerrico

Make products available at different price points.

Enter new categories. But now seeing cannibalisation of own brands.

Consumer spending of Rs.4000/-

Earlier : On 7 categories of goods & services

Now : On 14 categories !... Even if spends growing at 15% - it is by adding new

products to his portfolio



8

Competition from New Categories

Not just Sunsilk, Nyle or Dove Competition now from : durables, vacation

products, entertainment«..

Question to address : What is the plan to get

larger share of wallet ?



9

Questions

How to retain my customer in the category ± if not in

the price ranges ? Where is the spend going from the increased

surplus?

Some Answers

Teacher earlier using bus : now has Maruti-financeoptions ; takes away major chunk in EMI«.

Finance options ±VCD players, PCs, home fitness

equipments, heating facilities, ACs, foreign holidays



10

Conventional Categories suffering

Soaps, detergents, shampoos : no

perceptible up gradation to premiumproducts.

Consumers moving in newer categories ±and fast.

Foods : McDonalds, Pizza Hut and other options have affordability with fun ! Takingaway spending from conventional food items,edible oils breads etc«.



11

Consumer Behaviour

Large ranges to choose from

Become indifferent to price and quality asdifferentiators.

Reason: almost all products now available at

the same technology level & even price«

Buying more than ever before: but not basic,

daily use, routine stuff: since they don¶t

provide any excitement.



12

Consumer Behaviour

Consumer now spending more , eating more : but«.outside the home !

Spends on groceries reducing but purchases of all

new products has increased«.

Some of the increase has come thru substitution.



13

Strategy Paradigm Shift

Research on consumer behavior must be

redeveloped. Examine what is the consumer buying today

which she was not buying earlier.

Allow her to buy new products and she will

not buy conventional stuff«. As income goes up- consumption of

conventional products will actually drop !



14

Paradigm shift

Some of the things will not change

Like attitude : Mobile phones not changed till they break / get lost !

Washing machines & refrigerators are not upgraded

with fuzzy logic- if working fine!....

Solution lies in moving away from low excitementcategories to new ones- like the consumers !



15

Conclusion

In a rising disposable income scenario,

consumption of conventional products seemsto be declining.

Environment is now forcing companies to do

a complete re-jig of their strategy«

Inaction can lead to fast depletion in market

shares, losses and company closures.

______



16

End of Case Study



17

Category Collides

T ime to shift focus

From ³Category market share´to

³Consumer share´

-using the µCategory collide framework¶.

.



18

Category Collide

I dentify the opportunity - focus on wallet share.

- For edible oil manufacturer ±sell olive oil

thru drug stores«.

- Sell edible oil positioned as µgood for heart¶

± thru drug store !



19

Category Collide

Al ternate channel devel opment

- Kirana vs Paan shops.F ashion finite l ife cyc l e products

-Fall collection of Brooke Bond Tea.

Only those companies who dare will grab thisopportunity !

_______



20

Enhance Value

Background

Belated realization regarding fragmentation of consumer spends.

Slow down in industrial growth and first signs of

recession.

Coping up measures Cost cutting«

Layoffs & retrenchments



21

Coping with recession

Business leaders work differently

Make changes in business processes. Seek revenue generating opportunities

Upgrade consumers

Satisfy latent need that consumer is unaware of

Quantum leap thru innovation«. Innovation could be new technology, new products,

new services.



22

Actions by Business leaders

Continuously increasing satisfaction levels ensures

Consumer interest

Involvement in category

Investment in category«

Leading to loyalty



23

Growth ?

Where will growth come from ?

Line extension New segment of an existing product category

Helps get over taste and flavor fatigue«

Increasing the share of consumer food basket



24

How to combat recessionary conditions?

In recessionary times

Consumers postpone purchases

This impacts depth of consumption

Gerrico should introduce incentives, discounts,promotions to heighten consumer interest

Co-promotions

Banded packs, large value packs, smaller packs withsmall unit value-to attract new users«

Brand relaunch can energise the brand



25

Steps by Gerrico

Extend the portfolio of brands to other categories

Average companies live in the present: visionary cosplan for future.

Visionary cos ventured in rural markets, introduced

shampoo sachets, fuelled further growth thru media

boom

As changes happen successful cos realign their

marketing mix and service strategy, to exploit these

changes.

Eg. Rural market development by ITC & Shopper¶s

Stop !



26

Finally

Gerrico needs to make a fundamental choice :-

Demonstrate intellectual foresight and join the

leaders who drive the market

OR

Get led all the way to the corporate graveyard.!!!

_______



27

Thank You

Documents

More Cash but Few Spends by Sunil Sir