Constrained consumers create category challenges
Against the backdrop of global financial flux and the substantial consumer reset of the past three years, businesses are faced with challenges stemming from the consumer recessionary mindset. A majority of Europeans are feeling constrained by recession, and feeling slightly worse about the economy compared to the global view. Shoppers’ wallets will continue to be reshaped. With more cutbacks than anticipated at the beginning of the year, spending intentions are showing a higher and higher focus on at-home consumption versus out-of-home.
The Story of Brand
Manufacturer P is one of the top Personal Care manufacturers in Greece. This analysis focused on Deodorants, a highly fragmented category with a large number of items, variants, and high competition across local and international brands. Shelves at retailers are over-saturated (in terms of offerings) while category growth has stagnated: the highly competitive landscape leads to high pressure for promotions, eventually putting shrinking the overall profitability for the manufacturer.
Manufacturer P was looking to optimize the assortment at shelf, remove the clutter, identify the best-selling SKUs, and maximize distribution efforts, with the ultimate goal to improve rotation at shelf and optimize costs. Category management is pivotal in the strategic growth of a manufacturer in a consumer recession. With a comprehensive understanding of category management and assortment optimization, we conducted a study for Manufacturer P with the goal of identifying the growth areas within their category and creating room for future growth.
Manufacturer P’s business questions:
- What are the category’s threats and opportunities?
- What is the optimal balance of products in the category and portfolio?
- What products are driving or restricting growth?
- Can we demand a higher share of assortment?
- What is the ideal placement of each type of product at shelf?
- What are the opportunities for innovation?
Our solution
The right products in the right place: we help our customers drive shopper demand through custom-made scenarios that build space-aware assortments. By assessing potential-category versus current-category states, our customers can test different parameters and settings before selecting an assortment. Using NIQ Assortment & Merchandising capabilities, we unlock store planning opportunities through granular data and actionable patterns for our customers. Our solutions guide our customers into creating an end-to-end assortment and space strategy, utilizing NIQ’s unique incrementality data to drive revenue.
With our category management advanced analytics, we dissected and diagnosed the status-quo of the category assortment by retailer and managed to optimize the assortment of the whole category. We simulated various scenarios with the ultimate goal to boost sales and identify new growth opportunities for the Personal Care manufacturer.
We designed the strategy of our Manufacturer P’s portfolio by classifying their products into four buckets:
Counterintuitively, adding more items to a product portfolio doesn’t always bring additional sales. There could be many reasons; for instance, overcrowded shelves can reduce visual clarity for shoppers or mask out-of-stocks. In addition, the more items there are, the more price sensitive shoppers become. When faced with an overwhelming number of options, shoppers use price as the deciding factor.
Following our analysis, we identified an opportunity to optimize Manufacturer P’s portfolio. With the goal of delivering 7% manufacturer sales growth and 9% category sales growth, we made the following recommendations:
- Maintain 28 SKUs
- Push 6 SKUs
- Remove 17 SKUs
Thus, we reorganized the shelf of Deodorants in Hypermarkets in an optimal way that removes complexity, minimizes costs and delivers incrementality both for the category and for Manufacturer P’s brand.
The outcome
12-months following the implementation of the plan designed specifically to address Manufacturer P’s need in refining their assortment strategies, and upon reviewing the performance together, the results revealed that the Personal Care manufacturer had achieved:
#1: Incremental growth for the category: +11% category value sales organic growth in Hypermarkets
#2: Boosted sales and higher performance for Manufacturer P: +11.5% supplier value sales, growing ahead of the category and winning share in Hypermarkets
#3: Optimized assortment: -10% fewer SKUs by retailer, translating into greater shelf of space per item, boosting the visibility of the manufacturer’s brands and overall creating a better-organized category-shelf.
With our category management capabilities, Manufacturer P was able to identify incrementality within their category range and pinpoint how to maximize their portfolio assortment. This led to a double-digit incremental growth for both the category (the retailer) and the manufacturer.
An optimized portfolio, fueled by accurate data sets and trustworthy solutions, will strengthen and bring credibility to discussions between manufacturers and retailers, ultimately creating a win-win scenario with improved category sales. Advanced Analytics solutions can help identify the rights products to the market with the right space on the right shelf. Store-week level analysis ensures a high number of unique observations and, thus, allows robust simulations and scenarios about how assortment optimization impacts the category and brands’ sales.
Analytics for confident decision making
Discover new growth pathways through the best-in-class solutions that deliver timely, accurate, and high-quality recommendations to your business questions. Contact us to learn how we can help you optimize and refine your assortment.
