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Home / Industry / Retail /  Soft drinks, chocolates, sanitary pads have most underperforming packs: report

Fast-moving consumer goods companies, especially those selling soft drinks, chocolates or sanitary napkins, should rationalise their offerings and eliminate underperforming variants to help drive savings and reduce supply chain and packaging costs, according to findings of a recent study by NielsenIQ.

In India, categories such as carbonated soft drinks, chocolates, biscuits, shampoos and sanitary napkins have the highest number of low-selling or underperforming stock keeping units, the study said.

“The case for assortment rationalization is extremely strong. A recent NielsenIQ study demonstrated that an average of 1059 stock-keeping units or SKUs are launched monthly in India, with only 10% of those items getting sufficient distribution to survive," the researcher said.

In India, 77% of SKUs in the carbonated soft drinks category contribute to less than 2% of overall category sales, pointing to the excessive non-performing products and variants that exist within this category, the report said.

Among categories such as sanitary napkins 76% of variants are underperforming, while for chocolates the number stands at 75%. In shampoos 74% of SKUs contribute to minimum sales, while in toilet soaps and biscuits the percentage stands at 74 and 72 respectively.

A severe resurgence in covid 19 cases makes the case for rationalization of portfolio even stronger. This means that companies should prioritize sales of products in greater demand that drive volumes and add to their profitability.

"Now is the time for fast moving consumer goods (FMCG) manufacturers to reassess and rationalize their assortment in order to better meet the changing needs of pandemic-hit consumers," the market researcher said in a note.

Beverage, instant noodles, chocolate, and detergent are some of the most underperforming categories in the top 15 markets, NielsenIQ said.

The need for rationalization is even greater as consumers pick brands and products essential to them and go easy on discretionary purchases as the pandemic impacts household budgets and shopping baskets.

“Financially impacted consumers have less money to spend and will therefore be more focused on essentials. That doesn't mean that they will not have the desire to indulge once in a while, and particularly as a means to treat themselves as this pandemic resurges," said Vijay Udasi, head of analytics, NielsenIQ India and Indonesia.

The challenge for manufacturers and retailers is to ensure that the products and brands in their portfolio cater to consumers at all ends of the economic spectrum, while also remaining cost-efficient and eliminating wastage," he said.

Udasi said through portfolio rationalization 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.

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