FMCG SECTOR
Compiled by Yamini Sequeira
TIME TO SHIFT THE GOALPOSTS
Nilusha Fernando elaborates on the pressing circumstances faced by trade
Q: What are some of the unprecedented challenges that modern trade is facing at present due to the economic downturn?
A: As the economic crisis was taking root in early 2022, we faced many challenges due to the shortages of fuel, electricity and gas while trying to provide an uninterrupted supply of products and services to customers.
Multiple contingency plans were devised, keeping in mind different scenarios to keep stores open and provide customers access to their day-to-day needs.
The greatest challenge that the economic crisis brought on was the rapid rise in inflation and resulting impact on consumers’ disposable incomes. As product prices began to increase rapidly and incomes remained stagnant, consumers started downgrading and shifting to smaller pack sizes or opting out of certain product categories.
Certain product categories suddenly moved from being essential to discretionary as families attempted to stretch their incomes to cover three meals a day. The income tax changes impacted a different segment of consumers who also began looking for ways to rationalise and spend without dipping into their savings.
Import restrictions have also significantly affected the range of products that could have been available and caused disruptions to supply chains. This applies to other goods too that are not for resale such as equipment and consumables for daily operations, which suddenly became very expensive or unavailable.
Subsequent increases in utility rates added further pressure on consumers and the retail sector alike. The cost base was increasing but sales were being impacted with restricted consumer spending.
Q: In the prevailing stressed environment therefore, do the same marketing rules apply – or are businesses trying to innovate?
A: The same marketing rules don’t necessarily apply in such a dynamic environment. Combined effects created profound challenges for marketers in navigating the economic downturn as well as possibly the post-recessionary period.
Marketers have not had a playbook to guide them over the past two years or so when it came to surmounting these challenges. However, the golden rule about listening to your customers, and watching how they evolve and adapt, has been our cornerstone.
It has helped us to devise relevant business and marketing strategies to ride out the storm.
At a time when customers are redefining what value means to them, it’s important to ensure that one remains relevant to them and wider stakeholder groups, and also aligned to brand identities in the strategies being executed.
Considering the inflationary pressures, expenditure on research and communications can be slashed; but it’s important that this is done with a keen eye on effectiveness and return on investment above everything else.
It is also important to take a longer-term view while navigating the prevailing circumstances – so as not to jeopardise long-term brand equity. Overall, it’s vital that marketers remain flexible by adopting strategies that are responsive to the external environment and consumer sentiment.
Q: How are the modern trade chains mitigating the impact on sales? And has there been a substantial rise in online sales?
A: Modern trade, specifically supermarket chains, will have to establish a multi-pronged approach to survive a tough period such as an economic crisis.
Driving sales and customer footfalls with a focus on retaining loyal customers must take centre stage. The evolving changes in consumers will also offer certain business opportunities that brands can leverage.
Taking into account the pressure on consumers’ disposable incomes, we considered several mechanisms to provide affordability to customers. Where possible and appropriate, these include introducing lower priced products and smaller pack sizes, thereby providing accessibility to customers to continue purchasing in specific categories.
Online sales have not seen substantial growth following the pandemic. However, a recent study of the local online market shows that it has future potential.
Q: The sustainability of resources is becoming a key priority for organisations and nations. In your view, what are the main areas that need a sustainability focus for supermarket chains?
A: Sustainability is no longer an option or a choice – and brands must strive for it.
Maintaining the status quo on sustainability plans that are in place and executing any new strategies have become tougher given the present economic environment.
For brands with a wide presence across the country however, it is imperative that they engage with some of the key environmental, social and governance (ESG) aspects, and work towards reducing our impact on the environment.
We need to contribute in positive and meaningful ways to the communities we serve.
The main focus areas for supermarket chain operators is to minimise their impacts on the environment by reducing carbon footprints; sourcing and building sustainable supply chains; improving employees’ skills and capabilities; driving employment and diversity in the workforce; and engaging in meaningful ways with the communities they serve.
