Market - "Fix it & then Drive It" !

FMCG markets are very predictable. I say predictable as people with experience and exposure can immediately tell you the implication of every action taken in the market place. Wholesale activation, Retail drive, IMT & LMT drives…. Any action taken in these impact the overall market if not executed with clear objective and expectations. It is extremely na?ve on part of FMCG Marketing / Sales teams to think these special drives do not impact the overall market. Therefore activation's designed for specific trade channels have to be monitored and executed in a very controlled manner.

In my 32 years of market experience, the one thing I have learnt without a doubt is that trade is no one’s friend. They may like or remember you as a good or a bad guy, but their only and main interest is the margin they earn. The minute you try to squeeze these margins, you are their worst enemy.

 All “Good & Evil” beings with volume TARGETS. If volume growth expectations are realistic, stretched and challenging, things may go well. If volume targets are totally unrealistic, the implications are not only defeated in terms of volume achievement but totally demotivate the sales organization especially where an incentive based salary structure prevails.

Unrealistic volume expectations are normally seen in local organizations where the planning process itself does not exist. It is amazing to see large local companies operating without an annual business plan. Some refer to the volume targets as business plan. Therefore, in such organizations the whole system suffers as lack of planning impacts every department of organization. This lack of planning impacts most where sales are based of seasons, such as beverages, dairy, snacks etc. Such company’s then become production driven rather than consumer demand driven. In other words, whatever is available is pushes through to the consumer rather than what the consumer desires.

Such companies actually have far greater potential to sell only if they moved according to an annual business plan with flexibility to adapt during the course of the year. Not to have an annual business plan speaks volume for the people who operate such companies.

Getting back to the topic of “Fix it & then Drive It”.  All markets have their own dynamics, within Pakistan, markets also have their own system of working and trading, but what is common among them is the desire to earn as much margin as possible. The question one asks is, that are we a wholesale or retail driven organization. If one can clearly answer this vital question, the desired selling strategy becomes extremely clear. The GTM strategy is then planned and executed accordingly. One observes companies have huge sales team and yet following a wholesale strategy where more than 50 % of their sales go through the wholesale channel and normally through 1 or 2 SKU’s, and the SKU complexity at company level is more than 50 SKU’s. Unrealistic targets, heavy discounts and distributors selling at cut rates in territories other than their own, leads to a failed selling system. The Company also looks the other way as long as volume targets for the year are being met. But this is a short term view and eventually “bubble will burst” with such organizations. In the mean time they will achieve targets through one set of distributors and territories in a particular month and then go to other distributors / territories to achieve their targets in the month after. They will never achieve a sustained system of sales which will continue to deliver month after month like a well-oiled machine. The last 10 days of the month will always be make or break for them.

On the other hand, a realistic volume expectation, backed up by continuous desired availably, control of discounts and strict management of distributors operating in their own assigned geographical areas will give sustained results. Sales teams will achieve their targets, factories will plan and produce as per consumer demand and above all the “health of the business” will improve.

SKU strategy is also something one needs to look at very closely. SKU must be there to compete or must have a strategic reason for it to exist. In one of my roles as COO at IFFCO Pakistan, I was told that since its existence in Pakistan for the past 5 years, the Company had failed to achieve a positive bottom line. Apart from other issue’s one of the major isue’s was SKU complexity. With the help of my team, we decided one simple rule, each SKU present in our portfolio has to be profitable and has a strategic role to play against competition. We discontinued SKU’s which had limited or no role and were in the red. Within the same year we turned around the business and had a positive bottom line.

Sustained performance can only come through having realistic expectations. Unrealistic expectations opens up a whole new front for people to exploit the situation for personal gains. Unreal plans plant the seeds for corrupting the system, especially in sales.

So people driving Company sales who know that they are taking short-term actions, need to Fix their markets for a long drive…..otherwise one will keep hitting bumps and go off road and eventually crash !