PRODUCT OR DISTRIBUTION: The bigger determinant of FMCG success

This is an eternal question.

The product you are selling versus your ability to sell it?

The simple answer is that “great products are as important to FMCG success as solid distribution”.

But in reality, as FMCGs face budgetary constraints on where best to allocate scarce resources, it is not unusual that a call has to be made to prioritize one over the other.

What it means to have great products

• Adequate to excellent quality: Quality is the ability of a product to serve the need for which it is procured by the consumer, to an adequate or high level, on a consistent basis over every purchase.
• Low price in absolute and relative terms: The majority of Nigerians are poor. Granted, for some of us, money is nothing. But for most, money is hard to come by and when it does, the supply is really low. As such, a great FMCG product, in the Nigerian context, should be amongst the cheapest in its market. Expensive products regardless of the higher value they offer would fail to attain product-market fit, because frankly speaking if the market cannot afford the product then there can be no fit.
• Brand capital: A great product must be recognizable in a positive light. To be known is not enough. To be known to as a great product is the aim.

What it means to have solid distribution

• Omni-channel: This implies the use of a variety of distribution channels to get products to the final consumer. The possible channels include traditional trade, modern trade, direct sales, institutional trade, enterprise trade and ecommerce. Omni-channel makes a distribution operation robust by limiting the concentration risk of dealing with only one channel. It also increases the sales volume potential of the business by reaching consumers wherever they might exist.
• Assets: Solid distribution requires a robust mix of human, hardware and software assets. Human assets include field sales teams as well as supervisors and managers to oversee their operations. Hardware includes vehicles for sales team delivery operations as well as handheld devices (phones/tablets) for facilitating operations. Software assets include ERP, CRM, communication, intelligence software etc. necessary for effective operations. All the aforementioned are chess pieces that come together to make distribution happen.
• Effective, scalable, transferrable and repeatable processes: Distribution cannot be solid if there is no method to the madness. Exploiting multiple sales channels by deploying expensive assets requires a “synchronized dance”. The dance must be effective, meaning that it achieves the intended sales objectives. Scalable means it can be ramped up or down with little or no loss in quality of performance. Transferrable means it can be taught to more people i.e. no one person can claim to be sole repository of the process knowledge. Repeatable is self-explanatory i.e. can be done over and over, the same way, day in day out, with little or no need for customization.

Arguing for either of product or distribution

• In favour of Product: Great products sell themselves. Companies with great products need not fret. Even when they cannot effectively get to the market, the market would come to them. Customers would seek them out.
• In favour of Distribution: You can have the best products but if cannot get them in front of the customer, it would languish in your warehouse gathering dust. Even an inferior product that is available to the consumer would outsell a great product stuck in the factory.

My take

If it were up to me, I would say great products are marginally more of a decider of FMCG success than solid distribution.

My reasons go thus:

1. Developing a great product involves a delicate balance of art and science. Solid distribution on the other hand, is largely scientific and mechanical, being the result of deep pockets and brutish action. That which relies on art is more elusive and ipso facto more valuable than that which is merely science-based.
2. Product/market fit, which is essentially what it means to have a great product, is never guaranteed from the outset. A product might be the cheapest and still fail because it does not appeal to the market’s sense of value. Billions can be spent on building a brand and still amount to naught, because no one can predict how consumers would react to the brand’s marketing. Solid distribution, on the other hand, can be achieved largely to plan if adequate resources are committed.
3. Perhaps most importantly, a bad product that is well distributed can damage a brand/company’s reputation irreparably. But a great product with bad distribution would have no long lasting effects to its reputation once the distribution challenges are remedied.

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