SHORT SHELF LIFE: The silent killer of FMCGs in Nigeria

When the decision is made to enter a particular line of FMCG business, little if any, attention is given to the shelf life of the intended product(s).

But as would be shown, shelf life goes well beyond printing “production” and “expiry” dates on products.

What is shelf life?

The length of time between the manufacture of a product and when it is declared “expired” i.e. unsuitable for use or consumption.

Categorizations of shelf life

Depending on duration, shelf life can be categorized thus:

Challenges & limitations posed by short shelf life products

SSL products pose serious headaches to FMCG companies that if not well planned for, can hinder business performance significantly.

Challenges arising from SSL include:

• More regular production cycles: Short shelf life products need to be produced more frequently; in most cases, every day. Long shelf life products, on the other hand, can be phased to be produced say every other month. LSL enables FMCG companies to potentially manufacture products only say 6 months in a year while SSL requires that they manufacture products every blessed day.
• Short window for sales activity: Due to the relatively short time between when SSL products are produced and expire, they have to be sold fast. This puts the FMCG company in a desperate position. Inability to sell their 'perishable' products fast can lead to spoilage while still in the company’s possession. The net result of this is business loss.
• More power to the sales channel: As a result of the FMCG company’s desperation to sell SSL products as fast as possible, the players within its sales channels (distributors, wholesalers, retailers) become more powerful. Such players assume a position where they can demand more discounts, incentives, credit, delivery terms, name it. In short, they can hold the FMCG company to ransom at will. To add insult to injury, the sales channel players can also play desperate FMCG competitors in the same SSL market against themselves. If ever they say “Jump!”, the SSL FMCGs would be forced to respond, “How high?”
• More expensive and complicated distribution operations: Because SSL products have to be sold fast, FMCGs have to build adequate distribution capacity, in the forms of personnel and vehicular assets, to move the products effectively. Some SSL products also require specialized storage conditions such as cold chain, temperature control, moisture control, sunlight protection etc. All these make distribution more expensive and complicated than is required for LSL products.

SSL can be advantageous too

• 'Discerning' market appeal: There is a health-conscious consumer subset within the FMCG market space that is wary of LSL products. In their minds, LSL products are less 'organic' and are laced with chemicals. This demography prefers SSL products. They make up a small, growing, affluent and vocal minority that are worth keeping in view.
• Barriers to entry: SSL products limit their producers - in most cases - to markets in close proximity of their plants. This is due to the prohibitive cost of building a robust distribution infrastructure to push the products to faraway markets. Only well capitalized producers can achieve this, thereby relegating small cap SSL producers to the fringes.

Strategies for succeeding as an SSL FMCG company

• Have a mix of SSL and LSL products: When in a tight FMCG spot, diversification is usually the answer. A mix of SSL and LSL helps to limit the vagaries that SSLs pose to the FMCG company’s long term success.
• Ensure proximal market potential is high: Smaller cap FMCGs need to ensure that market potential for their products within the immediate environment of their manufacturing facility is high. As established above, SSL products are not well suited to sale in distant markets. A significant proximal market is critical.
• Diversify route-to-market channels; own some if possible: A way of reducing the power balance between SSL FMCG companies and their customers, is to have a lot of customers across different sales channels. Also, SSL FMCGs would do well to own some of their sales channels. A good case is point is Fan Milk Nigeria, which engages its own direct bicycle vendors to sell its ice-cream products. While this requires serious investment and effort, it safeguards Fan Milk from the unpredictability of relying on traditional sales channels.
• Build capacity for decentralized production: SSL FMCGs seeking to service large geographical territories would have to brace-up for multiple production facilities. Producing SSL products from one facility to serve an entire country (for example) might ultimately prove too much an ambition for even the most capable of FMCG companies.
• Adequate capitalization: Building manufacturing facilities, developing proprietary sales channels and managing the whole shebang cost a lot of money. Companies that would record major successes in SSL product business need serious financial muscle. This is not a game for lean pockets.

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