Category: Average Items Carried

CPG Jargon Buster Master Article

by adminin ACV, Average Items Carried, Brand Manager, CPG, CPG Jargon Buster, decision-making, Explorazor, FMCG, Nielsen, Nielsen Database, sales, Sales Managers, Sales per Million, Total Distribution Points, VelocityLeave a Comment on CPG Jargon Buster Master Article

Hello, and welcome to the knowledge hub that is the CPG Jargon Buster Master Article!

Here you will find direct links to many relevant jargon/concepts in the CPG Industry. Each term is explained in brief below, with a link to the detailed blog at the end of it. 

We keep adding more jargon as we write about them, so be sure to bookmark this page and keep learning! We’re also creating a FANTASTIC CPG-specific product for optimal and super-easy data exploration – you might want to check Explorazor out!

Till now, we have covered 

  1. ACV

ACV stands for All Commodity Volume. It is used in the calculation of %ACV (obviously, but the term ‘ACV’ is often used interchangeably with %ACV, so one needs to be mindful of that). 

ACV is nothing but the total monetary sales of a store. Assessing the ACV of a retailer helps suppliers know which outlet presents the best sales potential based on its business health. 

Learn how to calculate ACV using Nielsen data and how ACV relates to %ACV 

Read more: What is ACV in CPG?

  1. %ACV 

A more comprehensive blog than the ACV blog above, %ACV, or %ACV Distribution, helps managers understand the quality of their distribution networks. You might wonder why a product is not selling well in a region despite being apparently well-distributed there. A deep analysis of metrics such as %ACV will help you resolve that. 

Read the blog to understand how to calculate %ACV, and the 5 points to consider when performing the calculations:

Read more: What is %ACV?

  1. Velocity

Velocity is another metric to study distribution. Velocity factors the rate at which products move off the store shelves once they are placed there. 

Managers can take charge of sales by utilizing velocity fully, and understanding the two major velocity measures – Sales per Point of Distribution (SPPD) and Sales per Million. Refer to the blog to learn what these measures are, with examples to help. As Sales per Million is a complex concept we’ve also explained it separately in another blog:

Read more: ALL About Velocity / Sales Rate in CPG

  1. Average Items Carried

This is the average number of items that a retailer carries – be it of a segment, brand, category, etc. For example, suppose that Brand X has 5 products/items under its name. Average items Carried would be from a retailer’s perspective – he could be carrying 2 products, or 2.5 products, or 4 products of Brand X, on average. 

AIC is one of the 2 components of Total Distribution Points (TDP), the other being %ACV Distribution. The blog explains the relationship between AIC and %ACV with respect to TDP (Total Distribution Points), using examples to simplify. 

Learn why AIC and %ACV are called the width and depth in distribution, and how to calculate AIC in Excel:

Read more: What is ‘Average Items Carried’ and How Does it relate to %ACV?

  1. Total Distribution Points – Basics

Total Distribution Points, or Total Points of Distribution, is again a distribution measure, considering both %ACV and Average items Carried to produce a TDP score that helps Brand Managers understand things like product distribution and store health, and base their future strategies accordingly. 

There’s also a method for managers to know whether their brand is being represented in a fair manner on the retailer’s shelf, using TDP. Learn how to calculate TDP and the special case of TDP if %ACV is 95 or above:

Read More: Basics of Total Distribution Points (TDP) in CPG

  1. Sales per Million

How do you compare two markets where one is many times larger than the other? Does a manager simply say “It’s a smaller market, thus sales are less” and be done with it? Shouldn’t s/he investigate if the products in the smaller market are moving as fast as they are in the larger market? 

Sales per million helps compare across markets, while controlling for distribution. It accounts for the varying Market ACVs and stabilizes them, so managers can find how each product is doing in each market, regardless of market size.

Learn how to calculate Sales per Million with a cross-market comparison example following it:

Read More: Sales per Million 

  1. Panel Data Measures

Nielsen and IRI provide the numbers for these 4 measures, and even those who do not use Nielsen/IRI need to have an understanding of household-level analysis using these 4 measures.

Here are the one-line introductions:

  1. Household Penetration

How many households are buying my product?

  1. Buying Rate

How much is each household buying?

Purchase Frequency and Purchase Size are sub-components of Buying Rate.

  1. Purchase Frequency (Trips per Buyer)

(For each household) How often do they buy my product? 

  1. Purchase Size (Sales per Trip)

(For each household) How much do they buy at one time?

These 4 measures in table format can be used by managers to understand the consumer dynamics that drive the total sales for their product.

Understand these 4 measures in detail, and how they relate to sales:

Read More: Panel Data Measures

  1. Market Basket Analysis

Market Basket Analysis (MBA) is a powerful data mining technique used in the CPG industry to analyze customer purchase behavior and identify relationships between products.

Learn how Market Basket Analysis can help you gain valuable insights into consumer behavior in the CPG industry.

Read more on: Market Basket Analysis

  1. Point of Sale

The consumer packaged goods (CPG) industry is a highly competitive market, and companies need to make informed decisions to stay ahead.

One tool that CPG companies use to make data-driven decisions is Point of Sale (POS) data.

Learn how CPG and Pharma companies optimize their performance using Point of Sale

  1. Customer Segmentation

Customer segmentation, is a technique that helps you divide your audience into distinct groups based on their characteristics, behavior, or preferences.

By doing so, enterprises can tailor your strategies to each segment’s specific needs, improving your chances of success.

Read more on: Customer Segmentation

  1. Price Elasticity of Demand

Price elasticity of demand is calculated by dividing the percentage change in the quantity demanded of a product by the percentage change in the price of that product. 

The resulting number is a measure of how sensitive the quantity of the product demanded is to changes in its price. 

The formula for calculation Price of Elasticity is:

Price Elasticity of Demand = (% Change in Quantity Demanded) / (% Change in Price)

Check out our blog on how CPG companies take decision on the basis of Price Elasticity.

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What is ‘Average Items Carried’ and How Does it relate to %ACV?

by adminin AIC, Average Items CarriedLeave a Comment on What is ‘Average Items Carried’ and How Does it relate to %ACV?

Welcome to another blog in the CPG Jargon Buster Series. Today we’ll be gaining clarity on what ‘Average Items Carried’ is and how it is related to %ACV. We’ll also learn how to calculate it in Excel, in case the measure is not present directly in your database. 

WHAT IS AVERAGE ITEMS CARRIED/SELLING?

As the name suggests, it is the average number of items that a retailer carries, whether of a brand, category, segment, etc. A brand may carry 7 items or SKUs under its name, and on average, a retailer may carry 2, or 3.5, or 5.8 items of that brand. 

How we arrive at this number is through 2 ways – either it is readily available in your Nielsen data as ‘Average Items Carried’ or in your IRI data as ‘Average Items Selling’. We can also calculate it in Excel, as we will see later in this blog. 

AIC is one of the 2 components of Total Distribution Points (TDP), with the other being %ACV Distribution.

HOW IS AVERAGE ITEMS CARRIED RELATED TO %ACV?

Just like %ACV, Average Items Carried is related to the quality of your distribution efforts. While %ACV tells you about the breadth of your distribution efforts, AIC/AIS focuses on the depth of your distribution efforts. 

Consider this simplest of examples that illustrates how perspectives can shift based on whether you are looking at %ACV or AIC. Suppose there’s a category containing 3 brands, with brand distribution as follows:

Brands%ACV Distribution
A 95
B92
C90

We observe that Brand A had the best %ACV Distribution. However, this is the conclusion without consideration of Average Items Carried within each brand. 

Let’s look at the AIC:

BrandsAverage Items Carried
A 10.5
B12.5
C13.5

Here we see that Brand C has the largest number of items carried by outlets/retailers. 

Simply looking at %ACV without considering AIC is not where you want to be as a Brand Manager looking to uncover new growth avenues. To reinforce what was mentioned earlier, %ACV and AIC are two components of TDP, and optimal data analysis assigns importance to both. 

EXAMPLE – HOW WIDTH AND DEPTH MATTER IN DECISION-MAKING

Assume that only two Brands, LG and Samsung, are present in a market. 

LG offers 4 items/SKUs and is present in 60 stores. 

Samsung offers 8 items/SKUs and is present in 70 stores.

In table format with additional information:

# of items in stores
LG (present in 60 stores)SAMSUNG (present in 70 stores)
Item 16030
Item 26535
Item 37030
Item 45530
Item 5–35
Item 6–35
Item 7–45
Item 8–40
Total 250280

Now, for LG:

Average number of items of LG in stores:

= 250 / 60

= 4.16 items

LG’s efficiency rate:

= Average number of items of LG in stores / Total items that LG offers

= 4.16 / 4

= 1.04

Similarly for Samsung:

Average number of items of Samsung in stores:

= 280 / 70

= 4 items

Samsung’s efficiency rate:

= Average number of items of Samsung in stores / Total items that Samsung offers

= 4 / 8

= 0.50

Conclusion: While Samsung had greater distribution width by being present in more stores than LG (70 to 60) and more items listed to be sold (280 to 250), LG had greater distribution depth as is evidenced by its higher efficiency rate. This means that while Samsung is more widely distributed in the market, it is not as successful as LG when it comes to securing distribution depth. 

HOW TO CALCULATE ‘AVERAGE ITEMS CARRIED’ IN EXCEL

Very straightforward: you will have a %ACV of, say, a Brand, and the %ACV of all the items (or SKUs) within that brand. Now,

  1. Add up the %ACVs of all the items/SKUs
  2. Divide by the %ACV of the Brand

Cooking up an example:

%ACV Distribution
Total Brand90
Item 180
Item 245
Item 325
Item 430

Adding up all the items: 

80 + 45 + 25 + 30 = 180

Dividing by 90, we get the AIC as 2.0. We infer that retailers, on average, carry/sell 2.0 of the 4 items offered by the Brand.

Hope you found this blog helpful, and do not forget to refer to our CPG Jargon Buster Master Article for knowledge on the various CPG concepts. We’re building a product centred around Managers in CPG and Pharma cos only, so if you’re interested in exploring the niche Explorazor, you’re most welcome to!

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