Tag: CPG Jargon

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

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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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Basics of Total Distribution Points (TDP) in CPG

by adminin CPG, Nielsen, Nielsen Database, TDP, Total Distribution PointsLeave a Comment on Basics of Total Distribution Points (TDP) in CPG

We previously discussed ACV and %ACV as part of our CPG Jargon Buster Series. Let’s focus on TDP, Total Distribution Points, also sometimes known as TPD or Total Points of Distribution.

TDP numbers reflect the overall health of your brand from a distribution perspective. The higher the TDP numbers rise, the better your brand’s overall health.

CALCULATING TDP

TDP is closely related to %ACV – for distribution width, and Average Items Carried – for distribution depth. In fact, Nielsen states the method for calculating TDP as follows: 

“You can find it by calculating the number of retailers your products are in (breadth) and the number of products you’re selling in those stores (depth).”

TDP is generally part of your Nielsen database, so you will have it ready at your table. However, if you have to calculate it yourself, here’s how it goes: 

Suppose a Brand has 5 items/SKUs in its portfolio. TDP would be applicable at the item level of the Brand, meaning the 5 items/SKUs, and is calculated simply as the sum of the %ACV distribution of all these items. It is not necessary that these items be part of a brand; they can be clubbed under a category, segment, or any other similar product aggregations as well.

Example:

%ACV Distribution
Total Brand A80
Item A50
Item B60
Item C65
Item D75

TDP = 250 (50 + 60 + 65 + 75).

The maximum TDP score one can achieve here is 400, where %ACV distribution for all items is 100. One cannot set a partition and say that a certain TDP score and above is good, and below it is concerning. It all depends on the unique set of circumstances that surround your company, brand, category, etc.

Note: Avoid double-counting by excluding Total Brand from the calculation. 

IF %ACV DISTRIBUTION IS 95% OR ABOVE

If we were to calculate the TDP of Brands with %ACV Distribution of 95% or more, the TDP score and the Average Items Carried would be almost the same, provided that we shift the decimal point two places to the left. 

Look at the table below:

%ACV Distribution 
Total Brand X98
Item 166
Item 164
Item 178
Item 182
Item 180

TDP = 370

Average Items Carried = 370 ÷ 98 = 3.77 

Notice how if we would have moved the decimal two places in the TDP, we would have arrived at 3.70 of Brand X’s items carried by a retailer, on average.

A MASTER MEASURE – TDP

By allowing data analysts to look at both how widely the product items are being distributed and how well they are performing once they are in the store, TDP provides a solid base for managers to base their next strategies and objectives on. 

TDP further helps Managers in CPG understand Volume vs Brand Distribution. The item-level scrutiny ensures that managers know when their product is off the retailer’s shelf, as would be reflected in the total volume reduction.

TDP also lets managers know whether their brand is being represented in a fair manner on the retailer’s shelf. The method to do that is to find out your TDP percentage as against competition ÷ the in-store volume percentage. The volume percentage should not be higher than the TDP percentage.

Finally, TDP also allows you to gain intel on whether the product category has expanded, and find ways to bypass competition in securing shelf space to increase velocity.

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