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The Impact of Sustainability on CPG Sales.

May 24, 2023May 24, 2023 by Krina Rathodin Uncategorized

Introduction

In a world where environmental consciousness is rapidly gaining ground, the consumer packaged goods (CPG) industry finds itself at a pivotal juncture.

Sustainability has emerged as a transformative force, redefining the way CPG companies operate and influencing consumer behavior like never before.

Today, we delve into the profound impact that sustainability has on CPG sales, exploring the intricate relationship between consumer preferences, brand loyalty, and the quest for a greener future.

The Rise of Sustainability in the CPG Industry

As the global sustainability movement gains momentum, CPG companies are under increasing pressure to adopt sustainable practices.

Governments, NGOs, and consumers alike are demanding change, prompting the industry to redefine its priorities.

Companies are recognizing that sustainable business models not only mitigate environmental risks but also unlock new market opportunities and foster long-term growth.

What are the factors which companies need to keep in mind while creating sustainable products?

Consumer Demand:

In an era defined by heightened awareness of environmental issues, consumers are wielding their purchasing power to drive change. A seismic shift in consumer preferences is reshaping the CPG landscape, with sustainability becoming a primary consideration. Studies show that a significant portion of consumers actively seek out products that align with their values, placing sustainability at the forefront of their decision-making process. Whether it’s responsibly sourced ingredients, eco-friendly packaging, or ethical supply chains, sustainability is now a fundamental requirement for discerning consumers.

Here are a few examples of specific consumer demands related to sustainability in the CPG industry:

Eco-friendly Packaging: Consumers are increasingly looking for products that come in recyclable, biodegradable, or compostable packaging materials.

They prioritize packaging that reduces waste and minimizes its environmental impact, such as cardboard, paper, or plant-based alternatives.

Organic and Natural Ingredients: There is a growing demand for CPG products made with organic and natural ingredients. Consumers are seeking products that are free from pesticides, genetically modified organisms (GMOs), and artificial additives.

Ethical Supply Chains: Consumers are concerned about the ethical practices employed in the supply chains of CPG companies.

They demand transparency and accountability, expecting brands to ensure fair labor conditions, responsible sourcing of raw materials, and traceability throughout the production process.

Renewable Energy and Carbon Neutrality: Consumers are increasingly conscious of the environmental footprint of the products they purchase.

They favor CPG companies that prioritize renewable energy sources, carbon neutrality, and initiatives to reduce greenhouse gas emissions throughout their operations.

Water Conservation: Given the global water crisis, consumers are becoming more aware of water usage in the production of CPG products.

They prefer companies that implement water-saving measures, promote efficient water management practices, and support initiatives that address water scarcity and pollution.

Cruelty-Free and Vegan Products: The demand for cruelty-free and vegan CPG products is on the rise. Consumers seek assurance that the products they purchase are not tested on animals and do not contain any animal-derived ingredients. They prioritize companies that adhere to ethical standards in their product development processes.

Social Responsibility: Consumers are increasingly concerned about the social impact of the CPG brands they support. They look for companies that demonstrate social responsibility by giving back to communities, supporting local initiatives, and engaging in philanthropic activities.

Transparency and Labeling: Consumers want clear and accurate information about the sustainability practices of CPG brands. They appreciate transparent labeling that provides details about a product’s environmental impact, certifications, and eco-friendly attributes, enabling them to make informed purchasing decisions.

Competitive Advantage and Brand Loyalty

Sustainability has become a powerful differentiating factor for CPG brands. Companies that champion sustainability and integrate it into their core values enjoy a distinct competitive advantage.

These brands resonate with consumers on a deeper level, building trust and forging lasting relationships. By embracing transparency, socially responsible practices, and ethical business conduct, forward-thinking CPG companies foster brand loyalty that transcends the mere transactional nature of commerce.

Regulatory Landscape and Industry Initiatives

Government regulations and industry initiatives play a pivotal role in driving sustainability in the CPG sector. Legislative measures and policies incentivize companies to adopt sustainable practices, encouraging responsible manufacturing, waste reduction, and carbon footprint reduction.

Moreover, industry associations and organizations collaborate to develop guidelines, share best practices, and foster knowledge exchange. Certifications and eco-labels further contribute to consumer trust and help consumers make informed choices.

Overcoming Challenges and Implementing Sustainable Practices

While sustainability presents immense opportunities, it also poses challenges for CPG companies. Economic considerations and cost implications can deter businesses from fully committing to sustainable initiatives. However, innovative strategies and investments in sustainable technologies can yield long-term benefits, optimizing resource usage, reducing waste, and driving operational efficiency.

From packaging innovations to responsible sourcing and eco-friendly distribution, CPG companies are trailblazing new pathways towards sustainability.

Measuring the Impact: Data and Metrics

To truly understand the impact of sustainability on CPG sales, data and metrics play a crucial role. Key performance indicators (KPIs) allow companies to track progress, measure consumer perception, and assess the effectiveness of sustainability initiatives.

By analyzing both quantitative and qualitative data, CPG companies gain valuable insights into consumer behavior, enabling them to refine strategies, make informed decisions, and drive continuous improvement.

This is where tools like Explorazor come into place. With a simple “Google-like” search, analysts and users can search on their data. They can perform root cause analysis to find out the hidden opportunities and best practices that they can do.

Future Trends and Opportunities

Looking ahead, the future of sustainability in the CPG industry holds immense promise. Technological advancements, such as biodegradable materials, renewable energy sources, and circular economy principles, offer exciting possibilities.

The adoption of a circular economy model, where products and materials are reused and repurposed, can revolutionize the way CPG companies operate. The intersection of sustainability, innovation, and financial performance paves the way for a greener, more prosperous future.

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Market Basket Analysis: A Guide to Understanding Consumer Behavior in the CPG Industry

April 4, 2023April 5, 2023 by Krina Rathodin ACV

Understanding consumer behavior is crucial to make effective business decisions for any CPG company. Market Basket Analysis (MBA) is a widely used technique in the CPG industry to analyze consumer purchasing patterns and gain insights into their behavior. In this blog, we will explain what MBA is, its importance in the CPG industry, and how it can be used to improve business decisions.

What is Market Basket Analysis?

Market Basket Analysis is a technique that analyzes customer purchase behavior to identify relationships between products. It is a data mining method that helps identify which products are frequently purchased together and which are not. MBA can reveal correlations between products that may not be immediately apparent, providing insights into consumer behavior and preferences.

The basic methodology of MBA involves analyzing transactional data to identify frequently occurring product combinations. The analysis is based on the concept of Association Rules, which identifies the co-occurrence of items in transactions. MBA utilizes three important metrics: Support, Confidence, and Lift.

Support measures how frequently an itemset appears in the transactional data. It is the proportion of transactions containing a particular itemset.

Confidence measures the likelihood that an item B is purchased when item A is purchased. It is the ratio of transactions containing both item A and B to the number of transactions containing item A.

Lift measures the strength of association between items. It is the ratio of the observed support to the expected support if the items were independent.

Why is Market Basket Analysis important in the CPG industry?

MBA is essential in the CPG industry as it can provide valuable insights into consumer behavior, preferences, and buying patterns. By analyzing consumer behavior, companies can identify which products are often purchased together and which are not.

This information can help companies create more effective marketing strategies, optimize product placement, and improve product bundling. For example, if a CPG company finds that customers who buy chips are likely to buy soda as well, they can place these two products next to each other to increase sales.

Moreover, it can help CPG companies in making pricing decisions. By analyzing customer buying patterns, companies can identify which products are price-sensitive and which are not. They can then optimize pricing to increase sales and maximize profits.

For example, if a CPG company finds that customers who buy bread are likely to buy milk as well, they can offer discounts on milk to increase its sales and maximize profits.

Examples of Market Basket Analysis in CPG industry

Market Basket Analysis has several applications in the CPG industry. Here are a few examples:

Amazon.com: Amazon.com uses MBA to identify which products are often purchased together and recommends products based on the customer’s purchase history. This helps Amazon increase sales and improve customer satisfaction.

Tesco: Tesco, a UK-based supermarket chain, uses MBA to improve store layout and optimize product placement. By analyzing customer purchase data, Tesco can identify which products are often purchased together and place them close to each other to increase sales.

Coca-Cola: Coca-Cola used MBA to identify which products are often purchased together and launched a new product line based on the analysis. Coca-Cola found that customers who bought coke were likely to buy popcorn, so they launched a new product line that combined coke and popcorn.

Advantages and Limitations

MBA has several advantages that make it an essential tool in the CPG industry. It is easy to use, provides valuable insights into consumer behavior, and can help improve business decisions. However, MBA has some limitations that need to be considered. The results of MBA are based on transactional data, which may not be representative of the entire customer base.

MBA also does not provide insights into why customers purchase certain products together, which can limit the usefulness of the analysis.

How to perform Market Basket Analysis

Performing MBA involves several steps, including data preparation, data analysis, and interpretation of the results. Here are some factors to consider while performing MBA:

Choose the right data: MBA is based on transactional data, so it is essential to choose the right data source. The data should be clean, reliable, and representative of the entire customer base.

Define the scope: Determine the scope of the analysis and the products or product categories to be analyzed.

Set the metrics: Set the metrics to be used in the analysis, such as support, confidence, and lift.

Choose the tool: There are several MBA tools available in the market, such as Excel, SPSS, and R. Choose the tool that best fits your needs and expertise.

Interpret the results: Interpret the results of the analysis and draw insights from the data.

Market Basket Analysis is a powerful technique that can help CPG companies gain valuable insights into consumer behavior and preferences. However, performing MBA can be a complex and time-consuming process that requires expertise in data analysis. This is where Explorazor comes in.

Explorazor is a data exploration tool that can help CPG enterprises quickly and easily perform MBA and other types of data analysis. With Explorazor, you can ask a query in seconds and get insights on your data, without the need for extensive data science knowledge.

Moreover, Explorazor can also perform root cause analysis to help you identify the pain points in your data and take corrective actions to improve your business operations. By using Explorazor, CPG companies can gain a competitive advantage by making data-driven decisions based on reliable insights.

Try Explorazor today and discover how it can help you gain valuable insights into your data.

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ALL About Velocity / Sales Rate in CPG

January 9, 2023August 8, 2023 by adminin CPG, FMCG, Nielsen, Nielsen Database, VelocityLeave a Comment

Blog snapshot:

What is velocity, and why is it important to focus on this measure? After learning about ACV and %ACV in our CPG Jargon Buster Series, let’s have a look at what velocity is, its relation to sales and distribution, how to calculate it, and what the two major velocity measures are:

WHAT IS VELOCITY?

While distribution tells you how well your product is distributed in the market, or how widely available it is, velocity tells you well it sells once it is on the shelf. Velocity is the measure you want to look at when judging which product is the best-selling or most preferred by consumers, not distribution.

VELOCITY’S RELATION TO SALES AND DISTRIBUTION

When velocity and distribution are combined, one arrives at retail sales. Thus,

Sales = Velocity x Distribution.

CALCULATING VELOCITY

The formula to calculate velocity is derived as:

Velocity = Sales ÷ Distribution.

TAKING CHARGE OF SALES THROUGH VELOCITY

It is generally considered that distribution is in the hands of the distributor, and the manufacturer can always follow up with the distributor for better product availability across geographical areas. However, if the product is not moving off the shelf, meaning that velocity is low, then the manufacturer has greater control over being able to change that.

Let’s understand this through an example, for greater clarity. Suppose 2 products, A and B, are sold equally in a market of 100 stores. Product A has good distribution but low velocity while product B is vice versa.

The table is as follows:

Market of 100 stores	Sales =	Distribution (x)	Velocity
	(units)	(stores)	(units/store)
Product A	6000	60	100
Product B	6000	100	60

We see that although distribution for product A is not very impressive, the velocity, or the speed at which the product is selling in these stores, equalizes the sales of Product B, which, although present in all 100 stores, only manages to sell as much as Product A.

In the case of Product B, the manufacturer must have a closer look at his pricing and promotional strategies. Why are people not preferring the product even when it’s available to them in the outlet? Are my competitors outdoing me in those areas, or is their product quality better, or better suited to the audience I am trying to capture? Questions like these need to be raised and answered asap.

Tools like Explorazor and its root-cause analysis function can help a lot here.

TWO MAJOR VELOCITY MEASURES:

The example we described above was one of ‘Sales per Store’. This, however, is not and should not be used in real-world scenarios as store sizes differ, which leads to biases when estimating velocity.

When looking at sales for a single retailer or within a single market, we go with the first velocity measure – Sales Per Point of Distribution, or SPPD.

SPPD = Sales ÷ %ACV Distribution

SPPD is great for understanding where the root cause of a problem lies – is it in the distribution, or the velocity? Let’s understand this further with an example:

Mumbai Market
		Distribution	Velocity
Brand	Sales (in Rupees)	%ACV Distribution	SPPD
Product 1	65000	80	812
Product 2	95000	75	1267
Product 3	70000	15	4667
Product 4	80000	20	4000

Above is an item level report for an individual market. We see that Products 1 and 2, although impressively distributed, but have poor velocity. The opposite holds true for Products 3 and 4 – %ACV is poor, while velocity is great.

Note that SPPD works only for one market, be it at the retailer level, the channel, market, or the national level. When comparing across markets, SPPD doesn’t work. Also note that a 100% or close to 100% market distribution will mean that velocity and sales will almost be the same, so managers can overlook velocity in favour of focusing on sales only.

Sales per Million

In a cross-market comparison, certain markets are naturally bigger than others. In other words, the ACV of a Large Market, call it Market L, is bigger than the ACV of a smaller market, Market S.

This is where Sales per million comes in, because it accounts for the ACV of each individual market in the denominator.

Sales per Million is calculated as:

Sales

%ACV distribution X (Market’s ACV ÷ 10,00,000)

Note that ‘Sales ÷ %ACV Distribution’ is nothing but the formula for SPPD. Market ACV, as explained above, has to be taken in the denominator to account for the size difference in ACV.

Regarding the ‘in millions’, Market ACVs are large numbers, and we simply ease our calculations by denoting them in millions.

Let’s compare Mumbai, a bigger market, to Pune, which is 3 times smaller:

Mumbai vs Pune market comparison

Clearly, Pune’s numbers are lesser than Mumbai’s because of the size discrepancy. In comes Sales per Million to level that out.

Example of how we calculated Sales per Million (in the below table) using information from the above table:

For Product 1, Mumbai –

Sales = 65,000

%ACV Distribution = 80

Market ACV Size = 120 million

Sales per Million

= 65000 ÷ [(80/100) x (120 million / 1 million)

= 65000 ÷ [0.80 x (120)]

= 677

Similarly for all.

Notice that Pune’s sales compared to Mumbai

For Product 1, is almost equal
For Product 2, not far off
For Products 3 and 4, is miserably low

Without the Sales per Million calculation, Pune as a whole would have been swept under the rug under the guise of ‘It’s a small city, hence our products don’t do well there’. But conducting the above analysis clearly demonstrates that Products 3 and 4 need a lot of attention if they are to sell in Pune.

Some Notes:

Sales per Million can be used within 1 market as well, if you want to keep your velocity measures uniform throughout. SPPD is easier to use than Sales per Million, hence people prefer that too
Velocity is uber-important. Hope we didn’t fail to convey that!

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The Not-So-Subtle Relationship Between Branding & Sales

November 2, 2022August 8, 2023 by adminin Brand Recognition, Brand Trust, Branding, Data Exploration, sales

Today we’ll be talking about branding’s impact on sales using some examples from the FMCG industry. The purpose of this article is to convey, in no uncertain terms, that companies need to pay attention to and hammer down their branding strategies right now. We’ll also be exploring how ease of data analysis can help make better branding and sales decisions – and a very simple and effective method of easing data analysis. Let’s begin:

Function of A Brand – Seth Godin

You might have heard of various definitions of ‘brand’, but one of the most complete definitions that I have come across is from Seth Godin. I quote “A brand is the set of expectations, memories, stories and relationships that, taken together, account for a consumer’s decision to choose one product or service over another.”

He further goes on to say “If the consumer (whether it’s a business, a buyer, a voter or a donor) doesn’t pay a premium, make a selection or spread the word, then no brand value exists for that customer”.

Why this quote is complete is because it outlines the benefits that companies get when they get their branding right –

The consumer pays a premium to get your brand, simply by virtue of it being your brand
The consumer at the very least chooses your brand over others, in the event of other factors, such as price, being the same
The consumer herself begins actively engaging in promoting your brand via word-of-mouth

The right branding should get you sales and free promotion, per Seth Godin.

To get the branding right, one has to focus on branding in the first place.

Using Branding For Sales – Recognition & Trust!

Now that the need for branding is established, let’s skim over the very first ingredients needed to get the branding underway. A foolproof method is to start off by building greater brand recognition and fostering brand trust.

Attention Grabber: Brand Recognition

The competition for grabbing the mental space of a consumer is always ON. Round-the-year branding, even though it may not seem to be the most impactful at times, readies the consumer for the moment-of-truth, when she is looking to make a purchase. Hardly a consumer knows the difference between Tide & Surf Excel, but almost every consumer buys on the basis of the perceived value they derive from the advertising campaigns of each brand.

In other words, if they give first mental recognition to your brand when opting for a solution to their need, they are more likely to prefer your brand to others.

The right branding can even trump core value offered to consumer!

Care & Nurture: Brand Trust

Brand trust is one of the biggest drivers of brand loyalty, repeat customer purchase decisions, and long-term customer satisfaction.

Case Study: HUL Star-Sellers

In around 1997, HUL wanted to set up distribution of basic necessities like oils, detergents, and soaps across all villages in India. Distribution was one thing; store acceptance was another. HUL identified local influencers in villages even with populations of less than 2000 people and used them as ‘faces’ of the brand to persuade retailers to stock their products and sell in the local markets.

The branding was unconventional, but it hit the mark because HUL used the concept of brand trust as its base.

You will find multiple other examples of HUL paying focused attention on creation of brand trust. Ventures like Project Shakti are another reason why HUL was able to not only create thousands of jobs and revenue for the company, but also forge a lasting impact on the masses that today holds HUL’s name synonymous with ‘trust’.

From Cadbury to Pepsi…

Cadbury noted that the term ‘Eclairs’ was a commonly used term for a type of candy, and retailers were dishing out other brands in the name of ‘Eclairs’ instead of Cadbury’s well-known Eclairs. It undertook a product realignment campaign and renamed the product to ‘Chocolairs’.

Pepsi keeps changing its logos to keep up with trends, spending millions of dollars each time.

Tropicana’s package rebranding in 2009 for reasons similar to Pepsi’s, failed drastically, resulting in 20% year-on-year sales degrowth. As marketing professor and Ph.D. holder Mark Ritson noted, and we quote Brandstruck, the new design “achieved something Tropicana’s competitors had failed to in 20 years – a degradation of its brand equity and an undermining of its status as market leader.”

There are hundreds of examples in the FMCG industry itself, of how brands spend time, effort, and money to brand and rebrand their well-established products.

Branding seems to be pretty important for all of these brands.

Is it for you?

An Important Sub-Component – Proper Data Analysis

Just like all the sub-components in a branding strategy pave the way for good branding, a company’s overall choices of people, processes and products combine to produce effective decisions that impact every facet of the company, including branding and sales.

While we’re sure your choices of people and processes are most apt, we do have a proposal to add Explorazor to your product portfolio.

Explorazor is a data exploration and analysis tool built to ease the daily tasks of Senior Managers in Brand & Sales Teams, who currently work on Excel. Explorazor does not replace Excel; we are interested in complementing Excel. You can also explore some ways Explorazor differs from Power BI.

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In Retail, Building the Right Omnichannel Strategy is Everything

October 20, 2022August 8, 2023 by adminin Customers, Explorazor, Omnichannel, Retail, sales

Let’s look at the retail landscape today and how important an omnichannel strategy can prove to be in efficiently marketing a brand and driving revenues.

THE NEED FOR AN OMNICHANNEL STRATEGY:

As many times as you have read it, the truth stands that the pandemic initially forced customers to shop online, and in time, customers adopted digital services big-time. This is evidenced by the fact that a whopping 20 million people in Southeast Asia alone converted to being digital customers in the first half of the year 2021. Online searches for terms like ‘instant delivery’ have shot up by 215% in India, just 2021 to 2022.

The conclusion is that customers today are digitally present, and experience content and brands across so many touchpoints, that it is mandatory to have an omnichannel strategy in place for your brand.

An omnichannel strategy is a cohesive sales and marketing approach that seeks to use every customer touchpoint to provide a consistent and effective customer experience. It involves offering a company’s products & services at all customer touchpoints. Such touchpoints include digital channels like web and app, physical, brick-and-mortar experiences, and any other platform or device that a customer accesses.

‘Effective customer experience’ here means that a customer is satisfied with the product and/or while the company simultaneously generates revenue from that activity.

2 WAYS AN OMNICHANNEL STRATEGY HELPS COMPANIES:

Increased customer satisfaction – and company revenue

Let’s understand the power of omnichannel strategy in achieving customer satisfaction while simultaneously increasing revenue.

Consider the example of Petco Health and Wellness, an American pet retailer selling pet food, products, and providing related services. During the pandemic, it understood that its competition and other third-party online retailers were not able to fulfill orders within time. Petco introduced ship-from-store options where customers could browse and purchase online, and pick up the same from physical stores nearest to them.

Petco met the customers where they were, and provided a key micro-service that made customers love them – and made them some money. Petco’s acquisition costs were cut down by two-thirds, and they recorded a 100% year-on-year increase in sales.

High CLV and retention rates

Once sold to, they need to be retained. If you’re wondering who ‘they’ are, you’re probably working too late and need some sleep.

Back to the point. Once sold to, customers need to be retained. Creating an omnichannel presence, or being ‘omnipresent’ lets customers interact with your brand wherever and whenever they choose to. It lets the customers dictate what they want the brand to do, and brands can use this opportunity to foster real-time customer engagement and create lifetime value for the customers.

We’ve covered the ‘how to do it’ in a related blog ‘Getting Omnichannel Right in Retail‘, but just factor in what you’ve read till now and the fact that the global e-commerce share of retail sales is expected to increase to a staggering 24% by 2026, and you’ll see that there’s no doubt that the companies absolutely need an omnichannel retail strategy.

SOME PREREQUISITES FOR BUILDING AN OMNICHANNEL STRATEGY:

Before you go about building an omnichannel presence, here are some of the things you need to have in place. Keep in mind that the list is more exhaustive, and below points are indicative of the nature of preparation you need to undertake.

We can also help you with one of the rather important points..stick till the end.

Creating/Mapping Customer Journeys

When managers and teams work to create a framework for understanding customer journeys and how they react in certain recurring situations, for example, a festival that comes along every year, they are able to understand what the customer wants, and provide it to them.

Knowing who you are targeting

Let’s get this point through with an example. Think With Google shared crucial information for marketers wanting to reach audiences in Indonesia in the month of Ramadan. The data divided customers into 5 segments:

The devoted prayer
The homemaker
The Ramadan groomer
The tech followers, and
The home-comer

With almost the entirety of Indonesia following the religion of Islam, access to such data proves invaluable when slicing the total audience according to the right kind of demographics.

Knowing what you what to communicate

Once you have the right audience figured out, taking the right message to them is equally important. Create a crystal clear overarching brand positioning that you want to reach to reach your audience with

Conducting quick data analysis

Driving real-time sales and delivering personalized CX in an industry where customers display volatile, or easily influenced, behavioral patterns requires lightning-fast data analysis. And this is where we believe we can help companies.

KICKSTART YOUR OMNICHANNEL STRATEGY WITH …

In the quest to deliver a standard, unified experience to customers, we’re proposing that you work on a standardized, unified dataset as the starting point of your omnichannel strategy. Our data exploration tool Explorazor is built specifically to help brand teams arrive at high-quality insights in an easier and faster manner than their current mode of working, which is primarily on Excel. The usage is very simple – query the integrated dataset using standard keywords such as ‘MS Value’ for Market Share Value and get instant data pivots.

Explorazor is also infused with seamless root cause analysis, where managers can identify areas/events of concern via simple double-clicks. Other features such as pivots being downloadable as CSV files, various customizable options and chart style settings, time-period recognition (which is not present in BI Tools such as Power BI and Tableau) make data analysis so much easier, faster, and better for managers.

There’s no reinventing the wheel – one doesn’t have to completely leave Excel to use Explorazor either. Explorazor simply simplifies work done on Excel, to frame it as such.

Multiple Brand Managers from Fortune 500 love Explorazor. As one of them shared his opinion with us “Explorazor is a more intelligent Excel to me”.

Start with Explorazor, and end with more effective omnichannel strategies, optimized media spends, and higher revenues. Contact us at support@vphrase.com for a free trial and/or connect with our solutions consultant for a free demo.

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