October 09, 2013

What is TodaY the bEst busineSs StrategY for f&b itAlian marKet?

The easiest answer is: 
don't invest in the traditional channel, too complicated and in heavy financial difficulty, and concentrate on private label for GDO and HD.

It makes sense!

The easiest answer, but superficial.

It depends on your products' category, their brand awareness, leadership and if you have done a selective channel strategy until now or massive penetration in every channel to catch your consumer everywhere (I can continue but I know that you are experts)...

Normally, traditional channel gives an higher profitability than the others, especially if you can supply directly the point of sales without using distributors or wholesalers. Obviously the fixed costs are huge and can be supported only by huge sales volumes.

But let me to do an example in case a company already operates  both in GDO and in Normal Trade.
The choise to not invest in NT must consider the WD/ND ratios, but the consideration of the penetration of the channel is enough as first step. 
Not many companies have a coverage above 40% of total points of sales of the traditional channel. 

This simply means that is always possible to conquer new point of sales and to carry out added turnover.

How?
- Stimulating your direct sales force by appropriate incentives
- Giving new mandates to new agents for not covered areas
- A closer cooperation with the wholesaler by bonus to his salesmen, training on products and techniques, lasting agreement ...
- Exploit existing sales force of another company , expecially if off-truck sale, to reach unprofitable points of sales....
- Focus on service as added value for the point of sales both logistic than financial
And so on...

At the end, if is true that in the next years in Italy for the GDO/HD channels will increase the private label's market share, it is also true that the traditional channel will have his weigth still for a long time. 

So a Branded Company shall defend today his value to not lose it tomorrow, it shall be present everywhere his consumers will go shopping.

Therefore the best strategy could be summarized as:
Take a look to the highest profitability of traditional channel, especially for branded company, and provide yourself efficent technology and lean organization to produce PL. 

Maybe you should create two business units completely indipendent, one for branded product and another for private label or unbranded product... but this is another story.




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