New distribution channels for a disappointing FMCG product
Executive summary
Challenge
- A recently introduced product in a new category for the company is not selling as expected
- Strongly competitive market in the FMCG category - the fight for the consumer and space on the shelf
- Need to move away from typical sales channels and create a new value proposition to ensure revenue growth and profitability
Actions
- Diagnosis of reasons for poor rotation
- Opportunity map for product revenue growth
- Concepts for a product growth
- Strategic choice of concepts
- Market tests with customers and partners
- P&L financial forecasts
- Recommendations of business models and action plans
Results
- New distribution channel with a potential to stand out
- New product based on company resources, for a new customer segment
- Confirmed high sales attractiveness and uniqueness of the offer
- Implementation requirements
- Financial plans
- Cooperation with a partner for the new product
- Test pilot solution
Service description
We implemented the project in 4 phases:
1. Developing areas with the greatest potential for change based on strategic recognition of the current model and market environment.
2. Ideation and prioritization of the concept of new business models.
3. Validation of the market and financial potential of new concepts and the selection of the most promising ones based on management criteria.
4. Description of key conditions and implementation parameters for each of the models.
Our client
A large company from the Fast Moving Consumer Goods (FMCG) industry, a leading producer of renowned brands of sweets and snacks. Its products can be found in every FMCG retail channel in Poland, from small shops to the largest retail chains.
Challenge
A recently introduced product, in a new category, was not selling as expected. Additionally, its profitability was far from favourable, because of the battle for shelf space, high marketing competitiveness and saturation of the FMCG market
It was necessary to develop a new development concept that would increase product rotation and profit in this new category within 3 years.
Our goals
Our goal was to define, together with management, strategic market opportunities and to develop and select new business models for the product from the newly introduced category.
As part of the project, we were to validate new business models with customers and determine their business justification in relation to strategic and financial criteria.
Key actions
Based on analysis of current operations, competitiveness, megatrends and inspiration from other industries, as a team we generated many new possible value propositions, use scenarios, and customer distribution channels for the product. Then we selected those that met the agreed strategic criteria.
Additionally, as a result of analysis and conceptual work, a business model proposal was created for a completely new product based on the company’s underutilized resources.
We conducted market test to validate the hypotheses and check the attractiveness of our concepts with clients and customers.
For some concepts, the key was to quantify the potential of the value proposition for consumers, for others we established a relationship with a business partner to check interest in cooperation and determine purchasing indicators and product requirements.
Taking into account operational and cost parameters, we developed P&L financial plans and determined necessary investments.
Confirmation of market interest and commercial viability were the basis for recommending two business models and their implementation conditions.
Results
The company’s management accepted our recommendations regarding the “main” product. In the next fiscal year, a market pilot test of the model with a new distribution channel and innovative value proposition for consumers is planned.
Advanced discussions have begun regarding the implementation of a business model for the new product. The sweet spot here is the fact that it utilises production synergies and is based on a cooperation with a business partner that reaches consumers directly on a daily basis, throughout Poland.
Client benefits
Our client received not only concepts for new action directions going beyond competitive FMCG distribution channels, but also evidence that customers and partners are interested in them. Calculations indicating that these new directions will help achieve the assumed financial goals were also important. Thanks to this, the client can seize the opportunity to increase rotation of the “main” product and build strategic positioning in another product category, where cooperation with a partner can bring quick business benefits.
Innovative, market and financially validated business models are an opportunity for strategic competitive development of the company with the maximum use of its competences and market and operational synergies.
Summary
Entering the market with a new product category where competition is very intense is often associated with low profitability. The traditional increase in the marketing budget works in the short term and does not bring the expected results.
It is worth looking for solutions where no one from the competition has yet been found. Where we can offer consumers completely new experiences and a new value proposition.
And by working on new business models for one product category, we often discover opportunities for other categories which can significantly increase the benefits of working on innovations.