By Ray Florio, Growth Consulting, IRI
In the first blog post in this series, I wrote about stockpiling in the midst of a crisis and what happens when it’s over. In particular, we pointed out the likelihood of lower long-term penetration—the result of customers overconsuming products they’ve stockpiled and/or associating those products with the crisis.
Below are four recommendations to help CPG market leaders navigate these challenges during the COVID-19 crisis:
1. Do not incentivize stockpiling among consumers.
The first brands to see stockpiling are going to be market leaders. In the past, some brands have attempted to encourage stockpiling by implementing coupons, discounts, and other incentives linked to high multiples. This is a mistake, and not just for the reasons described above. During previous stockpiling events, these brands found their products became the choice for deal hunters, some of whom turned the crisis into a personally profitable event. We’ve all heard about some bargain hunters buying out all the toilet paper and hand sanitizers and then reselling them at exorbitant rates. These events, while reflecting poorly on those who are taking advantage of the situation, can also be a PR nightmare for the retailer and supplier. For these reasons, we also recommend limiting the quantity per household of items sold through direct-to-consumer channels, especially during a pandemic, extreme weather event or other crisis situation.
2. Rebalance inventories to the most critical geographies and banners.
Rebalancing inventories and plugging supply gaps will help shoppers avoid running short of needed products.While larger brands have higher levels of inventory and more extensive supply networks than smaller ones, few have the sustained capacity to fulfill all stockpiling needs, particularly if global supply chains see a disruption. As a result, before beginning any initiative to rebalance inventories, manufacturers must define the most critical geographies and banners. These determinations should go beyond where the brand has the strongest demand and should be balanced against the needs of local shoppers and communities.
3. Inform retailers of supply risks and backup plans early
Ensuring your relationship with retailers remains strong will prove critical to mitigate any longer-term declines. While smaller brands will move to fill in supply gaps, retailers will be more likely to sustain their presence on shelf if they feel the larger brands did a particularly poor job of meeting their needs. Everyone expects stockouts, and it will do no one a service to hide stockouts when they are coming. Appropriately forecasting future demand, alerting retailers where shortfalls are likely, and sharing backup plans to narrow the gap will help avoid some of the potential encroachment by other brands.
4. Invest in targeted consumer assistance in hardest-hit areas.
Brands should seek out opportunities to invest in highly targeted consumer assistance in the hardest-hit areas. In the past, this used to mean sending the product and supplies to victims in the first few days after a natural disaster. In the current crisis, this may mean working with retailers to waive delivery fees of supplies to older and other more at-risk shoppers in certain communities. If a product has a lengthy shelf life, the brand is well positioned to assist some of the hardest-hit consumers, particularly older demographics, who are most at risk during the pandemic.
Keep in mind that none of these recommendations are time intensive or require substantial change to existing capabilities. They are actions that can be taken right now. And we think they should be. In a crisis of this level, there is simply no time to waste.
For a deeper look into how stockpiling during COVID-19 will impact your brand, contact me at Ray.Florio@IRIworldwide.com.
Other Articles in the Series:
CPG Stockpiling: What to Expect Now and When It’s Over
Five Ways Smaller Brands Can Manage a Stockpiling Event
