No one wants to pull a product because it’s been underperforming, but sometimes it has to be done.
In the grocery sector, 70 to 80 percent of new products end up failing, and of course even established products can outlive their value. Just think about TaB, the diet soda that’s been on retail shelves since 1963: in October 2020, Coca-Cola announced that it was retiring TaB to “[prioritize] category-leading brands with the greatest potential for growth and scale.”
To be sure your food business benefits from the decision to pull a product, you need to know when is the right time, how to do it in a way that won’t upset loyal customers, and how to work with your retail partners to make the transition smooth for everyone. Using data as your guide, you can pull a product successfully to cut your losses and still maximize profitability.
Should you pull that product?
When you have a line of products, one of them will always be the slowest seller. But does that mean you should discontinue it? Here is a guide on how to make that decision.
Do a data dive
Entrepreneurs often trust their gut when making big decisions -- and when thinking about your product line, you can still listen to your instincts. But David Koretz, a food industry entrepreneur and founder with experience in the protein space and shelf-stable snacks, says “the decision also needs to be data-driven. It’s not just your gut, but also that micro/macro mixture of information, from unit economics to consumer trends.”
While basic data from purchase orders can help you see which products are the lowest sellers, there’s more to the decision than simply cutting out the last-place items. If you do this, you may unknowingly pull a product that doesn’t do well on its own, but that boosts the sales of other products in the assortment. Or, perhaps it’s a top-seller in a specific region, and can perform given the right geographic mix. Or, you might save money by cutting one product, only to see the per-unit cost of other products manufactured on that same line increase.
Advanced data analytics can help you truly understand your products, your sales, and your customers to avoid these snafus. For example, you might discover that the expensive mix-in for your kumquat yogurt never dropped in price as you had hoped it would, so you’re making 30 cents less on each unit of kumquat than on other flavors. There’s not enough margin for you to support that product.
It’s even better if the decision to pull a product is based on industry-wide data and not just your own; sharing data among all the partners in the food supply chain gives you a broader and deeper understanding of all the key factors. For instance, industry or category-level data can tell you which products are long-term consumer demand items versus short-term trends.
Check your complexity
Product innovation is crucial for food businesses as consumer tastes change and shelf space is at a premium. Often, the more varieties of a product you have, the more shelf space—and consumer awareness—you’ll get. This increases the pressure for food producers to pump out as many varieties of a product as they can.
But the more products you have, the more complex your supply chain gets. Response times and inventories can suffer, which leads to lower performance overall. That’s why it’s especially important now, during COVID-19, that food producers turn a critical eye on their products to determine which should stay and which should go. If you don’t, your retailer likely will: SKU rationalization is expected across the board this year.
Big food companies are already streamlining; for example, in June 2020, Mondelez announced a "significant" reduction in SKUs to help simplify its supply chain. And in July 2020, Coca-Cola announced they were planning to “ruthlessly prioritize core brands and SKUs”; besides TaB, Odwalla Juice and ZICO coconut water also didn’t make the cut.
Consider a redo
Even if the data shows your product is underperforming, your choices aren’t only to keep it or toss it. There may be an opportunity to reimagine the product or its marketing to make it more successful in your line-up.
For example, say your yogurt company offers four different mix-in flavors, including kumquat and peach. If the peach is selling the least, you may consider pulling it. But you might also examine if there’s a formulation issue with the peach. Maybe the sugar content is higher than the other flavors, turning off health-conscious consumers, for example.
Here are a few ways you might boost the success of a slow-moving product:
- Repackage it. Could it be that the packaging is increasing your costs or putting a damper on demand?
- Remarket it. Did this product enjoy the same level of marketing that other products in the same line did? If not, it may be a good candidate for new messaging or a new campaign.
- Rebrand it. A new logo, color, or slogan might help your product better appeal to your customer base.
- Reformulate it. As in our peach vs. kumquat example above, sometimes a tweak in the formulation, such as the flavor or sugar level, can save a product from the cut.
Analyzing your data and having conversations with your retail partners are good ways to determine whether any of these steps might give a product a second chance.
How to pull a product
If you’ve decided that you need to pull a product, you’ll want to do it in a way that benefits your retail partners and consumers. Here’s how.
Tell retailers a data-driven story
When it’s time to tell a retail buyer that you’re discontinuing a product, Koretz explains the approach: “You can’t just say, ‘This product sells less so we want to put this other one in its place.’ They need the full ‘why.’ Explain how this decision will maximize the value of your contribution to the set.”
So if you’re a beef jerky company with four flavors and you want to pull the slowest-selling flavor and replace it with a turkey jerky, weave your data into a story that shows how this action will benefit the retailer and their customers. “For example, we’d say that our consumer really likes our product line, and they're asking for a turkey product from us,” explains Koretz. “So let's take our lowest-selling flavor and replace it with the turkey product, because that's going to give us a better chance to support our customers in the long run.”
Make it seasonal
To satisfy the diehard fans of a less-popular or higher-cost product, it may make sense to turn it into a seasonal offering. In the yogurt example, the more expensive kumquat product might become a special winter flavor. “That fourth flavor of yogurt could be an annual variant that you can change every year—to keep experimenting and see if you find something that really sticks and the customers love,” says Koretz.
Keeping a lower-selling product alive seasonally for loyal customers may not be the most economical choice, but it could help you maintain year-round customer loyalty. In a survey from the Consumer Brand Association, 85% of consumer packaged goods CEOs ranked the consumer as having the number one impact on their decision-making. You’ll be in good company keeping loyalty top-of-mind.
Not all products can be winners, especially in the competitive world of grocery. By combining your experience and knowledge with your internal, category, and industry data, you can make the best decisions for both your business and your customers.
Crisp leverages the power of the cloud to help food brands gain critical insights, make better decisions, and skyrocket profitability. Reach out to us for a demo of our business insights dashboard.
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