The global FMCG industry is predicted to grow at an incredible 5.4% each year to reach $15 trillion by 2025, with much of this growth coming from developing markets, according to a report from Allied Market Research. However, historic data shows that large FMCG brands are stagnating rather than growing, with small companies generating two to three times their fair share of growth. According to a Nielsen report, the majority of growth (53%) in FMCG sales comes from the smallest manufacturers who seem to be cannibalizing sales from the largest food and beverage brands, whose market share dropped to 31% and contribute only 2% of the sector growth.
Smaller brands and e-commerce giants have outpaced large FMCG brands in driving growth due to their digital-first approach. With consumers changing the way they shop, digital technology has allowed smaller companies to remove their dependence on traditional distribution routes and gain faster routes-to-market, which is invaluable in developing economies. To remain competitive and recover market share, FMCG brands must fundamentally revisit their way of working and transform their distribution chain. If they continue with the traditional model of mass marketing, large FMCG sales teams will struggle to drive growth effectively.
The traditional distribution chain causes stagnation
The traditional FMCG distribution chain in emerging markets is characterized by a complex maze of intermediaries and players, including distributors, sales reps, wholesalers, and retailers. Despite the importance of the CPG industry, much of it is unorganized, with local convenience shops and mom-and-pop shops still playing a dominant role. The abundance of middlemen and the fragmented nature of the distribution chain continues to impose a challenge to the growth of FMCGs due to:
- Lack of visibility across the value chain: This is a significant problem for FMCG brands, especially in emerging markets like Africa, where van sales are still commonplace. With this inefficient distribution model, line of sight throughout the supply chain is almost impossible, leaving brands with no data at POS or insights into actual consumer demand.
- Sales and marketing teams are left in the dark, lacking the data and insights needed to respond to market demand in real-time and make strategic data-driven decisions to drive growth.
- Slower route to market: The traditional distribution chain is highly fragmented and interdependent, which increases the friction that large brands encounter when allocating inventory and moving products to the end consumer.
- High SG&A Costs: SG&A costs remain high and may account for up to 20% of annual revenue in the current sales process as sales representatives have to visit merchants to gather data manually.
To maintain market share and drive growth in developing markets, FMCGs must embrace an agile, digitalized distribution chain to optimize their distribution processes, increasing efficiency and reducing risk and cost.
Digitalizing the distribution chain is the way to grow
The annual consumption in developing markets is expected to hit $30 trillion by 2025, one of the largest growth opportunities in history. To maximize this potential, brands must transform their distribution processes and rethink how they interact with retailers.
Adopting digitalized distribution allows companies to meet rapidly changing consumer demands and address the challenges that traditional distribution could not solve, leading to a distribution chain that is:
- Faster: With advanced forecasting approaches built on predictive analysis of syndicated data across the entire value chain comes a more precise forecast of consumer demand. What were once monthly forecasts become weekly and even daily.
- More flexible: Sales teams can now respond flexibly to rapid changes in consumer demand, reducing “out-of-stocks” and empty shelves at POS and saving the $1 trillion lost every year.
- More granular: By understanding the micro-consumption patterns in the market, companies can manage demand at a granular level with intelligent, data-driven inventory allocation that capitalizes on higher margins.
- More efficient: With access to data analytics, sales representatives can automate sales processes and free up valuable time to generate new sales opportunities, leading to a 10 – 15% increase in efficiency.
Digitalize your distribution chain with the world’s first open commerce platform
To achieve growth targets by digitalizing the distribution chain, brands need a fully integrated system that connects manufacturers, distributors, wholesalers, and retailers, unlocking the value of the distribution chain. This integrated system needs to provide real-time, syndicated data to a granular level across the entire value chain, which can be broken down per distributor and even per retailer. While many FMCGs are beginning to adopt digitalizing their distribution processes, this level of in-depth insight into the value chain is almost impossible. Until RedCloud.
RedCloud is the world’s first open commerce platform that unlocks the full value of the distribution chain, connecting brands, distributors, retailers, and merchants. With RedCloud, you have access to real-time data captured across the entire value chain, giving sales and marketing teams:
- Increased visibility: Armed with real-time, granular insights, your brand has increased visibility at POS and can identify rapidly shifting consumption patterns in real-time to identify areas of high and low demand. You can also re-allocate inventory intelligently, based on customer segmentation to capture new sales opportunities that can increase revenue by up to 7%.
- Faster route-to-market: RedCloud provides better data analytics to help your sales teams create an agile, data-driven go-to-market approach that improves sales and lowers the cost to serve by up to 15%.
- Reduced SG&A costs: RedCloud allows you to automate sales processes and eliminate time spent on manual tasks like visiting merchants to collect data, physically selling products at the door reducing SG&A costs by 70%.
RedCloud is the partner your brand needs to digitalize the entire distribution chain, drive growth, and increase revenue by up to 25%*. To learn more about our solution and how it can help your business, request a demo today.
*Statistics based on research from Oliver Wyman.