January 7, 2024

Evaluating consumption patterns across one million outlets

Maximizing FMCG profitability by tailoring outlet level assortment

Evaluating consumption patterns across one million outlets

At a glance

Challenge

Consumer goods companies face a heterogeneous and challenging market influenced by geographic and demographic factors. For clients operating in a highly scattered market with over one million outlets, evaluating consumption patterns and optimizing product distribution at the outlet level is crucial to capturing market share and identifying growth opportunities.

Solution

A country-wide survey collected product-level sales data, followed by a three-step methodology to identify distribution opportunities:

  1. Outlet Segmentation: Clustering algorithm to analyze consumption patterns based on price and product characteristics across regions.
  2. Demand Model: Analytical engine to assess sales potential for introducing new products, considering substitution effects on similar products.
  3. Range Optimization: Optimization algorithm to select products with the highest impact on volume and margin for each outlet, tailored to its specific consumer demand.

Results

The proposed distribution strategy led to a 7% potential increase in sales volume by optimizing product ranges. Nearly 70% of the volume increase came from just 20% of outlets, highlighting significant gains with lower distribution investment. A dashboard was developed to explore these opportunities, enhancing the strategy’s actionability and providing valuable market insights for the client.

Challenge

Consumer goods companies face a heterogeneous and challenging market influenced by geographic and demographic factors. For clients operating in a highly scattered market with over one million outlets, evaluating consumption patterns and optimizing product distribution at the outlet level is crucial to capturing market share and identifying growth opportunities.

Approach

Solution

A country-wide survey collected product-level sales data, followed by a three-step methodology to identify distribution opportunities:

  1. Outlet Segmentation: Clustering algorithm to analyze consumption patterns based on price and product characteristics across regions.
  2. Demand Model: Analytical engine to assess sales potential for introducing new products, considering substitution effects on similar products.
  3. Range Optimization: Optimization algorithm to select products with the highest impact on volume and margin for each outlet, tailored to its specific consumer demand.

Results

The proposed distribution strategy led to a 7% potential increase in sales volume by optimizing product ranges. Nearly 70% of the volume increase came from just 20% of outlets, highlighting significant gains with lower distribution investment. A dashboard was developed to explore these opportunities, enhancing the strategy’s actionability and providing valuable market insights for the client.

Our
AI-generated
summary

Our AI-generated summary

Our AI-generated summary

Consumer goods companies have to navigate through a rather heterogeneous and increasingly challenging market, with demand patterns being greatly influenced by geographic and social-demographic aspects. Tailoring a distribution strategy in accordance with all these different factors is paramount to success. Our client operates in a very scattered market with over one million outlets.

Our AI-generated summary

Our AI-generated summary

By leveraging a country-wide survey to outlets, data was collected on product-level sales. A three-step methodology was deployed to pinpoint distribution opportunities:

Outlet segmentation – Application of a clustering algorithm to characterize consumption patterns relating to price and product characteristics throughout the country;

Demand model – Development of an analytical engine to evaluate the sales potential of introducing any product in a given outlet, considering the substitution effects on similar products.

Range optimization – An optimization algorithm was developed to identify the products with the largest potential impact on total volume and margin for each outlet according to its specific consumer demand patterns.

By implementing the proposed distribution strategy, opportunities were identified leading to a 7% potential increase in sales volume through the optimization of the ranged products.

Furthermore, with almost 70% of the volume increase originating from only 20% of outlets, substantial gains can be achieved with a considerably lower investment in distribution.

The development of a dashboard to explore the identified opportunities enabled users to explore demand patterns and distribution gaps across the country which improved the actionability of the proposed distribution strategy and provided valuable market insights to our client.

The challenge was to evaluate consumption patterns across these outlets and to optimize the product distribution on an outlet-level, aiming to identify opportunities to capture market share.

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