How Beverage Teams Can Improve On-Shelf Availability at Scale
Out-of-stocks can be a problem for all brands, but it's a particular challenge in the beverage category where consumers are typically looking to fulfill an immediate need and have plenty of options if their first choice is unavailable.
That means the category needs to prioritize on-shelf availability and leverage retailer relationships and the latest technologies — such as smart shelves and data-driven demand forecasting — to avoid losing out on sales and eroding the impacts of their marketing activity.
“In beverages, particularly in the convenience stores, you’re going to see consumers really looking at real-time consumption, so they’re going to make a substitution, most likely another brand,” said Sean Harapko, EY Americas consumer products growth markets and beverage sector leader. “On-shelf availability ties directly to lost sales.”
The beverage category has become increasingly segmented and competitive, which means both category leaders and challenger brands must be cognizant of their OSA to ensure they’re in the consideration set and potentially benefit from a competitor’s misstep by being the shopper's second or third choice.
“The consumer is willing to try new things,” said Erich Parker, Blue Chip senior vice president, integrated media. “That’s also due to the impulse nature of the category. It’s a low involvement purchase. I’m just grabbing a single, so it’s low risk for me.”
Ensuring products are on the shelf is especially critical when running any sort of marketing campaign during which demand might increase. Missing sales reduces the KPIs of programs focused on sales lift and shopper conversion and can actually erode brand loyalty, added Mary Kate Huffman, senior director, commerce and investment strategy, Blue Chip.
Artificial intelligence can be used to better integrate sales data and media delivery to ensure advertising isn’t being wasted, she noted. “There are new tools that we can use that can optimize delivery on places that are having low sales to try to increase sales or if they’re having great sales on their own, maybe we can pull back on media."
Loss Potential
The potential for losses is particularly high at retailers relying on traditional promotional calendars and offers delivered through circulars or coupons that are not tightly synchronized with their inventory management. Fulfillment and customer service teams should work together to ensure they’re meeting their goals for sales and shopper satisfaction.
“If you have issues predicting demand, then every time you shape that demand through a promotion, your chances for an out-of-stock are greater,” said Accenture’s global beverages lead Maria Rey-Marston. “Everyday low prices lets me train the consumer so I have more stable demand behavior, which obviously makes it easier to manage the on-shelf availability.
"But the minute your key competitor does not follow that same strategy, you have to respond because there’s a competitive pressure."
The last mile is often a focus of supply chain logistics, but Rey-Marston emphasized the importance of the last 10 feet — the distance between a store’s back room to the shelf. Failing there is the most expensive mistake since brands have already incurred the transportation and inventory costs but can still miss out on a sale.
New technologies that link POS transactions to inventory management to trigger replenishment can help prevent those issues.
“In any inventory system, you do what we call reorder points that [show a] depletion rate during the day or during the week," she said. "[There is] a trigger point that sends a replenishment order to the back room or the merchandiser" to tighten things up.
Huffman said visual intelligence is also likely to play an increasing role in helping improve OSA.
“We are seeing new capabilities in digital signage being able to recognize through AI that there’s a person standing there and even being able to connect the dots of who that person is,” Huffman said. “I think that’s only going to increase as time goes on and become more critical to how people are marketing.”
Harapko acknowledges that privacy concerns can limit implementation, but he expects more stores will begin using computer vision as costs come down, including integrating data from smart displays and security footage to track shopper patterns. Some consumers have pushed back against smart coolers, which can make it hard to see what’s actually inside the display, but he expects companies will keep using the technology to get real-time information.
“I think the technology still needs to be ironed out, but my guess is we’re going to see evolution there, and that will be something that becomes more prevalent as we go forward,” he said.
Indeed, PepsiCo struggled to obtain timely competitive data from a number of its key retailers, including Costco and Aldi, according to retail technology provider Storesight. Without visibility into assortment changes or pricing fluctuations, PepsiCo's category management teams had to piece together information through manual store visits. The slow and inconsistent process unsurprisingly made it even harder to understand shifting market dynamics or explain sales declines.
The beverage company has improved performance through shelf intelligence that includes enhanced reporting on assortment and pricing trends across beverages and snacks, as well as dashboards tailored for specific retailers, per Storesight. This real-time visibility in turn sharpened its view of competitor strategies, reduced reliance on manual audits, and provided leadership with actionable insights.
Proactive Forecasting
Demand forecasting technology has become more sophisticated in the past five to seven years, allowing brands and retailers to proactively determine which products they need to have stocked. New models include weather, social media activity, and schedules for local events like sports games and music festivals.
“I think COVID really alerted everybody that external data could be as valuable, if not more valuable, than internal data and helping figure out your demand forecast,” Harapko said.
Getting the right data will require collaboration between retailers and brands, something that will likely give the biggest players the most power. Just as the largest brands can guarantee their in-store placement through direct store delivery, the new competitive edge will be finding the most efficient ways to leverage emerging technology throughout the path to purchase.
AI is allowing brands and retailers to process data much quicker, enabling them to quickly calibrate promotions and pricing. That in turn makes digital shelves more valuable because it allows stores to implement changes without much labor.
“This industry has always been data rich, but we didn’t have the computing power to process at the velocity that you need to make some decisions,” Rey-Marston said. “We just didn’t have the computing power to be able to quickly triangulate your personal behavioral information with your current transactions with the reality of the products in the store with the competitive position of different products in the same category and make a decision fast enough to impact the results.”
This story was originally published on P2PI, a CGT sister brand.