Danone trims product range as shoppers balk at high prices

Firm logos are seen on merchandise displayed earlier than French meals group Danone 2019 annual outcomes presentation in Paris, France, February 26, 2020. REUTERS/Christian Hartmann

LONDON, June 20 (Reuters) – French meals large and the world’s greatest yoghurt maker Danone (DANO.PA) is slicing the number of merchandise its sells, a prime govt mentioned, adapting to altering client buying habits in Europe and past as inflation bites into family spending.

Supermarkets and the makers of packaged meals are struggling to fight rising prices, with merchandise starting from crude oil to paper packaging changing into dearer as a result of a protracted pandemic-led delivery crunch and Russia’s invasion of Ukraine.

Hovering inflation additionally means buyers are tightening their belts. On Friday, Tesco warned Britons are shopping for much less, switching to cheaper, own-brand merchandise and buying extra typically as they struggle to deal with the price of dwelling disaster. learn extra

Some meals shops have been pressured to take merchandise off cabinets earlier this yr as a result of they might now not afford to promote them. learn extra

These elements are prompting one of many world’s prime meals producers to rethink the way it sells its best-selling merchandise which vary from Activia yoghurt to Evian water.

“Inflation is a dynamic, significantly in Europe, that we have to begin to get used to,” Ayla Ziz, Danone’s world head of gross sales, instructed Reuters, talking forward of the Client Items Discussion board’s four-day World Summit convention in Dublin that started on Monday.

Danone is slicing again on so-called “inventory preserving items” (SKUs), that means some supermarkets would have fewer flavours and packaging sizes of Danone merchandise, she mentioned.

Fewer SKUs would assist reduce prices per sort of product, she mentioned, including that Danone was reviewing its “complete portfolio” with each buyer to see which SKUs it desires to discontinue.

SIMPLIFYING THE RANGE

Client corporations like Danone make many variations of the identical product – from large and small tubs of the identical yoghurt to completely different flavours and worth packs.

Simplifying the vary might means a few of these might be sacrificed to make it cheaper for retailers to inventory and handle a smaller, much less complicated stock.

For example, supermarkets would want to allocate much less cash to storing, monitoring and transporting merchandise.

She didn’t determine which ranges could be focused. “It is not a world reduce of some merchandise,” Ziz mentioned.

Maria Castroviejo, senior analyst at Rabobank Analysis, mentioned the steps made sense for corporations making an attempt to be extra environment friendly they usually mirrored actions by corporations at the beginning of the COVID-19 pandemic.

“If you must make a number of small batches of various merchandise, you’ve got extra disruptions, you must discover have extra substances,” Castroviejo mentioned.

Ziz mentioned Danone wished to “keep aggressive” so it was not slicing again on promotions however was as an alternative promoting fewer kinds of merchandise may even assist it save logistics prices.

Ziz mentioned Danone was investing in software program to assist it value merchandise extra precisely to satisfy ranges customers would settle for.

Meals producers have been in extended talks since final yr over costs with supermarkets. Discussions have been significantly robust in Europe as delivery prices have climbed to a report excessive.

Reporting by Richa Naidu; Modifying by Bradley Perrett and Edmund Blair

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