1. Make sure you stay on the Radar
In a panic situation, which judging by the videos shot in the aisles of our supermarkets and doing the rounds on Facebook, is very much the case, operators concentrate firstly on big suppliers and category leaders. At a time where delivery capacity is reduced by workforce absenteeism and outlets have restricted staffing and access, current business is a major challenge.
So what are some initiatives you can take now:
- Shout loudly to get your permits to deliver and operate
- Scramble to switch at least a portion of your sales to direct home delivery – build a B2C capability now.
- Decide who are our priority customers and give them priority in terms of service and above all delivery. Make sure that the importance of each priority client is communicated to them, and be in constant contact with any changes in availability and delivery schedules
- Pre-allocate and reserve stock for priority customers
- Have a critical look at your distribution model – many customers have already stopped trading, especially in the entertainment and fast food sectors
- Negotiate with major customers to have pre-agreed delivery slots so time is not wasted in queues or priority given to bigger suppliers
- Question whether you can cover the full retail universe or use key regional customers as wholesalers / sub-depots
- And sadly, cut back workforce to bare minimum (and merchandisers are redundant)
Rationale: the consensus is that this is going to be a fight that goes the distance – This thing will not end now, and you need to hold the distance.
2. Grab Cash
Having tackled the always difficult area of Manpower reduction, it is time to boost the cash position of the company as much, and as fast as possible. What can be done to get as much cash in as possible?
- Maintain as much cashflow as possible by building a home delivery B2C capability as retail outlets become restricted
- Look at the payment cycle and see where you can reduce credit – can you switch to cash only sales? Can you pull in cash with early settlement deals?
- Tighten control and management of Debtors – ask for your money now
- See where you can reduce variable cost or the beloved “discretionary expenditure”
- Look not just at general expenses but also at your service providers. Who and what do you really need?
- Cash being spent on Advertising and Promotion spend is wasted in the current market – cut it. Avoid giving trade discounts or promotional discounts
- CAPEX – stop it
- Repair and Maintenance – strip back to emergency or breakdown repair only
3. Re-engineer your Supply Chain
A major challenge is shortly going to be consistency of supply, all through the supply chain. Mauritius is highly reliant upon importation for raw materials for FMCG goods, and also for staples and other branded goods. Yet Mauritius is not a big market for most suppliers, so we will have little leverage for preferential treatment. Equally nearly all suppliers and countries are confronted with the same reality – reduced capacity, both in terms of production / transformation and export services. What can you do in these circumstances?
- Be ruthless with non-performing products. Strip down your portfolio to only Fast-Moving, quick stock turning products and eliminate the smaller, lesser performing by doing an ABC analysis and concentrate on the A products – fast turn essential to the company’s core offering
- Agree minimum quantities or quotas for key products with suppliers and boost up orders of staple fast-moving lines
- Hedge FOREX payments on forward contracts with suppliers and be ready to move prices on current stocks to offset the Rupee’s depreciation is essential.
- Seek out alternative suppliers for major products and categories – have a Plan B ready in case current suppliers cannot deliver makes sense.
4. Mid-Term Market
The immediate outlook when we have hopefully shaken off this pernicious virus is likely to be less than exciting, with a broad consensus being that there will be, or indeed there already is, a Global recession.
Mauritius is in the next 3-5 years, going to suffer significantly, especially as the Rupee devalues, the economy is hammered by the collapse of the tourism industry, and a slow and cautious return to trading and transaction. In these circumstances it is worth:
- Further developing and refining your B2C capabilities and transactional platforms and building your database of clients
- Analyzing the most important products which have major differentiation from competitors’ brands, and ensuring that they are given priority
- Deciding what are your best Value for Money (VFM) products and nurturing and promoting these as your priorities.
- Preparing a portfolio which is overtly VFM – perhaps in smaller pack sizes to maintain affordability
- Stripping out the slow turn / low market share products – rationalize your portfolio further
5. The Landscape beyond COVID-19 – Anticipate the Changes
Some elements to consider as the new landscape becomes clearer:
- Reliability of B2C home delivery is essential. Think what you need to deliver many more but smaller orders to individual households, how to operate to confirmed timeslots and get the right frontline staff to interact with customers
- How do you engineer your offers to consumers post crisis are likely to be much more aware of product quality, health characteristics and product certification – and it must be likely that the Govt will accelerate the agenda imposing standards and product testing
- Be predatory – quickly snap up good brands from operators who withdraw from the market – or go bust.
- Look for operations where there is synergy if you combine – be an instigator in the inevitable consolidation rather than a victim.
- Look to grab 1st mover advantage with innovative new products, especially where there is a clear Value for Money (VFM) benefit
- Make it easier for customers to pay you. The market will move to cashless transactions rapidly – with savvy operators leading this change
There are currently lots of challenges and uncertainty, but those who win in the new market environment post COVID-19 will be those who truly understand the new requirements of their consumers and who flex their brands and portfolios to meet demand – not those who think it will be a return to business as usual.
Director - Matrix 8 Services
Chief Executive with a proven track record of successful business development and leading turnarounds. Skilled at driving profit growth and market penetration in 3rd world markets, and managing significant strategic change and restructuring, in both multinationals and privately owned businesses. Over 25 years’ experience at CEO level in FMCG and other industries. Has lived and operated in 15 different countries in Africa and Asia. MBA from Cranfield (UK). Cosmopolitan, culturally astute, high energy and leads from the front.