1. How do we manage crazy?
The ultimate frustration – a major surge in demand for our products at the same time as our distribution capacity is hit by reduced workforce and uncertainty as to which smaller clients are or can remain open.
Some initiatives we can take now:
- Start home delivery B2C business now – even with a very restricted offer – to maintain cashflow and reduce perishable inventory. 80/20 rather than perfection is fine – but do it now!
- Boost production capacity to react to extraordinary market demand
- Decide who are our priority retail customers and tell them that they fall into the top category, and keep them closely informed of what can/cannot be delivered
- See if you can recruit 3rd parties to cover delivery demand at present
- Question whether you can cover full retail universe of use key regional customers as wholesalers / sub-depots
- Cut back workforce to bare minimum (and merchandisers are redundant)
The consensus is that this is going to be a Marathon rather than a Sprint so start getting ready for a long hard race of endurance – slim down now
2. Cash is King
Once you have agreed the shape and cost of a stripped back workforce what can be done to get as much cash in as possible?
- Drive transactions on your B2C system and grow coverage and portfolio depth fast
- Normal credit terms in abnormal times are inappropriate – can we switch to cash only sales?
- Grab the Debtors ledger and hunt for cash from customers – maybe offer early payment discounts?
- Look at your service providers. You probably no longer need employee transport, caterer and canteen, cleaning and other usually outsourced services
- Advertising and Promotion spend is wasted expenditure – cut it
- CAPEX – stop it
- Repair and Maintenance – strip back to emergency repair only
3. Focus on your Supply Chain
A major challenge is shortly going to be not satisfying Market demand but rather what market can you satisfy. 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, and – forgive the pun – will not be at the front of the queue in terms of priority markets to be supplied.
Nearly all supplier markets are confronted with the same reality – reduced capacity, both in terms of production / transformation and export services. What can you do in these circumstances?
- Strip down your portfolio by doing an ABC analysis and concentrate on the A products – fast turn essential to the company’s core offering
- Sense check the selection of priority products with the Finance guys who understand individual product profitability
- Lock in forward contracts with suppliers on volume – given the currency markets fluctuations real dexterity in moving prices 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:
- 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 – look at smaller pack sizes to maintain affordability
- Stripping out the slow turn / low market share products – rationalize your portfolio
- Post crisis looking at using wholesalers rather than covering the full retail universe via direct distribution
5. The Landscape beyond COVID-19 – Anticipate the Changes
I would like to make some predictions:
- Consumers are going to be much more aware of product quality, health characteristics and product certification – accompanied by new Govt measures on imposing standards and product testing
- The B2C channel is going to grow fast as consumers increasingly avoid retail outlets
- We are going to see considerable consolidation in the import and distribution segment with many smaller operators just not able to survive during the crisis or in the post crisis world.
- Big retail will get leaner, and will use their increased power to both reduce locally sourced inventory and SKU range, and will favor sales of directly imported own brands
- Traditional trade will be decimated post crisis with many smaller outlets never reopening
- HORECA, until recently a great source of growth for FMCG suppliers, will be a shadow of its former self
- 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 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.
Anticipating change, achieving lean operations, and operating with slimmer portfolios are going to be the keys for survival.
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.