1. As one of the most experienced and successful executives in the Fast Moving Consumer Goods industry, please share with our readers some of your thoughts about 2016 for FMCG.
The experience gained in over 20 years of trading FMCG, both in private Romanian companies, as well as in large multinational companies, as top executive or expert adviser, gave me the opportunity to understand that in 2016 the FMCG market in Romania is at the highest level of performance compared to previous years. I mean the production or import, distribution and trade through the largest retail chains or traditional commerce, but also the high level of consumption.
2. Have you seen any changes in strategy/ tactics for FMCG companies in 2016?
There are changes in the strategy of FMCG companies in the sense that I have noticed an increased interest in rigorously defining the target customer groups and knowledge of psychological profile in terms of needs and expectations. Changes in the behavior of different types of customers obviously generate a change in strategy or tactics depending on the life cycle of that company, brand or product. Also, we notice that the strategies for expansion are continuing, especially with the proximity format, acquisition and strengthening of the market position. Meanwhile, we are witnessing an intensive development of strategies to offer the customer what we call Total Shopping Experience through the operating model on - off line. In the e-commerce FMCG market we are witnessing significant increases, but it is still far from reaching its full potential.
3. What are the biggest challenges for FMCG in 2017? What are the latest tendencies?
As I see myself, in the collaboration with different FMCG companies in my current role of consultant or trainer, the big challenge for 2017 is to establish business relationships of deeper and wider partnerships between suppliers and retailers in order to identify and meet the customer’s expectations and reach the financial goals of both partners. Trying to be permanently informed with news from the international market, I can say, based on what I have studied, that what is most important for a company in FMCG remains to have a clear and consistent strategy, in which to place with major focus the components of category management as assortment, pricing, promotion and merchandising policies. By strategy, we mean a set of decisions regarding the structure, organization, functions and processes.
4. The Romanian fiscal system was subject to a major decrease in taxes in 2016. How do you characterize the boost in spending triggered by the VAT cut? Can we talk about a temporary growth or a permanent boost in spending power?
I believe that lowering VAT has caused an increase in consumption and purchasing power for the long term because the possibility of real and fair competition in the FMCG segment was acknowledged, especially in the supply of raw materials and fresh products. Increased demand should influence the development of FMCG companies, through a quantitative increase in the number of employees and their income, but also through a qualitative evolution of the investment in human resource training, as well as in technology and software. So, the demand also extends horizontally by upgrading the consumption habits.
5. How did the companies in FMCG adjust to the new taxes? What did they do wrong? Where did they excel?
The companies in FMCG adjusted quite quickly and in a fair way to the new taxes, with a good communication around the adjustments. The game was to profit from the favorable economic environment generated by the fiscal changes and other positive factors, and this indeed happened. The current price level of food products absorbed almost the entire level of the tax decrease. On top of that, I perceive a smaller focus on price competition and aggressive promotional offers. Anyway, a breath of fresh air was needed and expected in FMCG for many years now, so I mostly see the positive effects of the fiscal changes.
6. In June 2016, the Chamber of Deputies voted, in unanimity, a law imposing a 51% ratio of marketed food products to consist of Romanian products. How do you see the effects of such a legislative change? In this context, how should retailers manage imports, by obeying the law and, at the same time, by not jeopardizing their profits and market share?
As far as I understood correctly from the law complementing the famous 321/ 2009, it is not exactly mentioned that a 51% ratio of marketed food products need to be Romanian, but to be delivered through the shortest chain directly by the producers. This condition is also supposed to be applied to certain categories of food products. The spirit of the law consists, indeed, in offering higher opportunities for Romanian products to be exposed, which should be seen by retailers as an advantage. I believe it is useful to mention what a recent market research shows, namely that products/ brands wearing Romanian symbols (flag, national colors, traditional motifs, name…) are sold 5% more than other products with a similar level of price and quality. By consequence, enlarging the assortment of Romanian products will generate more sales and at least, preserve the market share. According to my experience, Romanian products from new suppliers are usually bringing higher profitability versus notoriety brands. Therefore, one potential solution to the necessity of obeying the food law would be to focus the assortment, merchandising and promotional policies on Romanian products. Moreover, as described above, a partnership retailer – supplier upgraded to the level of Fact Based Selling by sharing information and profit, together with a very efficient internal costs management would represent important contributors to the way of achieving the financial objectives.
7. At the global level, ‘category management’ is highly valued. In simple terms, this means that a company is managing a product category as a strategic business unit. How has this concept been applied in Romania? Does it work? Are we ready for it?
Category management is definitely one of my favorite topics. Having deep knowledge about it, I consider category management a combination of science, philosophy, art and fashion, at the same time. Category management is applied in Romania and it is of big interest for more and more companies. It is of highest importance to understand that CM should be a mandatory part of the global strategy, focusing the target customer groups according to the company’s segmentation criteria. Unfortunately, sometimes CM is confused with a onetime project approach concluded with a planogram. The fact is that CM is a permanent process of analyzing the customers’ behavior and applying the appropriate assortment, pricing, merchandising and promotional policies. It requires dedicated teams and a cross functional approach of the process. Despite the permanent efforts and resources involved, it is worth applying CM rigorously, due to the big benefits brought in terms of customer satisfaction and high financial profit. It is strongly demonstrated that retailers save time and own investments if they closely cooperate, during the category management process, with suppliers using those resources and expertise.
8. As an expert with a huge experience in multinational companies, as well as an entrepreneur, what are the best 3 advices for FMCG companies in 2017? What are your best advices for entrepreneurs in 2017?
If I were to use my expertise in order to advise the entrepreneurs and the management of the companies, my first recommendation would be to invest in the development of the people in order to get full engagement and passion for the jobs, as the main way to reach the objectives. Furthermore, a partnership way of working with the employees could generate an ideal level of performance. Meanwhile, building and implementing a clear and consistent customer centric strategy as an umbrella for the category management’ components represents the main challenge which enables SATISFACTION GUARANTEED as Sam Walton (founder of Wal-Mart USA) liked to say.