Danone slashes product line as shoppers balk at high prices
French food giant Danone is reducing the variety of products it sells to retailers as it seeks to cut costs, a senior executive told Reuters.
Supermarkets and packaged food makers are struggling to combat rising costs as products ranging from crude oil to paper packaging become more expensive due to a prolonged shortage of pandemic-induced shipments and the invasion of Ukraine by Russia.
These factors are prompting one of the world’s largest food manufacturers to rethink the way it sells its best-selling products, which range from Activia yogurt to Evian water.
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“Inflation is a dynamic, especially in Europe, that we have to start getting used to,” said Ayla Ziz, global head of sales at Danone.
The company is reducing SKUs, which means some supermarkets will have fewer variations of Danone products when it comes to flavors and sizes, she said.
Having fewer SKUs would help reduce costs per product type, she said, adding that Danone reviews “their entire portfolio” with each customer to see which SKUs they want to drop.
Consumer companies like Danone make many versions of the same product – from large and small tubs of the same yogurt to different flavors and value packs.
It’s not about removing a whole range of products from the market, but simplifying its range means that some of them could be sacrificed to make it cheaper for retailers to stock and manage more inventory. small and less complex.
She did not identify the ranges that could be targeted. “It’s not an overall reduction of certain products,” Ziz said.
Maria Castroviejo, senior analyst at Rabobank Research, said the metrics make sense for companies trying to be more efficient. Many companies did something similar at the start of the COVID-19 pandemic.
“If you have to make a lot of small batches of different products, you have more disruption, you have to find more ingredients,” she said.
Danone wants to “stay competitive” so it is not reducing promotions but, on the contrary, selling fewer product types will also help it save on logistics costs.
Ziz said Danone is also investing in software that helps it price products to a more accurate degree that consumers will be able to accept.
The moves come as food makers continue protracted pricing talks that began last year with supermarkets having been particularly tough in Europe as shipping costs hit an all-time high.
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