SMEs using data effectively can compete against industry giants

SME manufacturers will have to use data strategically to grow despite research indicating that their NPD is fuelling growth in the UK FMCG sector.

According to Circana, retaining distribution remains the linchpin for sustained success in response to large manufacturers who are intensifying sales promotions. The analyst group, formerly IRI and The NPD Group, urges SMEs to leverage data strategically to secure their position and compete effectively against industry giants.

Large manufacturers are increasingly relying on volume share as the primary pathway to growth, with sales promotion as the key enabler in the face of slow growth with easing inflation and lower interest rates.

Alex Lawrence, senior strategic insight director at Circana, emphasised the significance of SMEs to overall growth when he said that fuelled by innovation, SMEs are disproportionately contributing to market growth, providing 22 per cent of all NPD value sales (vs. their 15 per cent value share) in the last 12 months.

“They are however more vulnerable in the major multiple grocer channel (MMG) – a cornerstone for sustained growth,” Lawrence added. “But with the MMG channel accounting for 85% of FMCG market value retaining and building distribution in this channel is the key to sustaining growth. SME products will tend to have lower rates-of-sale, increasing their risk of de-list making retailer range reviews and refreshes a crucial battleground for SME manufacturers.

“With pressure on volume share growing, SME brands must develop a competitive advantage.”

SMEs – defined for the purpose of this research as manufacturers with less than £100m turnover across all categories – have made significant strides. In the past 12 months, they have contributed £20.1Bn to total store sales, experiencing 7.3 per cent growth. Over the last 13 weeks, SMEs maintained share growth, up 0.2 percentage points from last year. Currently, SME manufacturers hold 15.1 per cent value share, while large manufacturers account for 49 per cent and private label for 36 per cent.

SMEs played a pivotal role in NPD value sales, contributing 22 per cent (compared with their 15 per cent value share) to drive overall market growth.

While SME manufacturer growth mirrors the overall market slowdown, Circana found there’s a crucial difference. SME unit sales declined over the last 13 weeks. Further analysis of the top 500 brand value share winners across total store confirmed that 94 per cent of brand winners gained volume share, making this growth crucial in the current climate.

It shows that large manufacturers have turned to sales promotion to drive volume share and compete with private label. That coupled with their scale and larger budgets, means they have been able to secure additional store displays, most notably in non-food sectors. This in turn, helps them to sell more goods without risking a reduction in profits from the increased sales promotion investment.

Lawrence commented: “For FMCG SMEs, securing premium secondary display location with high gate fees is expensive and sales promotion will likely be from the product shelf location, greatly increasing the risk of margin and profit loss. As a result, range and distribution is a much more crucial battleground for smaller brands and an aspect of the marketing mix where SMEs need to establish a competitive advantage to drive growth in the second half of the year.”

Circana suggests SME manufacturers take a few measures.

• Retain and gain distribution for existing products: use robust and granular data in your range reviews and refresh processes to demonstrate your market and competitor SKUs and illustrate growth contribution and opportunities to retailers. Find out more via: https://insights.circana.com/page/waiting-list-liquid-data-go-uk
• Collaborate: add an extra data level to be able to converse with retailers about having secondary display locations.
• Innovate: continue driving NPD to capture consumer interest, maintain relevance and seek out emerging innovation opportunities.

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