Brand and Sales managers do spend a lot of time analyzing sales declines so they can explain it to their organisation. Mostly they know the internal reasons like a price change, out of stock or a new product they have launched which will cannibalize their own products, however external reasons can sometimes be hard to identify.
FMCG Academy believes these are the top 5 reasons for an immediate sales decline:
1. New Competitive Product Launch. A new product launches in the category at an average price or thereabouts and achieves some distribution. This will impact sales of all other similar products. There is a finite amount of chocolate, chips or cereals consumers can eat. So scan the market for any new entrant, even looking at new channels like online which you may not be actively tracking.
2. Distribution. This can work both ways. If your brands distribution drops, your sales will drop. If your competitor increases distribution, your sales should also drop as more consumers now have another product to consider. This is more common in emerging markets. In modern trade markets your retailer should normally advise you earlier of deletions, reduced distribution etc. so you can plan for it.
3. Competitive Promotional Activity. Normal competitive promotional or discounting activity should be accounted for in your sales plan, however, increased competitive activity will impact your sales. If your competitor normally has a promotional price of $2.99 which you have modeled in your plan and they decide to implement a $1.99 price, their sales will shoot up and your brand should decline for the duration of the promotion.
4. Stock allocation mis-match. This is less analysed but easily understood. Retailers and Distributors sometimes send out incorrect quantities of product stock to stores. This results in some stores having lots of stock and some running out very quickly. The stores with excess stock cannot sell more than they normally do, but you already knew that.
5. Shelf position Change. Sometimes retailers change their store or shelf layouts without pre-warning FMCG brand owners. A change in shelf position can be beneficial too, however, if your products were at eye-level but have now been moved to the bottom shelf, expect sales to drop almost instantly.
There could be more reasons for a sales decline, however these 5 are a good start to dive into and build some benchmarks.