When Too Much Ice Cream is a Bad Thing
LOCATION: Indonesia
A multinational player in ice cream novelties faced an assortment problem in Indonesia where the portfolio had become bloated and unmanageable. There was growth, but it was unsustainable with this approach. See how they licked the problem.
SITUATION REVIEW
We All Scream for Ice Cream
Despite a decline in Indonesian shopper spending due to an economic slowdown, a multinational player in ice cream novelties found their existing impulse portfolio growing in the modern trade in Indonesia. However, the portfolio had grown to a very diffcult to manage total of 140 impulse SKUs. That’s a lot to choose from! As a result of the complexity of choice, shoppers only found an average of 26 impulse SKUs representing the choice set in any given purchase situation.
OPPORTUNITY ASSESSMENT
Assessing the Essentials Novelty Items
Market structure work based on the CIA® platform was able to organize the impulse category into three distinct clusters of products: upsize, mainstream and upscale. Upscale items drove 65% of the business gains during the last two years, but represented only 24% of the average portfolio SKUs found in the cooler. Knowing that all three clusters needed to be represented by the portfolio, an assessment of incrementality versus transferred demand was able to justify the worth of each SKU to the brand in terms of contributing either volume or retailer value. Upsize was responsible for volume incrementality. Upscale was retailer value incrementality. Mainstream was the combination of both. Of the original 140 SKUs, only 23 were identified as essential, or core SKUs, under these rules leaving enormous opportunity for innovation in a reset.
SCENARIO DEFINITION
Picking the Best of the Batch
Using the incrementality results, a new portfolio architecture was designed to reduce the number of brands from 11 to 6 and the number of sizes from 25 to 12. Unique combinations of brand and size were therefore aligned with the market structure clusters and the subsequent occasions the portfolio facilitated. The first scenario was aggressive and removed all items except the 23 core products identified in the incrementality assessment. A second scenario allowed the next 24 highest items based on sales rate to rotate into the cooler as limited time offers on a bimonthly basis.
EXPECTATION ANALYSIS
Taste Testing the Options
Using the CIA® platform to evaluate the aggressive scenario and radically reduce the SKU offering of -83.6% yielded a volume decline of -6.2% and retailer sales value -2.8%. It was not the desired result, but it exposed a significant opportunity for SKU rationalization. The second scenario also significantly cut SKUs by -66.4%, but the models suggest that volume would only decline by -1.3% and retailer value would increase by +2.5%.
CLIENT ACTIONS
Putting the Tastiest ChoicesForward
The less aggressive scenario with limited time offers was a promising initial insight to better manage the portfolio and produce more with less. A more streamlined offering put less pressure on operations and the supply chain while simultaneously steering shoppers to an easier cooler to shop and make their choices. Additional scenarios were generated to give the analysis a more regional view of the core SKUs resulting in a better overall presence of the portfolio.