Article written by Stephen Wilson, Category & Insights Manager at Strikeforce.

The current economic environment is anything but clear, a little bit scary with the only certainty that households are forensically analysing almost every aspect of the spend – both discretionary and non-discretionary.

The trend of ‘premiumisation’ is experiencing slowing momentum, as is drinkers’ willingness to risk their ‘hard earned’ to try new brands and experiences.

There are dire predictions of further interest rate increases and rents increasing at an exponential rate, with impacts to be felt well into 2024. Coupled with soaring power and supermarket shopping bills, there is a growing appetite for fiscal restraint.

Historically, during times of financial duress there has been a flight to traditional, comfortable and trusted brands that offer perceived value and purchasing certainty. The challenge for brands and retailers is to assess this ‘step change’ and continually recalibrate their range offering to ensure they maintain a loyal customer base.

Any range review should start at a macro level and ask questions like “does space allocated to each category reflect demand?”

While understanding each categories’ share of liquor sales across the market is a great starting point, this may not necessarily be reflective of the store’s customer base.

To add another layer of complexity, the prevailing economic environment will probably drive brand and possibly category switching in some cases. For example, where it was a reasonable assumption that RTD sales accounted for 26 per cent of total store sales, it may now be true that a portion of these customers have switched to mainstream beer or cider brands at a lower price point.

The impact of not identifying this trend could lead to increased inventory holding costs, where demand for higher priced products has waned and inventory takes longer to clear. Allocation of existing space comes to the fore here as well, with cool room, floor and fridge space needing to be reapportioned. The risk of not doing so is lost sales through out of stocks and impact on cash flow.

From a category perspective it would be prudent to look at the mix of sales and identify where there has been a shift in spend from one brand to another and adjust inventory and space allocation accordingly.

Finally, the best source of information to understand fluctuations in demand is to go straight to your customer base and ask the question: “I noticed you have changed your regular brand; I am interested to know why?”

This approach should inform and allow retailers to make small incremental range and space allocation changes and stay abreast of any deviation in purchasing patterns rather than be forced to make wholesale changes. The result will be a healthier cash flow and happier customers.

This article originally appeared in the April issue of National Liquor News.

The Shout Team

The leading online news service for Australia's beer, wine, spirits and hospitality industries.

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