Dusseldorf Kitkat, Nescafé, Maggi, Thomy – over 2000 brands belong to the world’s largest food company Nestlé. Including the numerous flavor and size variants, the Swiss company has so far made more than 100,000 different items. Nestlé boss Mark Schneider is now in the process of radically cleaning up the overflowing range. Because in times of inflation and reluctance to buy, Nestlé no longer wants to afford such a wide range of products.
By 2022, Nestlé has already discontinued a fifth of its product variants. Schneider recently announced that the number is to be reduced by a further ten percent this year. “This is a huge cut and unusual, but reasonable,” judges Hermann Sievers from SMK Consult, an expert for consumer goods and retail. During the 2008 financial crisis alone, the range was streamlined to a similar extent.
Not only Nestlé, many consumer goods manufacturers – from corporations to medium-sized companies – have been in the process of significantly shrinking their product range for months. “This reduces complexity and increases efficiency,” says Sievers. As a result, there will be less variety on supermarket shelves in the future.
Reflection on fast movers
This variety often hardly paid off for manufacturers. Example Nestlé: A third of the more than 100,000 product variants accounted for just one percent of the group’s sales of 94 billion Swiss francs (around 96 billion euros). “With ten to 15 variants with minimal differences, we try to get down to one or two variants,” says the Nestlé boss.
Manufacturers of consumer goods have always regularly screened their range. Slow sellers are replaced by new products. But this time it’s different: “Brand manufacturers are under pressure. They are losing market share because consumers are turning to cheaper private labels,” Sievers explains. “Manufacturers are therefore sifting through where they can cut costs.” The brand manufacturers are focusing on highly profitable revenue generators, according to Sievers. “Fast movers are simply more profitable.”
Supermarkets and discounters are also in the process of streamlining their product range. “In times of reluctance to buy, they rely more on the hits than on the third variant of a variety,” says Sievers. Sales of food in the German retail trade fell by 10.5 percent in real terms in March compared to the same month last year – more than ever since the Federal Statistical Office began the time series in 1994. In times of inflation, many consumers only buy the bare essentials and are less willing to experiment.
AI identifies slow sellers at Unilever
Unilever (Knorr, Dove, Magnum) also reduced its product range by ten percent in 2022. By the end of 2025, a fifth fewer items are to be offered. For example, 5,000 types of personal care products are no longer sold. In addition, 50 to 60 local brands were discontinued, which contributed less than one percent of the division’s sales. “We are deliberately giving up unprofitable sales,” said outgoing Unilever CEO Alan Jope recently.
Artificial intelligence (AI) also helps with streamlining the range. “Polaris” is the name of the new data-based tool that will enable Unilever to carry out a detailed assessment of its portfolio. “This is how we determine whether an item should stay on the shelf or be discontinued,” explains Unilever. Poor-performing products would be consistently sorted out. That reduces costs. Instead, the British consumer goods group wants to focus on core items.
The consumer goods group Unilever (Knorr, Axe, Magnum) consistently lists underperforming items. Artificial intelligence helps with this.
(Photo: picture alliance / Sebastian Gol)
Before inflation, there was an overwhelming variety on German supermarket shelves. Consumers were often overwhelmed by this. “Our industry has overdone it with innovations – here a new flavor, there a different variant,” admitted Hanneke Faber, head of the global food division of Unilever (Knorr, Pfanni, Hellmann’s), recently in the Handelsblatt.
Unilever is not just streamlining its existing range. The group is also launching fewer new products on the market. In 2022, there were a quarter fewer innovations in food than in the previous year. This trend can be observed across the industry, as data from the market researcher Innova Market Insights shows: From January to December 2022, the index value for innovations in food in Germany fell from 100 to 83 points.
“Many consumer goods producers have to cut costs and therefore also save on new products,” confirms Werner Motyka, partner at the Munich Strategy consultancy. After all, according to market researcher Nielsen, the flop rate of new products is 75 to 80 percent.
Bahlsen, Vileda and Veganz reduce complexity
Not only global corporations, but also German medium-sized companies are currently sifting through their product range more intensively than usual. Germany’s second largest sausage manufacturer The Family Butchers wants to streamline its range – from 1340 to 950 sausage and ham products. “Meat prices have doubled in a year. However, we were by no means able to pass on all the additional costs to retailers. Certain products are no longer profitable for us or are exposed to massive competition”, explains Hans-Ewald Reinert, managing partner of the holding Infamily Foods, the discontinuation of almost 400 articles. In any case, the consumption of meat and sausages is declining significantly in this country, and inflation has strengthened this trend.
>> Read here: Retailer or manufacturer – who benefits from the high prices in the supermarket?
Veganz from Berlin handles things similarly in times of reluctance to buy. The listed vegan specialist has “consistently optimized its range in favor of profitability”. This led to the discontinuation and delisting of individual products – and thus to deliberate sales losses.
The traditional pastry manufacturer from Hanover is concentrating on its revenue generators and is getting out of unprofitable activities.
(Photo: Bahlsen)
Bahlsen is also streamlining its range. “Against the background of the immensely increased costs, we have decided – like other consumer goods manufacturers – to consistently withdraw from unprofitable activities,” says the biscuit manufacturer.
Vileda, known for household helpers from wipers to drying racks, has also been streamlining its range since last year. For some products there is less choice of colours, models, sizes and packaging variants. Other items are no longer produced. Vileda wants to use this to consistently reduce complexity. The advantages: It saves effort and costs if fewer goods have to be kept in stock.
Most consumers will hardly pay any attention to the reduced variety in the supermarket anyway. With wages not rising as fast as food prices, many consumers are likely to continue to turn to essential staples and no-frills private label products.
More: Manufacturers save on innovations in the supermarket