What you need to know:
- In recent years, FMCG makers have increasingly shifted to the use of technology to reach their markets directly.
- Employing technology ensures that firms are able to track, in real-time, the products that are most in demand.
Fast-moving-consumer goods (FMCG) makers are turning to digitisation of supply channels to ensure the right commodity is available to clients at the right time and quantities in the face of stiff competition.
FMCG companies such as food processors, beverage manufacturers, pharmaceuticals, tobacco processors, personal care products firms, and household items makers use one or a combination of various methods to reach their customers, which are known as Route-To-Consumer (RTC) channels.
Historically, firms that are based not only in Kenya but across the globe have been relying on brick-and-mortar retail stores that are ordinarily located conveniently near residential or high-traffic areas to make sales.
In recent decades, however, major shifts have taken place in the FMCG market, with companies increasingly shifting to the use of technology to reach their markets directly especially through e-commerce.
Employing technology ensures that firms are able to track, in real-time, the products that are most in demand, the most lucrative locations and demographics as well as changes in consumer demand.
Kenyan FMCG market is dominated by players such as Coca-Cola, Unilever, Nestle, Proctor & Gamble, Kenya Wine Agencies Limited (Kwal), BAT Kenya, East African Breweries Plc (EABL), Bidco Africa, Chandaria Industries Limited and Brookside among others.
They produce or supply some of the most-sold FMCG products in Kenya such as maize flour, toothpaste, rice, wheat, sugar, alcohol, soft drinks, tobacco, coffee, tea, fruits, and vegetables.
Other top consumer goods include bread, soap, detergents, toilet paper, diapers, chocolate, and bottled water.
But nothing could have prepared the businesses for the turmoil that ensued when the Covid-19 pandemic hit the country in March 2020, leading to over 345,900 confirmed cases and more than 5,600 deaths several months later.
Due to movement restrictions including a dusk-to-dawn curfew that lasted for more than a year, physical shopping was limited, giving online shopping an unexpected shot in the arm.
To adapt to these rapidly shifting consumer demands such as online shopping, FMCG companies are in a foot race to meet the needs of their customers through the investment of millions of shillings in new technologies to meet their RTC needs.
This is crucial because, despite the huge volumes of products that are moved by FMCGs every year, the margins are low, which makes it critical to digitise, eliminate inefficiencies, and proactively innovate in a bid to beat the competition.
EABL, which is listed at the Nairobi Securities Exchange (NSE), for instance, says it has employed a business analytics tool which it refers to as EDGE 365 that enables collection of data in real-time about behaviours of its customers.
“Consumers and shoppers are seeking convenience. Therefore, our ability to deliver to our consumers when and where they need our brands is more than ever important. Over the year, we reached key milestones in making our RTC agile to optimise these opportunities,” says EABL in its 2023 annual report.
The beer maker says it has also employed a Distributor Management System (DMS) to support suppliers on stock and sales management, and sales force automation as well as an advanced analytics business-to-business portal known as Diageo One, for generation of outlet-specific orders to service customers efficiently.
“Through our digital tools, we are also driving efficiency in our RTC as we can collect real-time data and analytics that help us drive the right action in the shortest time. Our business-to-business (b2b) platform, Diageo One, is now deployed in all our markets,” says the brewer.
One of the key environmental changes since Covid-19 is the growing significance of home occasion that offers consumption opportunities off-premise. FMCG firms are also utilising the Direct-To-Consumer (DTC) channel to reach their clients which enables them to cut the middleman and increase profits.
Others are employing the vast capabilities of artificial intelligence (AI) to optimise their product offerings and offer better insights into their products and clients.
For instance, BAT Kenya, which processes and sells tobacco products and tobacco-free oral nicotine pouches, says digitisation of its distribution models has boosted its efficiency in stock management.
“By applying modern technologies, including AI and machine learning, we ensure that our products are where they are needed when they are needed. We distribute our products effectively and efficiently using a variety of distribution models suited to local circumstances and conditions. These distribution models include retailers, supplied through distributors and wholesalers,” said BAT Kenya in its 2022 annual report.
The listed firm said adoption of dashboards and data platforms by its trade and marketing teams has expanded its retail business by 50 per cent leading to increased revenues.
Besides private firms, State-owned entities are also pivoting towards technology to streamline delivery of their products to their customers. Last month, the Kenya Medical Supplies Authority (Kemsa) said it is developing an online system that will allow patients to check the stock level of drugs at the nearest medical centre.
The move, Kemsa said, will save time for those in need by enabling them to know which medical facilities have the necessary drugs, and also enable the authority to track the drugs that are sold to patients to enhance accountability.
Unga Group Plc also says it is strengthening its Route-To-Consumer strategies by prioritising initiatives that will allow the company to reach its customers more conveniently.
During the Covid-19 pandemic and the electioneering period last year, the company says it leveraged digital capabilities to provide products directly to its end customers through online platforms such as Bidhaa Mlangoni.
“We will continue to work with our e-commerce partners in strengthening our technology-driven distribution capabilities so as to serve our customers more efficiently, conveniently and affordably,” said Unga Group in its 2022 annual report.
It added: “Suffice to say, we are encouraged by the level of engagement and feedback we are receiving, which will help improve the quality of our products and the way we reach our customers.”
Kenya imports most of its FMCG products with local manufacturing inhibited by a myriad of challenges such as a chocking taxation regime, high prevalence of illicit goods, and high cost of key inputs in production such as electricity, fuel, and raw materials.
Logistics is also a major headache facing FMCGs as the country lacks necessary infrastructure such as well-located and affordable warehouses and cold rooms.