Danone to trim product portfolio to remain competitive in an inflation ridden global economy

FRANCE – French multinational food group, Danone is trimming down the variety of products it sells to remain competitive in a global economy where inflation is sending food prices through the roof and limiting consumer purchasing power.

Ayla Ziz, Danone’s global head of sales, noted in an interview with Reuters, that cutting back on so-called “stock-keeping units” would help the French food group cut costs per type of product.

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What the cut back means, according to the Danone global head of sales, is that some supermarkets, particularly in Europe, would have fewer flavors and packaging sizes of Danone products.

Additionally, She revealed that the maker of Oikos and Activia yogurt brands was reviewing its “entire portfolio” with every customer to see which SKUs it wants to discontinue.

Ziz however did not identify which ranges might be targeted but instead revealed that the portfolio reorganization did not mean that the company was going to implement a global cut of some products.

To further remain competitive, ZiZ revealed in the interview that Danone was investing in software to help it price products more accurately to meet levels consumers would accept.

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Danone’s attempt to tame inflation impacts comes at a time when food prices are at an all time particularly in Europe which has been worst hit by the ongoing war between Russia and Ukraine.

Soaring inflation has meant that shoppers are tightening their belts, forcing them to buy less, switching to cheaper, own-brand products, and shopping more often as they try to cope with the cost-of-living crisis.

Considering consumer companies like Danone make many versions of the same product, simplifying the range could mean some of these would be sacrificed to make it cheaper for retailers to stock and manage a smaller, less complex inventory.

The situation worsened from the start of this year forcing some food stores to take products off shelves because they could no longer afford to sell them.

Reuters revealed that food manufacturers have been in prolonged talks since last year over prices with supermarkets. Discussions have been particularly tough in Europe as shipping costs have also climbed to a record high.

Reuters analyzed that considering consumer companies like Danone make many versions of the same product, simplifying the range could mean some of these would be sacrificed to make it cheaper for retailers to stock and manage a smaller, less complex inventory.

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For instance, supermarkets would need to allocate less money to storing, monitoring, and transporting products.

Maria Castroviejo, the Senior analyst at Rabobank Research, commented that the steps made sense for companies trying to be more efficient and they mirrored actions by companies at the start of the COVID-19 pandemic.

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