Food makers, feeling squeezed, pull the plug on slow-selling products
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[February 25, 2023] By
Jessica DiNapoli and Richa Naidu
BOCA RATON, Florida/LONDON(Reuters) - Major consumer companies including
Kraft Heinz Co and Conagra Brands Inc are culling product lines to
combat sky-high costs and falling consumer demand, their executives said
this week.
Many companies started slimming their offerings during the pandemic and
are aggressively renewing those efforts, eliminating less-popular items
to focus on products on which they can more easily raise prices amid
prolonged inflation on food items.
Executives at Nestle SA and Unilever Plc said they have seen billions in
savings after ditching the laggards in their product portfolios.
Conagra recently discontinued a Marie Callender's chocolate chip cookie
dough cream pie to make room for what the U.S. food company hopes will
be a faster-selling no sugar added apple pie.
"No one will have a perfect batting average," said Chief Executive Sean
Connolly in an interview. "The key is to have more winners than losers."
Eliminating less popular products is part of a "decomplexity program"
underway at Kraft Heinz, its executives said at the Consumer Analyst
Group of New York Conference this week. It recently discontinued Heinz
Real Mayonnaise.
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Mondelez International Inc CEO Dirk Van de Put told Wall Street analysts
at the conference that the Oreo maker had clear rules on replacing old
products with new ones - "one in, one out."
Martin Renaud, a top marketing executive at Mondelez, told Reuters the
chocolate manufacturer has "too many flavors."
"We sometimes have the tendency to launch a lot of things because they
are exciting but we need to be very rigorous," Renaud said. As Mondelez
adds products with different price points, it adds complexity, he added.
"I am a big advocate of simplicity."
Companies cull product offerings to make room for new iterations of
their most popular items, such as smaller-sized versions for dollar
stores or larger ones for warehouse chains like Costco, said Justin
Cook, U.S. consumer products research leader at Deloitte. Cash-strapped
shoppers are more frequently looking for bargains at both types of
retailers.
"It’s more expensive to make a lower-volume product," Cook said. “If
it’s not a high-performing item that people absolutely have to have,
companies feel it’s harder to raise price."
Nestle said cutting products saved 1 billion Swiss francs last year
($1.06 billion), while Unilever said the practice saved $2 billion.
Retailers are also demanding new, fast-selling products to enhance their
own faltering sales. Products most likely to get the boot are those with
niche or limited popularity.
Heinz Real Mayonnaise has a small share of the global market, according
to the research firm Euromonitor.
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Ben & Jerry's, a brand of Unilever, is
seen on display in a store in Manhattan, New York City, U.S., March
24, 2022. REUTERS/Andrew Kelly/File Photo
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For some consumers, such cuts can be jarring.
Vinh Banh said in an email he has long used Heinz Real Mayonnaise
for sandwiches and deviled eggs. He was disappointed to discover
this month that Kraft had killed the product, which it launched in
2018. Banh, 34, from Garland, Texas, said he is on the hunt for any
remaining jars he can find.
Kellogg Co ditched its line of Special K protein shakes and Nestle
axed Lean Cuisine paninis, frozen Sweet Earth Benevolent Bacon and
Sweet Earth Vegan Hot Dogs, spokespeople for the companies
confirmed.
'PREPPING FOR A SLOWDOWN'
In some cases, suppliers are bowing to retailer plans to reduce
inventory, hoping that cutting product lines will make stores more
efficient and less costly to run and stock.
Walmart told Reuters it was seeking more data from suppliers to
justify pricing and pushing for more creative ways to defray costs
and cushion price hikes to consumers.
"We recognize that price concerns are more elevated at this point in
time, but that's where we can lean in and have data driven
negotiations with our suppliers," Chief Financial Officer John David
Rainey said.
"I have seen a lot of reduction in inventory purchases this year,"
Kelly Pedersen, a partner at PwC, said at the National Retail
Federation conference in January. "Everyone is prepping for a
slowdown."
Unilever, which makes Magnum and Ben & Jerry's, is slimming the
variety of ice cream it sells, finance chief Graeme Pitkethly said
this month on an earnings call.
The company has for over two years used artificial intelligence in
its 'Polaris' program to help manage its assortment. It credited
Polaris as it cut its variety of products by about 20%.
Unilever also trimmed about 5,000 types of products in the personal
care category.
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Food makers tend to cull products without much fanfare. At the
consumer products conference they highlighted new offerings, many of
them increasingly popular handheld foods that people can eat while
scrolling on phones.
That does not mean consumers don't notice when a beloved item
disappears from the shelf.
John Finn, 35, runs a Twitter page called "Discontinued Foods" with
over 23,000 followers.
"You'd be shocked by the loyalty and personal connections people
have to food products," he said.
(Reporting by Richa Naidu and Jessica DiNapoli; additional reporting
by Siddharth Cavale; Editing by Bill Berkrot)
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