A lockdown to slow the spread of COVID-19, while an important decision by the government, hurt the economy and the retail segment in India. Retail giants in India worked with the objective of keeping the food chain going so that modern and traditional trade outlets would not run out of stock during the lockdown period. One such brand was Dr Oetker.
Although the brand faced a massive challenge in the form of the movement of foods –from the plant to the consignee, from the consignee to the distributor and from the distributor to the retail outlet – and production was halted for a week, Dr Oetker worked hard to ensure that supply was not depleted.
Once the brand received permission from the concerned authorities to reopen with strict guidelines and SOPs, several consignees, distributors and retailers went out of their way to ensure product availability on retail shelves by depleting pipeline inventories. And while foodservice sales nearly dropped to zero, and the sales of Dr Oetker’s retail products slowed down in the two weeks after March 24 due to closure of malls and shops, mid-April onwards, the brand observed increased order volumes for condiments such as mayonnaise and Italian sauces.
In an interaction with Progressive Grocer, Oliver Mirza, Managing Director & CEO, Dr Oetker – Indian Subcontinent talked about the steps the brand is taking to overcome the impact of the lockdown and their future plans.
Excerpts from the interview:
How did you cope with the constraints forced by the lockdown in terms of underutilisation of production capacity, shortage of labour and workforce and distribution challenges.
Our production facility was shut for a week post the announcement of the lockdown. After receiving necessary permissions, we restarted operations with only one-third of the workforce. We are operating a few busses with social distancing protocols. Thermal screening of employees and regular sanitisation is part of our standard operating procedures. We even sanitise shoes of every employee before they enter the production area. We are practising strictest social distancing and hygiene guidelines. Every department in the facility has pitched to achieve production excellence.
Distribution challenges were plenty, but we have been able to sail through by support and collaborations with partners. Our consignees, distributors, and retailers went out of their way and stepped up coordination of sales logistics to ensure the availability of products on retail shelves. During this time, we have seen several examples of partnerships that helped us reach shoppers faster. In some cases, we directly supplied products from the plant to some retailers, while a few retailers picked up products from distributor warehouses to replenish their stores.
What steps has the brand taken to address supply chain issues?
We worked closely with our business partners to keep the supply chain going. When the lockdown was announced, and our sales teams started working from home, we immediately launched a toll-free number so that retailers could contact us centrally to be serviced. A next-generation mobile app was also introduced for retailers. We also reached retail outlets via B2B platforms like Udaan and Gram Factory. For store deliveries, we tied up with Zomato and used services of delivery apps like Dunzo.
During this time, our sales teams took orders via phone or just from nearby stores. Despite supply challenges due to lockdown, we have successfully managed to fulfil each order. Such unprecedented times require agility and adaptability, and our primary focus is to normalise production, sales and logistics and ensure employee safety.
Compared to the before-COVID phase, have you seen an increase in demand for your products? If yes, what has been the increase in terms of volume/value percentage before and after the lockdown?
Compared to the before-COVID phase, unit sales of our mayonnaise, sandwich spreads and Italian sauces in April and May increased by about 30 percent. Individual veg mayonnaise jars have seen a jump of 50 percent and selected Italian sauces grew by up to 80 percent. Value growth was even more substantial. Interestingly, we observed a change in the channel importance for the overall mayonnaise category.
Retailers who presented our pizza toppings along with prepacked pizza base and cheese blocks were particularly successful in encashing the shopper’s readiness to spend money on what appeared to be a bundle offer thereby increasing the ticket size.
As a brand, did you do anything innovative to incentivise your retailers and also customers during the lockdown phase?
During the lockdown, as the movement of goods was restricted in the country, our priority was to ensure consistent servicing of retail outlets so that they would not run out of stock. As we were also facing a shortage of workforce, we operated a reduced assortment with a focus on broad shopper appeal and necessity. We did not supply niche products like pasta and pizza sauce no onion no garlic to avoid complexity and clutter. Most retailers welcomed this move as they themselves focused only on stocking up necessities. We managed to service all orders across the country during the lockdown.
Going forward, do you plan to make any strategic shift to your branding and advertising/ promotional strategy for your products?
We would not be making any strategic shift, but we would be looking at adding another dimension to it. We are the best in the industry when it comes to quality, food safety and hygiene standards. Retailers and shoppers want to know how we manufacture our products, that none of them is touched by hand and that all our products are safe to consume. Moreover, we will review the formulations of our products with a focus on clean labels.
Please tell us about your future plans in terms launching new products and any investments. What you are doing to strengthen your market share?
2020 is an unprecedented year, something that most of us have never seen in our lifetime. We will revisit our plans for 2020 as soon as normalcy is restored, which we hope happens soon. We have a few product launches in the pipeline, but we understand the pressures on our retail partners during this time. A new listing request will only add to their stress, and that’s why we are postponing all new launches till stability restores. Our objective is to offer relevant products and increase the off-shelf velocity for our retail partners.
According to you, how has the pandemic changed consumer behaviour? What steps are you taking to match new consumer expectations?
While more and more consumers are experimenting with food at home, they have become more aware of food safety, hygiene and quality. The need for transparency increases. We expect this trend to become the new normal. Dr. Oetker, as a brand is synonymous with quality. Our global tagline is ‘Quality is the Best Recipe”.
When it comes to shopper behaviour changes, neighbourhood kiranas and modern trade stores have seen higher footfalls and increased ticket sizes. Our endeavour is to ensure consistent and right SKU availability while expanding our retail reach and being the engine of category growth.