We interview Advantage Italy Country Manager, Massimo Nicolini to understand how the pandemic is currently impacting the performance of FMCG suppliers and retailers in the country. Massimo cites feedback reported in the 2020 Advantage Report Italy Main and Mirror programs, with a focus on performance concerning the global Advantage practice: “collaboration in a crisis situation.”
Q1 - Are there notable differences in how suppliers and retailers in Italy collaborate in a crisis situation based on category? Ex. Health & Beauty vs. Food vs. Essentials/Hygiene?
Grocery Categories in Italy have been hit by COVID-19 to very different degrees, with food, frozen food and personal care being affected the most. Consequently, these are also the categories where Advantage Report performance was jeopardized the most. Supply Chain and Customer Service performance declines were common, this is along with declines in scores relating to the general difficulty with respect to agreed-on plans.
In general, large multinational companies were often perceived as being slower in adapting to the crisis. When they were unavoidably required to change their objectives and plans, they often found themselves in a challenging situation between a rock and a hard place with not enough autonomy to do so. At the moment of truth, where there were only two points of leverage to play with, either (1) merely delivering according to original plans or (2) engaging in a positive dialogue with their clients on one side and with their HQ on the other; not everybody succeeded.
Q2 - What have Italian retailers indicated that they need the most from their suppliers to best collaborate in a crisis situation?
Transparency and flexibility are the two most popular keywords we have seen during our qualitative interview process. Transparency was required to facilitate communication and reciprocal understanding. Not all the retailers were completely forgiving or empathetic toward the objective issues their suppliers were facing. Nonetheless, an inability to be transparent and shy away in front of one’s own clear logistics deficiencies was identified as an undesired behaviour, according to the retailers we spoke to.
If transparency was about exchanging critical information, flexibility was the capacity of both retailers and suppliers to act accordingly by adapting visions, plans and objectives. This was not an easy one since doing so required changes to budgets, the vision on the categories, consumer marketing strategies and processes such as e-commerce systems, to name a few.
Q3 - Based on the Advantage Italy program results, what are top-performing suppliers in the market doing to collaborate in a crisis situation?
The real winners in this year’s Advantage program were in the Beverages category. In general, the best players who managed to maintain the strength of their multinational/global counterpart while promoting positive dialogue with retailers for both long-term commercial relations and short-term transactional exchanges. This was a very difficult exercise for players operating in categories whose supply chains were under stress.
This is also the year where local suppliers performed strongly. They were more agile to deliver and extremely relevant and efficient when retailers optimized their category management.
Q4 - Based on your program results and interview commentary, what are the key actions that suppliers and retailers in Italy can take to improve how they collaborate in a crisis situation in the future?
There are clear opportunities to improve collaboration between Italian retailers and suppliers. For one, in e-commerce, besides the clear need for learnings, improvement and growth, the market might face resistance among some more conservative and traditional retailers who are still looking at e-commerce as a very complicated and less profitable channel.
In the eyes of retailers, COVID-19 demonstrated that category management cannot be left entirely in the hands of suppliers. They are now expecting a more “consumer-centric” category management approach, leaving the competition between big brands as a priority of the past. In a dramatically different world resulting from COVID-19, there is an enormous need for insights and understanding of consumer priorities and behaviours. This is a market with important reciprocal expectations for information exchange.
To conclude, Italy is a market with an extremely heterogeneous infrastructure bringing important challenges to optimize logistics and supply chain. This was a popular topic last year, and we can reasonably expect that suppliers and retailers post-COVID will oblige to identify new common solutions together in this space.
To connect with Massimo on this topic and more, find him on LinkedIn.