Focus: Food makers, feeling squeezed, pull the plug on slow-selling products

Hostess Brands

27/02/2023 05:00

(Repeats Feb. 24 story with no changes)
    By Jessica DiNapoli and Richa Naidu
       BOCA RATON, Florida/LONDON, Feb 24 (Reuters) - Major
consumer companies including Kraft Heinz Co  KHC.O  and  Conagra
Brands Inc  CAG.N  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  NESN.S  and Unilever Plc  ULVR.L 
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. 
    Mondelez International Inc  MDLZ.O  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  COST.O , 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. 
    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  K.N  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. 
    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)
 ((richa.naidu@tr.com; Follow me on Twitter https://twitter.com/Richa_Writes;
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