RARE DROP FOUND FOR UNSALEABLE CPG GOODS
MIAMI BEACH, Fla. -- Unsaleables, or products deemed unfit for sale, cost CPG manufacturers $2.57 billion in 2003 across all retail channels, down $140 million from the previous year. It marked just the second annual decline since the industry began tracking unsaleables a decade ago.This was the upshot of the 2004 Unsaleables Benchmark Report, sponsored by Food Marketing Institute and Grocery Manufacturers
August 2, 2004
JULIE GALLAGHER
MIAMI BEACH, Fla. -- Unsaleables, or products deemed unfit for sale, cost CPG manufacturers $2.57 billion in 2003 across all retail channels, down $140 million from the previous year. It marked just the second annual decline since the industry began tracking unsaleables a decade ago.
This was the upshot of the 2004 Unsaleables Benchmark Report, sponsored by Food Marketing Institute and Grocery Manufacturers of America, Washington. The study was released here July 20 at the Joint Industry Unsaleables Management Conference, also sponsored by FMI and GMA, as well as by the National Association of Chain Drug Stores and the Consumer Healthcare Products Association.
The $2.57 billion unsaleables total was derived from an industry-weighted unsaleables rate of 0.99%, as reported by CPG manufacturers for 2003, and multiplied by $260 billion, which is the estimated retail value of center store warehouse-delivered products. The 0.99% figure was a decline from the 1.02% reported the previous year.
The study noted that a manufacturer's average rate of unsaleables costs as a percentage of gross sales -- the average of all company rates, treating large and small companies equally -- declined to 1.11% last year from an all-time high of 1.18% the previous year. The report covers branded manufactured CPG products, not including those delivered via direct-store delivery; random-weight perishable products; items sold by prescription; or private-label products.
Convenience and drug store channels experienced the biggest reductions in unsaleables rates, to 0.86% of sales from 0.97% for the former, and to 2.02% from 2.57% for the latter. Meanwhile, other channels still saw unsaleables rates go up, including the supermarket channel, where the rate grew to 1.36% from 1.31%.
"This [overall] decrease is the result of long-term efforts on the part of manufacturers," related Anne Lightburn, co-author of the unsaleables study and president of foodBiz. "The trend of increasing unsaleables has been a long-term issue, and it cannot be solved with a point solution."
Swell/adjustable rate allowances, stockkeeping unit rationalization, a focus on managing unsaleables, and increased efforts directed at policy compliance were cited by the study as specific contributors to the reduction.
Despite the decrease in manufacturer unsaleables rates, Dan Raftery, unsaleables analyst and president of Raftery Resource Network, Antioch, Ill., is not convinced the study's results signify major progress on the unsaleables front.
"In the past 10 years, the general trend is that unsaleables rates are increasing. Two points on a graph do not define a trend because, overall, unsaleables continue to rise," he explained. "The data reported in this study is 2003 data, and it's somewhat lagging behind current trends, including mergers and acquisitions" that can affect unsaleables rates.
Moreover, the report acknowledged that although unsaleables costs declined last year, the physical volume of unsaleables did not decline commensurately.
Lightburn speculated the closing of Fleming's wholesale distribution business could have influenced the increase in supermarket industry unsaleables, but stressed this was not mentioned specifically by respondents.
Although manufacturer participation in the study is close to the prior year's level with 44 companies responding this year, vs. 48 companies the prior year, distributor response rates fell short of numbers required for quantitative results. Only 19 companies responded this year, vs. 36 the prior year. Thus, the study provided only qualitative information regarding distributor unsaleables.