Rotating Goods: the Faster the Better
Imagine a child running in the street, turning a wasted tire in front of him at high speed. It just seems like a childhood play but there is a whole factor combination that allows that wheel to stay running, circulating, without falling, always balanced. There is a need to always keep it in high rotation but ensuring that speed is controlled so one can adjust the trajectory to the obstacles and surprises that may appear along the way. Maybe it’s a good analogy for a key concept in the Food Retail business, known as FMCG: Fast-Moving Consumer Goods.
The obsession with freshness forces us to be able to quickly get the best products to our stores every single day.
FMCG are those food products or household items that a consumer buys every time he goes to a supermarket, which implies being products that leave the shelves very quickly. They are usually high-volume products sold at affordable prices. In the case of Jerónimo Martins, there is another fast analogy and that has to do with freshness, the freshness of the food products that are made available to consumers. The earlier a fresh product is consumed, the closer it will be to its peak taste and nutritional value. And this obsession with freshness, forces us to be able to quickly get the best products to our stores every day, bringing us closer to the FMCG concept.
Rotation – key concept
This is where high rotation ties-up with freshness. Whenever a consumer buys a product in a supermarket, it creates the need to replenish that product so that the next consumer can obtain it as well. And the better we are able to perform this rotation, the faster we can ensure the supply of a product. Rotation is something that immediately reminds us of an engine. The higher the rotation, the faster. The higher the performance, the greater the success. And this concept can be extended to a macro perspective, both economically and socially.
From an economic point of view, it can almost be said that product rotation allows us to increase sales, which creates more value, serves more people, increases their satisfaction, requiring also a bigger team to deliver good results. More people means creating more jobs, having more investments, having more success in creating wealth, having greater capacity to share this wealth with everyone involved: producers, retailers, consumers.
From a social point of view, we have an example of what can happen when we lose the ability to keep rotating. In many European countries the population is ageing, i.e. there is a loss of rotation. Many societies run the risk of languishing. So, on the one hand we have low rotation, which leads to stagnation and inertia, and on the other hand we have the energy provided by high rotation, which creates growth and regeneration.
Mass market versus exclusivity
FMCG require a maximum rotation, enabling a constant supply capacity to satisfy consumers. At the same time this allows more people to get access, benefiting the lives of those consumers with a wider range of choices and being able to reach a variety of fresh products. And this makes a difference. The sale of this mass market products is only possible if prices are affordable, which requires along the supply chain very tiny profit margin in each unit that is sold. That’s why this kind of business requires a large scale.
The contrast is clear with niche products, where companies seek to offer exclusivity. There is an intentionally blocked rotation, to raise the value of what is unique. Individualisation allows consumers to stand out in the crowd. But this type of products, associated with luxury goods, obviously reaches fewer people. In this case these people are willing to pay a high to very high margin of profit in each unit. Exclusivity must be paid.
In Jerónimo Martins, the choice for the high rotation of products democratises consumers’ access to high quality and safe products, with a freshness guarantee. At the same time, the Group is also promoting a more comprehensive sharing of value with the societies where it invests and develops its businesses.