As it reported like-for-like sales growth of 13.3% in its first quarter, Reckitt Benckiser underlined the challenges the business faces in terms of demand planning and understanding whether the buying habits it has seen will continue in the short term.
Unclear whether buying will be maintained in rest of 2020
Although the company was able to report strong sales growth across most geographies, especially in March and April, Reckitt Benckiser did note it was unclear about what ‘the split between defensive buying and higher levels of underlying consumption’ actually was. Although it believed key brands would ultimately benefit, it was expecting an ‘unwinding of ‘pantry load’ as [it] works [its] way through the crisis’.
The company highlighted this was especially likely in its over the counter / heath relief product area, where it said there have been ‘likely significant pantry-loading activity [which] makes it difficult to fully assess changes in underlying consumption caused by COVID-19’.
Demand and supply planning become difficult when demand patterns change. In the case of the present pandemic it is clear there is not a sufficiently comparable historical event that can be used to get a sense for customer demand. The company went on to underline this point, noting ‘a lack of clarity makes full year assessment challenging as material de-stocking could reduce sales should COVID-19 effects pass’.
Ecommerce boosted by shoppers’ shift to stay at home
Reckitt Benckiser said revenues generated in the ecommerce channel rose by more than 50% during the quarter, especially in March, as shoppers stayed at home and shifted more of their spending online. It said the growth was broad based, ‘with growth across all major platforms and market places’.
However, it did call out the strong growth it had seen in Greater China and North America. As part of the announcement the company also highlighted how ‘technology and ecommerce are changing the way consumers know both what and how to buy, and where to look for information and advice’. This will likely boost visibility for well-known and regarded brands, which has become a point highlighted by other manufacturers following the pandemic.
Long term strategy and trends remain intact
Despite the size and impact of the challenges provided by the pandemic, Reckitt Benckiser was keen to stress the importance of remaining focused on the long-term trends driving its strategy, which are likely to remain afterwards. It noted it how it remained convinced that ‘urbanisation and global warming [will] continue to drive hygiene as the foundation of health, [which will be affected by] pressures on state-funded healthcare [and result in] growing demand for self-care’. Given this, the company remained focused on implementing its long-term strategy for growth, saying ‘while there may be changes to the pace and sequence of some of our investments… our destination is clear’.
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