Five mistakes soft drink companies make in route-to-market (RTM) for fragmented channels in Italy
Italy’s soft drink market is a rich and complex environment, characterized by regional diversity, cultural variations in consumption habits, and a highly fragmented distribution landscape. For multinational and local soft drink companies, succeeding in this market demands an intricate and well thought out route-to-market (RTM) strategy. However, many of them make mistakes that hinder their performance when trying to reach Italy's diverse channels. Here are five common pitfalls soft drink enterprises face when implementing RTM strategies in Italy’s fragmented distribution system.
1. Neglecting regional preferences
Italy’s deep-rooted regional differences in culture and preferences present a unique challenge for soft drink companies. For instance, sparkling water consumption is high in the south, while certain regions have local preferences for specific flavored soft drinks or beverages like chinotto, a bittersweet soft drink. Moreover, northern Italy has a more cosmopolitan, international palate, while southern Italy tends to maintain traditional beverage preferences. Companies that ignore these nuances risk alienating large sections of the market. A common mistake is applying a "one-size-fits-all" approach to distribution and marketing strategies, failing to tailor products and promotional efforts to regional tastes.
Solution: A region-specific approach that considers local tastes, traditions, and consumer behavior should be embedded in both product offering and distribution. Partnering with local distributors or regional experts can help ensure that products are appropriately marketed and stocked in the right areas.
2. Over-reliance on national distribution networks
Many soft drink companies rely heavily on large, national distributors to cover the entire country. While this may work in more centralized and less fragmented markets, Italy’s complex retail landscape (comprising hypermarkets, small independent grocers, cafes, restaurants, and vending channels) requires a more flexible and localized distribution strategy. National distributors often lack penetration in smaller towns and rural areas, where local players dominate.
Solution: Companies should develop a hybrid distribution model. This includes leveraging national distributors for large-scale coverage while building relationships with smaller, regional distributors or wholesalers who understand the local retail landscape and have established networks.
3. Inadequate channel segmentation
Fragmentation in Italy’s beverage retail sector means that different channels – for example, large supermarkets, traditional grocery stores, and Horeca (hotels, restaurants, and cafes) –, operate in unique ways. Many soft drink companies fail by treating all channels the same, offering identical promotions, pricing strategies, and product mixes to every retailer. This blanket approach does not take into account the distinct needs and dynamics of each channel, particularly when dealing with Horeca outlets where brand positioning and customer experience can significantly impact sales.
Solution: Companies need to build a deep understanding of each channel and develop tailored strategies. For example, the product mix offered to Horeca should emphasize premium or exclusive offerings, while smaller neighborhood grocery stores may need competitive pricing and attractive margins. Channel-specific promotions and packaging formats (e.g., multipacks for supermarkets vs. individual servings for cafes) are essential to effectively penetrate these diverse segments.
4. Underestimating the power of local relationships
In Italy’s fragmented market, local relationships often determine success. Small independent grocers, regional distributors, and even specific restaurant chains may prefer working with suppliers they trust and have built long-standing relationships with. Soft drink companies that neglect to invest in these personal connections, risk losing out to competitors who understand the importance of relationship-building in the Italian market.
Solution: Businesses should invest in building strong, localized sales teams with a mandate to establish long-term partnerships with regional distributors and key retail accounts. This often means not only selling a product but offering personalized support, flexibility, and localized marketing initiatives that resonate with independent retailers and restaurant owners.
5. Ignoring digital and alternative channel growth
Digital channels and e-commerce are rapidly expanding across Europe, and Italy is no exception. While the online share of total retail sales in Italy is still lower compared to other European countries, the trend is rising. Many soft drink companies, however, have been slow to adapt, focusing solely on traditional retail channels and underestimating the potential of digital platforms, direct-to-consumer models, and food delivery partnerships.
Solution: Companies should begin integrating digital channels into their RTM strategies. Collaborating with online grocery delivery platforms, developing a direct-to-consumer e-commerce presence, and leveraging partnerships with food delivery services (e.g., Deliveroo, Glovo) for instantaneous drink delivery in urban areas offers significant growth opportunities. Additionally, data from digital platforms can provide insights into consumer preferences and trends that may be missed in traditional retail.
Conclusion
Succeeding in Italy’s fragmented soft drink market requires a comprehensive RTM strategy that respects the country’s regional diversity, embraces local distribution partners, and acknowledges the diverse needs of different retail channels. By avoiding the five common mistakes outlined above, soft drink companies can better position themselves for long-term success in one of Europe’s most unique and challenging markets.
