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Yesterday Chris Houghton and Stergios Bititsios presented at Food Matters Live, a high profile event bringing together professionals from across the food and drink industry. If you missed the presentation or for those who enjoyed it and want a recap, here is a blog summarising the talk and some of the themes we covered…
Earlier this year supermarket giants Aldi and Lidl deployed marketing campaigns in the UK, designed to shake up the grocery sector and build pressure for branded goods to demonstrate their value proposition versus own label (private label) products.
Lidl with their ‘Shop a Lidl Smarter’ campaign targeted the likes of Strongbow, Stella Artois and Redbull by presenting audiences with anecdotal results of blind consumer taste testing, revealing the favourable results of their ‘look-a-like’ own label products. Aldi’s ‘Like Brands but Cheaper’ approach was more light hearted and endearing but equally as tactical citing that consumers liked both own label products and branded goods equally, with the likes of Heinz, Kellogg’s and Dettol targeted in the crosshairs. In both instances they clearly illustrated the gulf in pricing that challenged consumers to question their choices of how they spend their money. Together the German supermarket duo have sent shockwaves through the UK grocery market, rapidly growing in the past three years and gaining a combined market share of around 10%. This growth and the ensuing supermarket price wars has benefited consumers and helped keep inflation low whilst the repercussions have been strongly felt within the boardrooms of multinational brand owners across virtually every category.
These powerful campaigns present a healthy dilemma in the hearts and minds of consumers with their loyalties and sense of ‘value’ challenged. As a result, their shopping baskets are filled with a mixture of both branded and own label goods where individuals have judged which products are right for them and their family. The allure of these discounted products is by no means limited to those with the tightest budgets as we’ve witnessed in our research with some shoppers purchasing at both extremes of the market, making savings in one category to permissively spend more lavishly in another.
Outside these pricing wars the influence of our connected lifestyles and that of Generation Z have also had an impact on purchasing decisions, more so than ever before, with any brand or product’s shortcomings being shared virally, impacting their reputation overnight. Conversely for the well performing brands their new launches or experiences are captured and rapidly shared amongst peers, creating a buzz. Both sides of this virtual coin are at the forefront of the minds of brand owners. It raises the stakes that can influence the decision makers to be more cautious, sometimes paralysing innovation initiatives, which in turn opens the door to agile, independent start-ups to enter the fray and challenge the branded establishment.
Some brands and categories are traditionally well prepared for such promiscuous shopping behaviour and are well versed at delivering on-going adaptations and product extensions to remain competitive. Meanwhile others are working through the difficulties of this new landscape, planning their strategies to stay relevant. These dynamics clearly present a survival of the fittest environment with the grocery stores providing the backdrop to this brand vs. own label vs. independent battle royale.
So what can brand owners do to help ensure their products are the ones that reach the checkout rather than be left on the shelf?
Established brands are generally market leaders because they have stood the test of time! They’ve demonstrated their unique proposition accurately and conveyed their value to the consumer, gaining their trust, year on year. However, trust is a delicate matter and a number of brands have needed to re-think their approach to stay relevant with the changing expectations of the modern shopper.
Instinctively many brand owners react to these new challenges by ‘papering over the cracks’, commissioning new ad campaigns and/or graphic refreshes, spending millions looking for quick, tactical wins that aim to keep them competitive for the short term. But is this sustainable and does it really affect the ‘value equation’ that consumers weigh up each time they face a new dilemma? The widely quoted statistic of ‘70 percent of purchase decisions are made in store’ still resonates around the important role product form and packaging plays in this process, whilst advertising remains helpful to maintain brand awareness, articulate benefits and create emotional connections.
If a brand, over time, is behaving in a way that’s no longer relevant to the market then it needs to find new ways of re-defining its key attributes and find a vernacular pertinent to today’s time and place. To do this the brands need to intimately know their market and the trends that are influencing their behaviour. Well prepared brands that are likely to thrive in the future would clearly know the answers to these questions:-
- Do you have a deep understanding of your ‘future’ consumers?
- What is the future landscape and potential threats that surround your brand?
- What does your brand stand for and is it experienced in relevant ways?
- Does your innovation pipeline align with the answers above?
What brands should be looking for in their responses is a positive answer for each question that remains broadly consistent throughout the cross functional teams in their organisation. The hidden factor though, embedded in the final question, is one of time. How far ahead have you planned your product and innovation pipeline?
To those outside the FMCG sector it may come as a surprise that it can take longer to develop and launch a new consumable product and/or piece of packaging than it takes for a home appliance, especially for a global brand where 2-3 years development time is a minimum. This is purely down to the scale of the operation and the volume of units made in each sector. Innovation pipelines should be planned at least 3-5 years into the future to allow development teams sufficient time to implement them.
This means the answers to the earlier questions need to be grounded in a sound prediction of the future. In addition, those that can employ techniques to shorten their development time are best placed to demonstrate agility and be relevant. This is why independent brands are thriving - they often deeply resonate with shoppers whilst providing timely and relevant products as their decision making and development process are more streamlined vs. the multinationals.
So if a brand has designed and developed a product for 3+ years they need to be confident that it’s a real game-changer and deliver something relevant for the consumers by the time it hits the shelves!
Consumers mentally juggle multiple considerations when purchasing a product - some brands have the privilege of being put into the basket automatically whilst others face an in store judgement. I’ve picked a couple of personal examples that are driven by different motivations.
The first that makes my shopping list is Marmite’s Big Squeeze. This is a unique product and its 3D brand expression is a modern take on its traditional identity. Marmite, which is French for ‘cooking pot’ articulates this heritage in the shape of its packaging and 2D branding. These qualities provide recognition, trust and familiarity. But why buy the more expensive ‘Big Squeeze’ (a squeezable plastic, inverted pack with a flip lid and silicone valve) and not the glass jar? The obvious answer is convenience. I save time with the flip top lid, the gravity fed product and the fact I no longer need to get a knife to dispense. But this is just a part of the overall experience, with the added control I now create a Jackson Pollock like pattern on my toast or write my children’s initials on their toast to positively change the eating experience. The silicone valve means the product now appears to stay at its best for longer, which in summation provides my justification of ‘value’ – quicker, longer lasting, more engaging, better tasting! Love it or hate it, people are passionate about Marmite, and that is an important asset for loyalty - contrary to the theme of the Aldi ad.
The second is Method’s foaming hand wash. This has many attributes I value: like Marmite there’s convenience, a simple press on the pump and the product is measured and pre-formed before turning on the tap, ideal for my children in particular. Its form is elegant, tactile, stable; the product is fragrant delivering on a multi-sensory level. But its hidden resonance comes from what it stands for as a brand, a champion for the environment and a leader in sustainable production and packaging design. Method’s ‘Beyond the Bottle’ design
illustrates their comprehensive approach to sustainability that’s backed-up by their ‘cradle to cradle’ certification. Loyalty is retained by buying their pouch refills, so we’re not wastefully throwing away perfectly good bottles and pumps on a monthly basis…. to truly enable ’refill not landfill’.
Over the years I’ve had the pleasure to work extensively with big brands together with a handful of independent and own label companies, I’ve seen recessions and credit crushes peak and trough, new products come and go. This latest serge from own label and independent brands unsurprisingly fits with our instincts in the UK to root for the underdog, coupled with our acute sense of good ‘value’. As Generation Z matures, its purchasing power will increase and so brands must provide relevant products for the ever widening and diverse market needs. All FMCG producers need to be acutely aware of who they are catering for now and in the future. But the words of the poet John Lydgate still ring true some 600 years later: “You can please some of the people all of the time, you can please all of the people some of the time, but you can’t please all of the people all of the time”. Many more healthy battles to win consumer loyalty lie ahead - and those that are well prepared and agile will always have the advantage.
Mike, Matt and George try to predict emerging challenges, innovation opportunities and technologies that will shape our work at CDP over the next ten years.
17 January 2020
Chris Houghton, CDP’s Brand Innovation Leader reviews the world’s largest consumer product expo, CES 2020 in Las Vegas.
10 January 2020
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