In this post, research analyst, guest Blogger and friend of Concerto, Suzie Shore (@juicyinfo) shares some custom insights developed for Concerto on the top trends affecting the FMCG (fast-moving consumer goods) market in the UK. Interesting for those in the category here in North America as well.
London, November 2, 2012: Suzie Shore, Juicy Info.
What’s happening in FMCG (UK)?
As the name implies, FMCG is a fast-moving and fiercely competitive industry spanning all manner of foods, drinks and everyday household products. The UK is dominated by multinationals such as Unilever, P&G, Kraft and Nestle, the grocery retailers and a wide range of medium and small producers. Grocery retailers play an important role in the UK FMCG industry, providing an array of private label brands at different price points.
The big five
Mega trends present major challenges for FMCG businesses at large, not just in Europe but across most advanced economies. These are not new trends and they are ever evolving, presenting challenges in the short, medium and long term.
The big five =
- Mass urbanisation
- Ageing populations
- Growth of the middle-classes
- Consumers in the driving seat
These are big issues, so I won’t re-write the wheel here. If you’d like more detail, soft drinks giant Coca-Cola kindly provides a clear synopsis of the big five trends shaping tomorrow’s consumers, presented at a conference in July 2012.
The heady excesses of the pre-2008 world remain firmly behind UK consumers. Some five years on, price-conscious and value-seeking behaviour has become entrenched as the ‘new normal’ and the FMCG industry continues to to adapt to this change in shopping behaviour.
Consumers are working to a strict shopping list and shopping around for the best deals. On its new blog, Tesco’s CEO reports half of all site visits to Tesco.com (its food site) are purely to check prices. Consumers are spending more time and effort to find the best deals, mindful of not going over budget.
As Tesco’s CEO points out in this article, the change in shopper behaviour is not just about shortage of funds, but ‘pride in value-seeking’.
“It’s a psychological and social phenomenon as well as an economic one…It is about the satisfaction of finding value.”
FMCG players have responded by putting value at the heart of product development, a trend that is likely to continue. Unilever’s healthy revenues in October 2012 were partly attributed to the launch of more value-priced products. Talking to the FT in July 2012, Unilever stated:
“Particularly in Europe, consumers are poorer than they used to be, and feel entitled to be – and they are going to be that way for a while”
In the UK, the recent 1% rise in GDP in Q2 may have taken the economy out of recession, but consumers remain cautious about the future. Indeed, GFK research released in late October reveals that consumers confidence remains downbeat.
Despite adopting austerity measures, UK consumers still need to treat themselves and will combine ‘economising’ with trading up to premium items to reward themselves. Brandrepublic looks at this ‘conflicted’ consumer in more detail and how it has put pressure on FMCG to innovate at both the value and premium end of the market. In this economic climate, promotions remain a valuable tool for FMCG players as outlined by WARC.
Healthy/Wellthy/Better for me
We are what we eat, that’s for sure. Despite being better informed about our health, the UK, like many advanced economies, faces unprecedented levels of obesity. At a recent Wired 2012 conference, Jess Greenwood from ad firm R/GA, made a compelling statement, outlining the scale of the issue:
“this  is the first year in history that more people will die from obesity than malnutrition.”
FMCG manufacturers have been addressing consumers’ health concerns for some years now, removing bad ingredients, accentuating healthier alternatives and giving many brands a ‘health halo’. For some consumers, health is now considered something of a status symbol, a trend coined as ‘Wellthy’ by Trendwatching.com.
Consumers across the board are increasingly looking for brands and indeed companies that have health embedded at its core. In March 2012, Nestle announced it would be the first confectionery giant to remove all artificial, colours and flavours from its range, in line with ‘consumer sentiment.’
In recent years, package labelling used by manufacturers and retailers has come under scrutiny. In October 2012, the UK government announced the launch of auniversal traffic light labelling system designed to help consumers assess a products’ health credentials. The voluntary scheme will become standard across all major retailers in the UK, but some manufacturers have opted out, such as Nestle.
Addressing consumers’ need for convenience has proved pivotal to the FMCG industry and remains an underlying force shaping product and packaging development. One of the most dynamic changes in delivering convenience sits on the retailing side, where online shopping and digital technology is transforming shopper behaviour.
Just yesterday, Tesco launched its new Online Commuter Zonewww.tesco.com/commuters aimed at the busy urban shopper. Tesco has curated products into sections such as ‘prepare for the day’, ‘while at work’ and ‘relaxing at home’, as part of a new online fascia. The retail giant is targeting urban consumers who would normally trek home laden with bags, encouraging them to get products delivered instead. Tesco is looking to capitalise on consumers’ downtime on the work commute, encouraging them to place orders via mobile devices.
Put simply, consumers care where their food and drink is coming from. A recent YouGov survey found nearly half of Brits prefer to buy locally-sourced food when they can. Sustaination has a great collection of stats on the growth of local food and drink, if you need more persuasion. http://sustaination.co/facts/
Consumers have been opting for authentic, locally sourced and produced products that reflect British culture for some time now and it shows so sign of slowing. Brands with a heritage or story to tell are resonating more with consumers. The notion of buying local, regional and British produce can be linked to issues of sustainability, civic pride, nostalgia and protectionism over our economy and food industry.
The year 2012 was a landmark year for all things British, following the Queen’s Jubilee celebrations and the London 2012 Olympics. Cool Britannia really did rule the way as we revelled in all things British.
Business & workplace innovation
According to Ernst & Young, innovation has been critical for FMCG manufacturers to grow revenue and improve margins, but in today’s climate, they require innovation just to “stay in the same place.” The need to innovate faster and smarter has led to new workplace initiatives among FMCG multinationals, according to the FT.
In March 2012, Unilever launched its Open Innovation platform, opening its doors to more collaborative partnerships with third parties. Six months after the online platform was launched, Unilever claims the proportion of collaborative partnerships has climbed from 25% in 2009 to 60% in 2012. Kraft Foods is also adopting more relaxed working practices to foster creativity and collaboration.
Today’s consumers are more informed about the environment, but we don’t always act on our intentions to support it. A report by PWC on sustainable packaging, released in June 2012, underlines that consumers are still far less willing to trade up to green grocery products than before the recession hit hard. In the present economic climate, recycling is the number one way consumers feel they can contribute to improving the environment.
Consumers are becoming more influenced by the actions of parent companies. Large multinationals with substantial influencing power and clout are heavily scrutinized with negative press widely publicised through social media. CSR policies that deliver on promises and are not just marketing-hype need to be integral to a company’s ethos. Consumers will name and shame the bad ones.
One of the biggest challenges facing FMCG brands is that created by digital technologies. Engaging consumers in online social spaces is gaining ground, but it’s not an easy feat. Leading consumer brand, Coca-Cola is intent on building a social brand, and provides seven rules for brand-building in social media in this article from Fortune.
In the UK, Heinz and Cadburys are two of the leading FMCG brands that are engaging consumers on social platform, according to eConsultancy. At the IGD conference in October 2012, Heinz said it had doubled its marketing budget over the past three years, with a big emphasis on digital, as a means of innovation. Heinz used Facebook to launch its Balsamic Ketchup and has also used Facebook to enable consumers to personalise cans of tomato soup to send to loved ones.
The personalisation agenda will become increasingly important in FMCG according to the IGD aided by digital technologies, enabling brands to build a direct relationship with consumers.
I’m open to suggestions for future blogs too. Just email email@example.com or fire me a tweet @juicyinfo if there’s a topic or industry you’re interested in. I’ll do my best to write a feature on it.