5 FMCG Categories in long term decline (developed markets)
In light of the mega socio, economic and techno trends impacting the FMCG Industry (click here), some categories or segments are bound to get negatively impacted and could either vanish or become very small over the next decade. The following 5 categories are likely to decline in light of changing demographics i.e. proportion of Millennials Vs GenX vs Baby Boomers and larger migrant populations. The decline in these categories will be further assisted by reduction in shelf space by major retailers to make way for rapidly growing categories like organic, natural and private label.
However, highly creative marketers with reasonable resources could stem this decline or move users to complimentary categories. Why should you care? Working in a sunset industry or category is neither fun nor financially rewarding.
1. Soft Drinks (normally Fizzy)
This is in decline and if not this will be adversely impacted as a number of nations implement soda or sugar tax on this category, thereby increasing consumer price. (Click here for a few tips on managing FMCG brands in the sugar tax economy) Major players are busy re organising their portfolios, however, the horse has bolted and these sugary soft drinks will reduce in volume over the next decade and possibly at a pace faster than we’ve seen before. There may still be some money to be made as the category is large, but the smaller ones will get marginalised. With the current environment and information dissipation, fizzy sweet beverages will soon start being perceived the same way as tobacco. Fizzy drinkers like smokers might have to leave the room to get their fix.
2. Biscuits and Cookies The innovation pipeline on these products appears to be drying out. Dependent on the sugar content, certain segments within this category will be targeted for a sugar tax. While in the current environment this is a fairly price sensitive category with reasonable brand switching, over the long term, the growth will only come from value added organic, natural and creatively sweet offerings. Large volume segments are headed for a decline.
3. Everyday Confectionery / Candy
By every day I mean products people buy weekly irrespective of occasion. The small chocolate bars (normally under 60g) along with the sharing blocks (normally over 200g) will decline. The more decadent occasion driven segment of box chocolates however will continue to grow. In due course these high fat and sugar products will also be in the sights of the sugar tax man.
4. Breakfast Cereals (as we know them now)
This is an interesting category, that was noble at heart, however, over the last 20 years, the lure of easy profits has put them in the unfortunate situation of competing with sweet snacks. How did they manage that? Just walk down the breakfast cereal aisle of any major supermarket or grocery store and you will notice the very large number of items offered with high sugar content with bright colourful packaging. Various data sources are now pointing to close to a third of breakfast cereal consumption occurring outside of breakfast hours, very commonly as a sweet snack late afternoon or even a few spoons after dinner as a mini dessert. Once consumption started moving away from breakfast time – this category was doomed, and sugar tax may still be on the way. Most of the breakfast cereal brands also made the cardinal sin of not having separate brands for traditional breakfast cereal and for the million extensions that have been launched with high sugar, and made into bar form for snacking and the like. Not everyone sinned, one major confectionery manufacturer I worked for many years ago was also a major player in the breakfast spreads category and still is. A clear written rule was to never promote the breakfast spread with the confectionery brands. They could not be co-promoted or co-displayed which ensured consumers never made the connection between the two distinctly different brands. This business continues to grow.
5. Canned foods
With the big move towards fresh and locally sourced products. Canned foods are declining though some still have a role to play in various markets due to unavailability of fresh items and convenience. Unless prepping for doomsday, a large number of consumer simply don’t buy canned items? Yes, they are cheap, but they lack the nutritional value or mouth feel of fresh items. These products do appeal to the lower socio-economic segments of society and are heavily price promoted. There is no innovation, whether it be canned fruit, vegetables, tuna and the like. Again, retailers are well on their way to reducing shelf space for these categories.
Feel free to comment about any other categories that maybe in a long term decline.