8 mega trends Impacting the global FMCG (consumer packaged goods) industry (updated August 2016)
Data explosion is underway as the ability to acquire, store and process data continues to improve exponentially. This includes social media related brand engagement scores generated through mentions, searches, likes, comments etc. all of which can be analysed to deliver meaningful insights.
The FMCG world already had weekly consumer sales, brand tracking, consumer panels, shopper data from friendly and well compensated retailers and another few hundred metrics depending on which data/analytics organisation you talk to.
95% of the data being generated and sold to eager marketers and analysts is useless. Some of it, due to its very high frequency of delivery is probably detrimental to the business, as it leads the organisation to believe in a short term truth that does not actually exist in the long term. This leads to poor strategic options being taken.
The smarter organisations will buy only the relevant data (manage information costs), deduce the correct linkages to consumer behaviour and use it effectively to develop products, manage trade and communicate effectively to consumers.
2.Speed of social media
Information now moves at a rapid speed. A tweet, FB post or a Youtube video can go viral in hours. No longer can an organisation sell a product that was unsaleable in a developed market due to health concerns in another less developed market as regulations had not caught up. Regulations will take time to catch up but consumer information is just a Google search away. The brands may not all be global but we have the global consumer who may live in Australia, but shops from the UK & China and is aware of the child labour issues at the tea gardens in Assam where her tea comes from.
To get an idea of the volume and speed: when Germany defeated Argentina in the final there were 618,725 tweets per minute. Psy’s music video ‘Gentleman’ had 100 million views in 4 days. Information dissemination will be rapid and with no place to hide. Smarter brands will use this effectively to reach globally while limiting brand communication costs.
3.Health Concerns will continue to impact consumer food buying decisions. This is one of the biggest trends with a few key sub trends
a. Fresh & locally sourced and at premium prices
Consumer desire for fresher products without any additives will drive development of fresh, locally sourced, ready to cook products. A number of these products will appear in the “chilled” part of the supermarket. This growth will be at the cost of highly processed products in a tin or pouch, stored at ambient temperatures with long shelf life ranging from 6 months to a few years, will decline. Organisations with experience in managing a chilled supply chain will get a head start. Research by Havas Worldwide in mid 2016 validates this trend. See the Eaters Digest Report here
b. Increase in boutique / artisan manufacturers
To provide locally sourced products there will be an increase in the number of small artisan / gourmet producers who will showcase their products in a non-commercial package while demanding premium prices. Most small operators will fail, but a constant pipeline of local producers will emerge, motivated in some way by the growing number of food shows which makes many believe they are the next Jamie Oliver. This will continue for a while till the bigger organisations figure out a smart way to operate local operations again. This will be hard as they would have spent a good part of the last 20 years closing local factories for bigger more efficient units in cheap labour markets
Everything with high sugar in products disguised as ‘food’ will need to re-invent itself at some point in the future. Cereals with 20%+ sugar are definitely on the way out and this trend will continue to accelerate. Sugary beverages, confectionery, snacks and biscuits etc. will see reduced consumption and will have to re-invent themselves with smaller pack sizes (150ml can of fizzy), warn consumers of over consumption, and not be seen to be fighting this trend among others. This will happen voluntarily or the local laws will take over. Consumer knowledge of high sugar products to avoid will improve dramatically over the next 10 years. Grocery shopping apps will not only tell you how much you have bought in dollars, but also the total nutritional value of your purchase: for e.g. what percent of your weekly purchase was sugar. Fat was the old villain, now it is sugars turn. Will obesity reduce? I hope so.
d. Organic and Free Range
will continue to grow and will gain substantial market share in some categories. Current flaky rules around what is organic or free range will be tightened as more players get attracted to this segment. Brands will enter this premium segment to overcome the low profits of the mass segments.
4.Online grocery shopping
This is growing rapidly in most developed markets albeit off a small base. While most major brick and mortar retailers now offer online shopping and delivery, the birth of smaller online retailers with tight product lines and deeper prices will begin to emerge. Most modern developed market retailers carry anything from 10,000 to 25,000 SKUs (product lines). Imagine an online retailer with only 500 SKUs or even lower. And when some of these tight range online retailers grow big, brands which grew on the strength of adding a new flavour or fragrance every quarter will struggle as category and range management for a 500 SKU business will be easier, but brutal for brand owners.
5.Environment & Sustainability
Organisations that can demonstrate sustainability across their total ecosystem will benefit from stronger consumer bonding scores. However the ability to charge a premium to cover increased costs will remain limited as consumers will increasingly see sustainability as a given rather than a perk to be afforded by few. The Tesla of the FMCG world is still to be created.
However, the larger manufacturers will try and create separate brands and business units to capture the green consumer, some of these will succeed provided they manage to distance their legacy brand from the new green offering.
As mega factories open across Asia and Eastern Europe, cost of production will continue to come down due to massive economies of scale. Helped by the increase in number of free trade zones and agreements, it will make less sense to have factories all over the world – rather a mega unit optimised to be placed near source of raw materials and the bigger markets. Over the last 50 years the growth of global FMCG organisations has been driven by trying to sell a broadly similar product to all parts of the world. This has also resulted in organisations becoming more centralised in new product and brand development while keeping local operations to optimise the in-market execution.
The current trend of the price discounters and premium high end retailers both growing at the expense of the middle ground retailers will continue for a while till the middle ground figures out a way to fight back. Fight back they will with sharper and more relevant positioning (using themes of sustainability, ethical & local sourcing, etc.) while re-inventing their range architecture and pricing strategies. Those that don’t will perish rapidly as they get stuck in the middle with reducing share and supplier investment (trade spend)
How different would a supermarket product range look if everyone shopping there was 50+. Filled with fresh foods, fish (salmon), wholegrain and few premium sweet offerings along with a large aisle of health supplements. This demographic has more money and will place a higher value on food quality. The challenge will be for brands to appear relevant to this ageing demographic while being ‘cool’ enough to attract the younger consumers.
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