In a world of increasing extremes more and more shoppers are selectively trading up and down. There is substantial growth at both the lower and upper ends of some markets as consumers search on best price for commodity goods, but are prepared to pay a premium for high quality more ‘meaningful’ products.
This phenomenon is not just restricted to FMCG. There has been strong growth in discount chains, such as Ikea and Primark, and high end manufacturers like Paul Smith and Belle Maison. Increasingly ‘mid-range’ manufacturers, for example Courts, Kookai and Ciro Cittero are struggling in their markets and in some cases being forced to close.
Consumer demand is changing; more people are becoming affluent and better educated and as result shifts in attitude, behaviour and demographics can be seen. In the UK there are more single person households than ever before and an alarming drop in the number of couples with children. Changes are being made in store to reflect the differing needs of the consumers
So, let’s take a look at how far we have come in twenty years…
In Laundry we can see that there is now far more choice with products offering many additional features such as stain removal, colour care and added softness. At the same time, own label value products have entered the marketplace.
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Twenty years ago there was no such thing as a Ready Meal; now they are in abundance in a wide variety of formats. This reflect the development of the time poor, affluent end of the market who make up a significant proportion of the marketplace. More women are at work and everyone works longer hours leaving little time to prepare meals froom scratch. However with increased focus on fresh ingredients and concerns about health could this swing back the other way over the next 20 years?
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In Oils there were only a handful of items; by 2006 there are lots of varieties including a number of premium lines. Tastes have changed and oil is no longer only used to fry with. People have become more adventurous in the kitchen, regularly using a variety of oils to cook with and flavour meals, and as a result the choice available on shelf has widened.
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It is quite surprising to see how far we have come in 20 years and while some brands remain constant many have fallen out of favour with the consumer and passed into history.
So…how can you make sure your brand is on the shelf in years time?
1) Develop a complete understanding of the shopper
With today’s multi-channel technology it is getting harder to reach your consumers in great numbers. So it is more important than ever to develop an understanding what happens at the shelf - where the needs of the manufacturer, the retailer and the consumer converge.
With a better understanding of how consumers respond at the fixture you can develop a tactical plan for promotions and the layout of the shelf and how best to prioritise your marketing efforts.
In the wine category increased polarisation at either end is being established. Tesco is the biggest wine merchant in the UK selling 1 in 5 take home wines. The wines stocked are of good quality and sell for around £4 which is considered fairly low price with broad appeal to the mass market. However some consumers want to trade up as they become more knowledgeable about wines and have more money to spend. In response to this Tesco has introduced a range of wines that retail from £7.99 to £99.99 in 90 specially selected stores.
IRI can help you understand more fully why consumers trade up, where the squeeze will be felt elsewhere on the fixture and what motivates consumers to buy a particular brand.
2) Direct your brand for category growth
There is huge competition for space on shelf, the average supermarket stocks 20,000 to 50,000 products! In a year the average consumer will buy from a range of 300 products but in their average shop will only pick up between 20 and 50 items.
To get a win win scenario for both the retailer and manufacturer category direction and collaborative marketing strategies need to be developed.
By looking at the product attributes it is possible to see which type of products with grow category and which will cannibalise it. In the two scenarios below we see different ways of selecting items for the fixture.
In this scenario picking the top ten sellers based on their total sales will give us revenue of £444.
However by breaking this down further and picking products based on segment sales an extra £31 in sales is generated.
When conducting a range review it is also important to consider range elasticity. In the following scenario space is based on elasticity which generates an additional £41 in sales.
In the final scenario we consider what happens when you look at incrementality of the products within the sector:
Here an additional £69 of sales are generated, a great way of driving growth within the category and a winner for both manufacturers and retailers.
3) Be flexible and precise
By becoming more flexible companies are taking advantage of the services provided by others. An example of this at work is the case of RJA Foods distributors of pomegranate juice Pomegreat. There is only one employee of the company, Managing Director Adam Pritchard. Adam runs his business by organising other businesses. Every aspect from production to marketing is outsourced to others, leading to a turnover of almost £3m per year driven by sales of 150,000 litres of fruit juice a week! As demand changes he can be flexible and adjust to increases or decreases more quickly and efficiently than more traditional manufacturers.
Reorganising a business model for creativity and growth can help you to become more innovative. P&G have done just this and are aiming for 50% of their new products to come from outside of their labs.
If you would like any further information on any of the topics above, or on how IRI can help ensure your brand is still on the shelf in 20 years, please contact Craig Lawrie or Lisa Costello via email or on 01344 746000.