How FMCG giants can beat the challengers
It is not a good time to be a fast-moving consumer goods (FMCG) giant.
The old certainties of rising incomes, abundant retail space, and established marketing techniques are fast vanishing, and the pressure is on.
According to the 2017 edition of the FMCG Global 50 from OC&C Strategy Consultants: “Revenue growth for the Global 50 turned negative for the first time in 13 years (-0.7 per cent). Underlying organic volume growth also remained at near record lows, at just 0.7 per cent.”
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It’s a trend that keeps brand marketers awake at night – and the time is fast approaching to confront the issue and start finding solutions.
A changing world
One of the most significant causes of this problem is the loss of market share to startup brands. Today’s brightest and best business school leavers take their newfound knowledge of brand positioning, distribution, and promotion to start their own brands.
Consumers search them out, retailers want to stock them, and they are taking significant market share from established players. Lily’s Kitchen, for example, is already in major retailers. Bulldog is giving Gillette a run for its money. Fevertree’s market value in April 17 was $1.8bn – higher than Britvic’s $1.7bn.
Buy them out
The established FMCG players have not sat still while these upstarts steal market share. Some have tried to acquire the success of the startups by buying the firms: Unilever bought Ben & Jerry’s, Cadbury snapped up Green & Blacks, AB InBev bought Camden Brewery.
Yet these acquisitions don’t always work. Within the corporate stable, it can be hard for startups to retain what made them successful – Green & Blacks started using non-organic chocolate for the first time in 2017, and Ben & Jerry’s has been surpassed by the new ice-cream on the block: Halo Top.
Even when they do succeed, the revenue generated by startups is relatively minimal. You need to sell a lot of Camden Pale Ale to put a dent in the five per cent fall in sales that Budweiser suffered during 2017.
Make it relevant
Instead, a strategy that has worked for some brands is to invest in brand relevance to reconnect with consumers.
Hellmann’s recent redesign is a bold move in this direction. It sees the brand shifting from its previous bright, synthetic look to a more natural aesthetic, drawing on its 1913 origins in a New York deli.
It is notable that this shift is happening as Hellman’s Mayonnaise overtakes Heinz Tomato Ketchup as the UK’s most popular sauce. The best time for a brand to invest in relevance is when it’s riding high.
That’s a lesson many other leading brands should learn. As Child’s Farm takes second place in the child skin and hair care market, growing by 175 per cent in 2017, Johnson & Johnson should be investing in brand relevance if it wants to protect its number one spot.
A radical rethink
What about brands that have failed to act, or those in a category that’s in terminal decline? These brands are rapidly approaching crunch time.
For many, the plan should be to become the last man standing on the supermarket shelves, maximising sales and focusing on profit for as long as the category survives.
Look at the detergents market. Consumers are increasingly moving away from washing powders to capsules, liquids, and other more convenient formats. So how to manage this declining powder segment? Eventually, it will decline so much that only one brand will be needed. But which one?
Unilever’s Persil leads the market, and it also has Surf. But P&G has the stronger portfolio: Ariel, Bold, Fairy and Daz. But is either company talking to retailers to do a deal to profitably manage the decline?
Brand relevance is important, but so are commercial negotiations to ensure that yours is the brand that continues to be stocked by major retailers when others are delisted.
Time to act
Whichever approach is right for your brand, you will need a brand strategy partner that is prepared to propose bold solutions to difficult problems, and has the skills to reposition your brand and keep it relevant.
With a clear-eyed view of the situation, a brave plan, and the right partner at your side, there is opportunity for every FMCG giant.
Yet, as all these trends accelerate, there is no time to waste.
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