2018 has been a difficult year for FMCG. Nielsen report that revenue growth in the sector has stagnated, with a drop predicted for groceries, drugs and mass merchandise; the Financial Times calculates that growth rates in FMCG may never return to their 2007-2008 highs, even if growth does return to a 2-3% standard over the next three years.
Lean times make brands nervous, and keep them on the lookout for the next big thing. Toward the end of 2017, predictions for the coming (current) year’s trends were already flying thick and fast. Now that we’re safely into Q4, it’s time to look back and ask whether those predictions came true where it really matters - the bottom line.
War on sugar vs. sweet revenge
GlobalData analytics suggested that the ongoing trend toward healthier snacking would be met head-on by a counter-trend which they call sweet revenge- a celebration of indulgent treats. Nestlé’s UK launch of luxury brand Les Recettes de l’Atelier back in Q1 was seen as the leading edge of a backlash against the war on sugar. Clean labels, they suggested, would be out; ‘dirty labels’ would be in.
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Did things work out that way? Yes… and no. Take ice cream: Nielsen report 1.6% growth in ice cream sales during 2018. But they also report that customers made their choices based on specific factors - including the presence of sugar substitutes, which 18% of ice cream buyers reported as an influence. Halo Top, one of the biggest ice cream brand successes in the US, valued at $100m in January of this year, has continued its meteoric growth by aiming straight at the low-calorie crowd.
The war on sugar, it seems, isn’t over yet.
Experience over product
Millennials - when they’re not busy killing industries and being impossible to market to - prefer buying experiences to buying things. The FMCG industry had to respond with new formats, extraordinary ingredients, and personalised solutions - at least, that’s what Schieber Research predicted for 2018.
Unsurprisingly, FMCG marketers have reached into their hats and pulled out an experiential rabbit. The social media boom has enabled experiential marketing to reach more people than ever - there’s the hands-on experience of the actual visitor, and then the digital footprint of those visitors’ snaps, shares and stories. But there’s more to this experiential lark than in-store events, as leading challenger brands have come to realise. Breakout coffee startup Bulletproof doesn’t just sell a butter coffee energy drink; it sells a lifestyle that includes the Bulletproof Diet book, the Bulletproof podcast and two Bulletproof cafés in Los Angeles.
The brand experience can even stretch into how people buy and use the product itself. Rather than attempting to challenge dental care leaders like Colgate and Philips at POS, Quip has adopted the Dollar Shave Club model with new toothpaste, batteries and heads for their electric toothbrushes delivered to the customer’s door. It’s a powerful piece of customer-led design - clearly addressing poor dental care among the new consumer generation - in a field that’s barely had to innovate for years. They’re now on track to have 1 million customers by the end of 2018.
Big names in FMCG need to watch their backs: it’s no longer enough to put a product on the shelves and an occasional marketing campaign behind it.
Nielsen claimed that 2018 would be make or break time for FMCG marketers. The strategies that had worked for years would fall apart in an increasingly polarised market, where differences in consumer behaviour across retail channels, departments, categories and brands would become more pronounced than ever.
As 2018 has gone by, midmarket brands have struggled the most - the likes of Marks and Spencer, whose in-house food halls sit in an awkward space with supermarket layout and boutique exclusivity. Markets have become increasingly polarised between small challenger brands at one end of the spectrum and established big names at the other - which has given rise to a curious yet powerful strategic choice.
Rather than compete with the challengers, the biggest FMCG brands are buying them out and owning both ends of the market - that’s why Heineken advanced its acquisitive agenda by taking a stake in Beavertown Brewery back in June. Despite backlash against ‘Big Beer’, particularly in the USA (where the Brewers’ Association seal of genuine independent craftsmanship is growing in popularity), the biggest brands are adapting to disruptive, polarising market forces by buying their way in and then leaving well alone - profiting from consumers at either pole.
Mass branding is dead; long live brand relevance
McKinsey’s prediction for 2018 centred on the way FMCG would have to model and message. The classic value creation model for FMCG brands centred on a mass marketplace, retailer relationships and product innovation aligned to growing wealth among consumers. With a new generation of consumers being less wealthy (not to mention more suspicious of brand messaging and more inclined to niche, personal brands) than their predecessors, the basis for the model broke down. Mass brands advertising on mass offline channels would fall behind; agile and relevant brands that could offer products for specific consumer needs would come out on top.
By Q2 of 2018 it was clear that without a reason to opt into a name brand, consumers would turn to the cheapest product: Kingsmill, Walkers, Muller and Birds Eye were all declining in relevance during Q1. The biggest gains in 2018’s sluggish FMCG market would be made by brands who could give their customers a reason to believe, even if it meant an extensive rebrand.
Häagen-Dazs has successfully enacted that scale of change. Global brand director, Jennifer Jorgensen, admits it was a close thing - the ice cream giant entered 2018 with its luxury lustre seen as unattainable and young consumers writing it off as the sort of thing their mums would buy, which Jorgensen calls “the kiss of death for any brand.” Alongside an agency partner, Jorgensen rebranded Häagen-Dazs as “Instagrammable”, a total repositioning that chimed with Millennial aesthetics and media habits. There was a possibility of alienating existing customers, of course, but as Jorgensen puts it, “if we miss this generation we won’t have a business in the next thirty years.”
Brexit will reshape the UK FMCG market
We made our own set of predictions for 2018, of course - health and wellness, personalisation, experience-over-stuff marketing and, crucially, one about the hard realities of a Food Brexit. Based on experiences of the 2008 economic crisis, we predicted a rise in budget supermarket shopping, a decline in luxury brands, and a positive response to economy-driven brand messaging.
This week, we saw the fall of Poundworld pinned on Brexit in action - the declining value of the pound sterling being one factor in the repricing and gradual erosion of the brand’s identity. Discount retail as a whole has struggled as discretionary spending declines.
Shoppers have been promised a cheaper grocery basket once tariffs on non-European goods like cheese, beef, fruit and coffee are removed from the equation - but suppliers are stockpiling in preparation for shortages brought on by uncertain im port laws. The British luxury market, through its official sector body Walpole, has lobbied against a no-deal Brexit as “the worst possible scenario for business”. And the public is increasingly concerned about the same no-deal scenario, which could see an increase in the cost of imported goods. Seven in ten British consumers believe a no-deal scenario would change the way they shop, based on this perceived short-term impact on costs.
In these uncertain times, it’s vital for FMCG brands to understand how customers are behaving and why. Trends, then, are crucial. Brand managers needs to look forward to see which way the wind is blowing for consumers of all ages. Of equal importance, however, is understanding what is a long term trend, and what is simply a fad, destined to disappear in 12 months. So look out for the impending trends for 2019, but understand your own customers, and their requirements first and foremost.
Building brand relevance is a matter of soft power - read more about the principles of soft power design here.