Procter & Gamble or Coca Cola?

Did you know that Procter & Gamble pioneered soap operas? While ‘Painted Dreams’ is considered to be the oldest soap opera program (on radio), it wasn’t until P & G launched ‘Ma Perkins’ on radio in 1933 that the term was coined. 

In case you are curious, the story revolves around a widow forced to juggle financial and family problems, while at the same time promoting Oxydol, P & G’s laundry detergent. 

This was just before WWII. By the start of the war, P & G was producing more than 21 different radio soap operas EVERY WEEK. Another significant event in 1939 was the launch of the TV. Within 5 months of launch, P & G aired its first TV commercial. They also continued producing soap operas for TV. By the end of the war, P & G’s revenues had reached nearly $350m. 

(Interesting fact: Neil McElroy, one of the marketeers behind these innovations, later became the US Secretary of defence. He also pioneered brand P & Ls in the CPG industry.)

Getting back to ad spend, very similar to P & G, Coca Cola launched one of its most effective campaigns around the same time, during the Great Depression – The pause that refreshes. During the first year of this campaign, sales is said to have doubled. And then WWII happened. Coca Cola continued its ad spend during this time, and the then company president, Robert W. Woodruff even declared that any American soldier could get a coke for 5 US cents, regardless of its actual price.

Coca Cola’s ads during this time focussed on the softer sides of conflict; on Coke’s ability to bring people and nations together. The ads showed American soldiers drinking Coke and laughing with British, Soviet, Polish, Brazilian & Chinese soldiers, with a caption around ‘ Have a coke’, with messaging around solidarity.

Fast forward nearly 80 years, we have another crisis and the two companies have diametrically opposite strategies for ad spend. 

The Coca Cola company has decided to suspend all its marketing activity in several of its markets during Covid. 

Here’s a direct quote from The Drum on what drove this decision, “We’re being … mindful about the right level of brand marketing and new product launches given the consumer mindset across market,” Quincey told investors yesterday (21 April). “We’ve developed and determined that in this initial phase there is limited effectiveness to broad-based brand marketing.”
“With this in mind, we’ve reduced our direct consumer communication we’ll pause sizable marketing campaigns through the early stages of the crisis and reengage when the timing is right. These plans will vary from market to market with our earliest reengagement focusing on the recovery in China.

At the same time, Procter & Gamble is investing in marketing during this period. 

Again, a direct quote from The Drum, “We need to work hard to ensure that we maintain mental and physical availability to the greatest extent possible, so that those consumers return to their beloved and trusted brands – which are ours – as they’re more fully available.”
“There’s a big upside here in terms of reminding consumers of the benefits that they’ve experienced with our brands and how they’ve [met] their family’s needs, which is why this is not a time to go off air.”

We, at Salesbeat, think P & G’s approach is more likely to succeed in the medium to long term. Once lockdowns ease and Covid passes, consumers will remember who have been with them through this crisis. As the saying goes, ‘Out of sight, out of mind’. 

What we are going through currently is a war after all, only this time with an invisible enemy.

Fast moving consumer goods/consumer packaged goods, Covid 19 and lockdowns

There are several conflicting opinions on which consumer packaged goods (CPG) brands will emerge stronger after this pandemic – those that are start-ups or those backed by large companies. While direct to consumer (DTC) brands are thriving, large brands, especially those in the personal care, home care and hygiene sector, are indeed seeing a spike in demand due to their credibility. This has led to empty shelves at supermarkets, where some of these brands have run out of stock. 

As most large companies rely on just in time manufacturing (or as close to it as possible) to keep their working capital efficient, they are currently working on alternative plans to source and manufacture their products. And this will delay them, more than this will delay start-ups.

While start-ups are also facing the same problem, they do not need to adhere to the same processes for approval of new suppliers as do the large corporates behind large brands. This pandemic will be a true test for large CPG companies who have been focussing on driving agility in their organisations.

So, on the supply side, start-ups are likely to have their suppliers lined up vs the large companies.

On the sales side, CPG companies seem to have furloughed most of their sales teams during the epidemic, regardless of whether they are start-ups or well-established large companies. However, we have noted that these companies have retained a skeletal sales team, usually senior commercial/sales directors.

At start-ups, these senior salespeople have as strong a relationship with buyers as do their teams. However, at large companies, senior directors have evolved into more people managers than active salespeople. This, combined with a start-up’s natural agility, has resulted in most start-ups maintaining their relationships with buyers at supermarkets while remaining relevant to consumers through social media. 

Large companies, however, have less contact with buyers and their social media strategy has not changed significantly from before lockdowns.

Once lockdown lifts, there will be a race to the finish line with brands in fierce competition with each other to make their annual targets, or finish as close to annual targets as possible. It will be critical to ensure that all orders are captured and that there are no disruptions in supply chain. Any and all feedback on brands from buyers will need to be acted on according to consumer priority and communication between sales, marketing, supply and finance will be key. 

You may be thinking that it sounds like large companies will need to start operating like start-ups and you’d be right in thinking that!

Much like the brands that won after wartime (the ones that remained relevant and available to consumers during those times), the brands that win after lockdowns end will be those that maintain a presence at stores, maintain their relationships with buyers, and maintain or even increase their presence on social media. 

So what does the future look like?

So what is the future of retail as it pertains to groceries?

We believe that brick & mortar stores, whether they are supermarkets, convenience stores or even open air markets, are here to stay. Online grocery stores will take more share from brick & mortar stores. However, they will co-exist. 

Total grocery revenues will be almost evenly split between online and brick & mortar stores. Customers will use grocery stores to explore and discover new brands, and buy fresh groceries and meat. 

Companies will use brick and mortar presence to signal brand credibility to customers and to encourage trial. Just like D2C brands are now building their brand identity selling directly to consumers, there will come a time, when brand identity is built at brick & mortar retailers and consumers will look to establish brand credibility at stores.

Deliveries are becoming less of a pain point as an increasing number of stores offer delivery service to customers once they buy their groceries at stores. There will be fewer brick and mortar grocery stores in the future as their revenues will not justify the rent on the space. 

Additionally, there will be fewer stores in prime locations, further lowering the rent paid annually by these retailers. The reason they currently have stores in prime locations is for convenience (of their customers). But online shopping is likely to be the more convenient choice of the future, whether it gets delivered or whether it is picked up from a convenient location. This would leave a higher margin for retailers than they currently have.

The winners in this space will be:

  • the ones who can get delivery of fresh produce right. The greatest concern/barrier for customers buying online is fresh produce. Online grocery stores and brick & mortar stores that have an online presence should build a reputation for delivering high quality produce consistently to encourage repeat purchases and new customer sign ups
  • the stores that can offer a ‘pick-up at store’ option for those who shopped online or the online stores (like Amazon fresh) that offer deliveries within an hour
  • the brick & mortar stores that can offer busy households a painless shopping experience without queues, like Amazon Go. This combines the convenience of buying online with the experience of buying at stores
  • the ones who have an online presence combined with brick & mortar stores

Watch out for this space next week to understand what led us to these conclusions!

The Future of Retail as we see it at Salesbeat

A month or so ago, I sent out a survey to understand the future of grocery retail across the globe. We got more than 300 responses from 25 countries and across ages ranging from 20 until 70+. Super appreciate everyone who replied. Thank you!

Everyone talks about how online buying is on the rise and that one day, everyone will be buying their groceries online. We wanted to get a better understanding of why everyone saw online grocery buying as the future and whether all countries around the globe felt the same way, so we could set our users up for success.

We intended to leave the survey open for just a week initially, but seeing some of the initial responses, which were very contrary to expectations, we decided to leave it open for response for a couple more weeks, which turned into a month.

So what did we see? We’ll be posting 3 blogs about the results:

  • The first will be on what is happening now
  • The second on what we see as the future from the results we got
  • The third will go into why we came to that conclusion

71% of our respondents buy their groceries from Supermarkets. Just 2.9% of our respondents buy their groceries online. The remainder 26% said they shopped both online and in stores regularly. 

Of the 2.9% who responded that they only shopped for groceries online, the bulk of respondents were in the 50-70 age range. We were expecting these respondents to be much younger – Gen Z respondents to be specific. Or even late millennial respondents.

But when we dug into why we saw these results they made sense. 

It turns out that most of Gen Z enjoy the grocery shopping experience. They prefer going into stores to get what they want. As the current working culture turns more to remote working and flexible working, it does indeed make time for the Gen Z respondent to go into stores to shop on a weekly basis. Also, they feel they need to touch, feel and see the actual product on shelf. 

Most millennials have a preference for shopping at stores and topping up online. 

The previous generations, in contrast, had far less time because of their commute into work and due to the squeeze on time, you see more respondents who shop both online and at stores. Online for convenience and stores when they had time. 

Also, we found that respondents in the 50-70 age range found it far more convenient to buy mostly online due to mobility issues. 

More to come on this next week!

Top reasons why Food & beverage start-ups and NPDs fail (continued)

So last week we spoke about what could go wrong with new product launches and we are continuing that theme this week. You’d be surprised how many things can trip you up close to launch date, after launch or even well after launch.

  1. Bad customer experiences: Your customer has been very specific about the configuration of the cases and pallets of your brand. But unfortunately, your manufacturer has not heeded instructions and delivered your first order the way they have always done things, which is quite at odds with your customer requirements. They do this a second time. They get this sorted out the third time, but by then your customer has made a note of this. The next time something goes wrong, they delist you. 
  1. Bad consumer experiences: Your first two weeks of launch have gone great. Your brand has been flying off the shelves. You know the third week may not be great, as your first two weeks have gone splendidly. Your fourth week should go well. But it doesn’t. Your sales drops. Your fifth week sees almost no sales and in the sixth week, the category manager tells you that unless your sales rebound, they are considering delisting your brand in favour of a competitors. So what went wrong? Your brand obviously fills a gap, but consumers just did not come back to buy more. It became difficult to drive trial too. Did you look at whether you were getting bad word of mouth? Did you get feedback from any of your consumers from the first two week? Anything can go viral these days and all you need is one or two people who dislike the product to start a social media campaign. Maybe someone got a bad batch or just did not like the taste.
  1. Weather and seasonality: ‘The weather, really?’ you are thinking. Yes, the weather and the season play a very important role in the success of seasonal or weather dependent foods. For example, the best time to launch an ice-cream or frozen dessert brand is during the summer, when your consumers will be open to trying new brands and products. During winter, if a consumer is buying ice cream, he/she already has a favourite and she/he’ll go for that brand/flavour. The same goes for beer in winter and mulled wine, mince pies and winter soups in wummer. Any of you who launched your ice cream brand during unseasonably cold summers will know what I am talking about!

Top reasons why Food & beverage start-ups and NPDs fail

So the stars have aligned and you are ready to launch that new food brand that you’ve been developing for the last 6 months. You have the funding, you have found the right manufacturer with the right licenses and you have a national listing. What could possibly go wrong?

Congratulations, you have a national listing!
  1. Consumers don’t want it: Now you are thinking about the sampling sessions you/your agency held when everyone loved your product and brand. Well, it turns out that unless the product is that bad, your sample group will tell you what you want to hear. After all, you are paying them to be part of the group and they feel obligated to give you the answers you want to hear. Consider speaking to random people at your corner grocers outside of their stores to get honest feedback about your product. Or speak to your kids, they’ll be honest!
  1. Cultural nuances: Brand names, packaging and the right ingredients are so critical to the success of your food product. They can make or break your brand if not done right. Did you get enough feedback from your target consumers in the target market? Did you check whether the ingredients raise any red flags for your consumer group? What about the brand name? Does your brand name mean anything different to your target consumers than to you? More on this subject in a later post.
  1. Pricing is all wrong for the customer segment: Your brand/product is targeting a very specific segment of consumers. It could either be too expensive for the consumer to buy or too cheap for the target segment. Keep in mind that for certain products, price also acts as a signal for quality. So when you work up the pricing, take into account what your consumers should be paying for it. Do your homework and look into what competition is doing and what similar products or even complementary products are priced at for those consumer segments. Then work back the numbers to your selling price to the customer, taking into account retailer/customer margin, warehousing costs, logistics costs and any additional costs the retailer/customer needs to bear. 

Stay tuned for more next week!