The state of flux in FMCG

FMCG brand managers are facing an unprecedented and almost overwhelming combination of challenges, which are coming at them faster than ever. We have labelled this phenomenon the age of progressive FMCG – political and social tensions, culture wars, gender wars, warnings of impending environmental disasters, the obesity crisis and the collapse of trust in traditional media and other forms of authority. It makes for a darkly dystopian mix.‘ according to a report by FINN, a communications agency.

Despite all this change, FMCG companies continue to homogenise shopper characteristics by generational cohorts for different markets. While this worked well 30 years ago, when each generation had its own signature characteristics, today, this has changed.

Patterns across generations

These days, due to technological advances, there are similarities in shopper behaviour across generations that could be used to categorise shoppers rather than relying on generational similarities.

For example, each generation has people who adopt technology early. Not only that, but Baby boomers needed to undergo a ‘crash course’ in ecommerce and social media during the pandemic for everyday shopping and to keep in touch with their family.

As a result they found that e-commerce is a far more convenient channel for their shopping needs than travelling to stores. This is especially so for baby boomers who maybe mobility constrained & for those baby boomers living in emerging markets, where proximity to stores and traffic are deterrents to shopping at stores.

Another commonality across generations is the impact of price. While only 73% of Baby Boomers considered price a key factor influencing their purchasing decision vs 78% of Gen Z, the delta between the two is not significant.

Consumers across generations love a bargain, with 75% of both millennials and baby boomers agreeing that they’re more likely to purchase if they have a coupon or loyalty discount. For more information on multi generational retail strategies, read this report.

Pre pandemic studies on FMCG now out of touch with consumers

Most studies on shopping preferences and styles of the different generations were done pre-pandemic. These are now of out of sync with the consumers of today, and that includes baby boomers and Gen Xers.

A recent 2022 study by Hubspot on how each generation shops shows more similarities that differences between many of the generations. While 50% of Gen Z shoppers said that a brand’s ESG initiatives are important to them, 35% of Baby Boomers also said the same, with Millennials at 41%.

Millennials & ESG initiatives
Gen Z & ESG initiatives

While only 25% of Baby Boomers say that ESG initiatives by brands influence their choices, 71% of those who agree want companies to take action on Climate change.

The key takeaway is that consumers across generations are concerned about similar things. The only difference is the percentage of each generational cohort.

Leveraging similarities

Today, we live with spiralling inflation, geopolitical conflicts and the ever present threat of another pandemic. These uncertainties are impacting consumption choices yet again.

Perhaps it is time to regroup consumers by how they discover products & shop and what features/benefits influence their choices rather than relying on generational similarities to target consumers.

You’re not you when you’re hungry

The ‘You’re not you when you’re hungry’ marketing campaign, by the Snickers team at Mars, celebrates its 12th anniversary this year. Since its launch in 2010, the campaign has won several awards including Cannes Lions, The One Show, D&AD and the Emmys. And as the campaign premise is universal & timeless, it hasn’t needed much change(through time or for different markets) either. But what catalysed the Mars team to develop & launch the ‘You’re not you when you’re hungry’ campaign?

The problem

Snickers as a brand had become overly targeted and focussed on a subsection of the male population – young men. The brand used ‘bloke humour’ to focus exclusively on this consumer segment. As a result, they were unable to grow beyond a certain point. However, contrary to their focus, the Mars team wanted Snickers to be a universally loved brand for men.

The process

The team decided to identify a universal human truth that worked across markers and time. This would help them build a global brand. Through customer interviews and research, they discovered that men seek acceptance and membership of the “male pack‟. They found out that when they’re hungry, they’re not themselves which threatens their place in the pack. This insight was consistent with the brand’s heritage, whilst also being relevant to a much broader audience.

The resulting brand idea was, “A proper, nut-filled Snickers sorts out hunger and restores your role in the pack”. 

The solution – You’re not you when you’re hungry campaign

And so, the ‘You’re not you when you’re hungry’ campaign was born. The team decided to implement the campaign universally, tweaked for local culture.

  • The US was critical for success as the country was Snickers’ number-one market. The team launched the campaign during the 2010 Super Bowl Game , featuring US actress Betty White. The ad topped the Super Bowl favourite ad poll and generated 91 days of media coverage worth $28.6m. Betty White appeared on TV shows such as The Jay Leno Show and Oprah Winfrey Show and the ad was played during each appearance.
The US version of the ad
  • In Australia, “Hungerithm” monitored the mood of the internet and offered discounts from 7-Eleven stores when the internet is “hungry”
Hungerithm explained
  • In UK, the team leveraged timely tweets by celebrities that may be attributed to hunger. Once such example relates to Top Gear presenter, Jeremy Clarkson’s infamous dust-up with a BBC producer that generated 5,000 retweets and 390,000 media impressions
The Snickers team’s tweet to Jeremy Clarkson

The results

Prior to launch of this campaign the Snickers brand growth lagged behind its key competitor and also the category.

By leveraging their insights into their target consumer group and tapping into a universal ‘truth’ to create a compelling campaign, the Snickers team at Mars was able to grow the brand by 15.9%. As a result, Snickers is significantly ahead of its closest competitor and the category itself.

All the best Snickers commercials from this campaign

Heatwaves – Making the most of demand

We are only just past halfway through 2022. However, this year has already been extraordinary in many respects, one of which is the record breaking number of heatwaves we’ve seen so far across the world. For those interested, this Wikipedia page lists all the heatwaves in 2022 to date.

Impact on sales

A comparison of sales in the 12 weeks to 10 July 2022, to sales in the 12 weeks to 11 July 2021, shows mixed performance across grocery stores in the UK, with discounters gaining the most, due to consumers switching to them to minimise their grocery spend in light of soaring inflation.

However, despite current inflation rates, BRC-KPMG retail sales monitor for July 2022 showed that total sales increased by 2.3% during the month, bringing to an end three consecutive months of decline.

Ice cream, beer, water & barbecue ingredients sales benefitted the most from the heatwave, while sales of barbecue grills themselves rocketed during this time despite fire hazard warnings. Outdoor furniture sales also benefitted, as more people planned to spend time outdoors in August. Clothing retailers also benefitted during this time.

Gelato & ice cream brands and vendors benefitted all through Europe, as people consumed them in a bid to cool down.

US grocery sales, in the meantime, also benefitted from this, albeit in a different way. Online grocery sales saw the most increase at 17% vs prior year in July, as more consumers sought to avoid travelling outside during this time.

On the overall, US supermarkets benefitted from increased demand during this period, with Albertsons companies benefitting the least at 10% growth vs prior year.

However, some delayed impacts of these heatwaves are yet to come. Typically, for regions that have high humidity levels, heatwaves bring with them increased demand at a later date for anti mould and anti fungal products. Also, shampoo, conditioner, anti frizz hair products and shower gel sales increase following heatwaves as people use these more frequently during heatwaves than they usually do.

So how can you best prepare your store for these heatwaves?

Keep an eye on weather forecasts by reputable agencies. When a heatwave, storm, cold wave or any unusual weather event is expected, look at temperatures expected, humidity levels etc and consider how these, in combination, will impact human behaviour.

For instance, a heatwave is declared in the UK anytime the temperature rises above 25℃ or 26℃. When temperatures are between 26℃ & 32℃, people plan to and are likely to go out, and enjoy the warm weather outdoors. So sales of certain products like beer, wine, water, picnic essentials, barbecue ingredients etc are all likely to increase a few days ahead of these heatwaves. Sales of these products continue to stay elevated during the heatwave as some consumers maybe more impulse led than others. During this period, depending on humidity levels, sales of anti frizz hair products and brands may also increase.

However, when temperatures increase beyond 35℃, sales of these products may not increase as much, as some people may prefer staying indoors where it is cooler. Also, impulse sales will not be as high at stores, and may move to quick commerce channels, as more people want to avoid the heat outside.

When a heatwave is expected, looking at humidity and dust levels is important when considering what and how much to reorder as they impact demand for shampoos, conditioners, moisturisers, home cleaning products and laundry products.

Sound complex? That is because, it is

Impact of changes in weather can be difficult to predict when looking at things in isolation. So consider not just weather forecasts, but also the demographics of consumers around your store location. People from different countries behave differently when it comes to weather. So if your store is located in a cosmopolitan area, consider how people from different backgrounds may react differently to these changes.

If you’d like to learn more about how to prepare for unexpected weather events and maximise sales during these times, email me on veena@salesbeat.co

Heinz & consumer centricity

The iconic glass Heinz ketchup bottle was a staple in family kitchens around the world. But did you know that H J Heinz pioneered glass bottles in the Ketchup sector? This was primarily to show consumers that there were no nasties in his bottles of Ketchup. Nasties in Ketchup bottles? Really?

Yes, at one point Ketchup did not contain even one tomato. It has its origins in the East and was a fermented mix of Yellow Fish, Shark & Mullet. For more info on this, check out the article here.

Cookbook author, Pierre Blot, used the words “Filthy, decomposed and putrid.”, in 1866 to describe ketchup brands that were available the.

At a time when no one cared about what went into ketchup, H J Heinz was obsessed with purity in his product. He put his ketchup in glass bottles so consumers and shoppers could see how pure the product was.

57 Varieties labelling

You maybe surprised to know that 57 Varieties of Heinz is a work of pure fiction. That is not to say that there aren’t/weren’t 57 Varieties of Heinz. At a time when there were more than 60 varieties of Heinz, HJ Heinz went with 57. There are several sources that claim different reasons one. One claims 57 was H J Heinz’s favourite number. Another claims, 5 was H J Heinz’s favourite and 7 was his wife’s favourite. Yet another source claims that H J Heinz simply liked the look of the number.

But what all these sources agree on is the reason behind placing this at the neck of the bottle. This label was a signpost. Instead of whacking the ketchup bottle on the back of the bottle as many did, which usually did not result in much ketchup, consumers were meant to whack the bottle where the label was placed to get ketchup out.

As you can see, probably not the best solution, but better than whacking the bottle on top.

EZ Squirt launch

Malcolm Gladwell, in his book, What the Dog Saw, described the trigger for the research that went into launching squeeze bottles. Heinz had commissioned several studies into how Ketchup was consumed and the consumer persona that consumed the most ketchup. So it was well known that children were their biggest consumer group and one of these user group sessions was a turning point for Casey Keller, a former manager with Heinz.

He was at one of the household observing how people consumed Ketchup. “I remember sitting in one of those households,” Casey Keller, who was until recently the chief growth officer for Heinz, says. “There was a three-year-old and a six-year-old, and what happened was that the kids asked for ketchup and Mom brought it out. It was a forty-ounce bottle. And the three-year-old went to grab it himself, and Mom intercepted the bottle and said, ‘No, you’re not going to do that.’ She physically took the bottle away and doled out a little dollop. You could see that the whole thing was a bummer.” 

Heinz

According to Keller, this was the moment of truth. The average 5 year old consumed 60% more ketchup than the average adult does. And the problem was that the products biggest consumers did not have access to Heinz Ketchup whenever they wanted to consume it. Parents decided how much ketchup their children consumed.

Heinz launched the EZ Squirt bottle as a result. In homes where Heinz in EZ Squirt was used, sales of ketchup increased by 12%.

According to Keller, the innovations in the ketchup space by Heinz “have driven category growth while increasing Heinz’s ketchup sales (by) approximately 7% annually over the past two years, giving the brand a record 60% market share.

“It’s obvious that innovation is the name of the game in this category.”

Launch of the upside down squeeze bottle

However, the Heinz team identified that people were still finding it difficult to get ketchup out of the EZ Squirt plastic bottle.

They often got too little ketchup, but they would just make do with what they had instead of continuing to squeeze to get more. Also, residual bits of ketchup would gather around the nozzle clogging the nozzle toward the end. The Heinz team noticed that consumers often stored their Heinz bottles upside down.

Heinz & consumer centricity

So Heinz launched the upside down squeezable bottles with a valve fitted inside to get the most of the ketchup inside the bottle.

“The upside-down bottle has it all,” said Heinz brand manager Melissa Hill. “It gives an instant flow of ketchup, with no more shaking, complete controllability, and no messy residues on the cap. Squeezing is believing. The valve literally sucks ketchup back up the very instant that squeezing stops.”

As a result, according to CNN, sales of Heinz ketchup in that year rose by 6% when the category itself grew only by 2%.

Heinz continues innovating to meet changing consumer preferences

In November 2021, Heinz announced that they were collaborating with Aptar Food & Beverage to incorporate a new recyclable valve system in their range. As recently as in May 2022, Heinz announced that they were launching their ketchup in a paper bottle made entirely of sustainably sourced wood pulp.

Heinz & consumer centricity

The next 12-18 months will tell how well these changes have been received by Heinz consumers.

If you’d like to read more about how other FMCG companies have approached customer/consumer centricity, check out our blog on this topic.

Promotions – Evaluating & implementing them

The last few weeks, consumers have been switching to less expensive brands and those that they perceive as better value. This includes consumers switching to low priced brands and products on promotions.

During times like these, i.e economic recession combined with decreasing disposable income, companies often turn to promotions as a means of increasing revenue. However, as more companies turn to promotions and the number of promotions in stores increase, consumers begin to factor in these lower prices.

They get so used to it that they become reluctant to purchase products at the regular shelf price. This also results in margin dilution. However, promotions can also attract new customers, boost sales volumes and generate awareness, if planned and executed effectively.

‘If planned and executed properly’ is key, as according to a paper by promotion optimisation institute, 72% of promotions do not break even. Not only do 72% of promotions not break even, but 22% of them also perform worse than if no promotion had been implemented at all.

Lets look at why

Most promotions run year after year, with only slight changes, if any, to the promotional mechanics. Given the fast changing times we live in, it can be dangerous to assume that the same promotion will be effective year after year in the same store.

This assumes that socio economic factors and the demographics around these stores do not change and competitors will react the same way as they did previously. And we all know that this is rarely the case. We have all changed jobs, houses, where we live, the restaurants we frequent, the brands we buy, when and where we shop and in general, our life routine.

So why do we assume everyone else remains the same when we analyse promotions for effectiveness? I have been a victim of this thinking as a commercial finance person, early in my career, too. We assume the same conditions and uplifts as the year before when assessing promotional effectiveness for future periods. Also, we assume that all consumers react the same way regardless of the neighbourhood and their socio-economic make up. Again, this is rarely the case.

Example, a 50% off promotion for a consumer staple generates a lower sales uplift when implemented in an affluent neighbourhood than in others. This is either because consumers would have bought the product without the promotion anyway or because a lower price is unlikely to motivate them to switch from competition. So it is key to understand the demographic and socioeconomic make up of shoppers at each store or each cluster of stores (stores can be categorised for socio economic make up) when promotions are evaluated. As this changes over time, it is important to re-visit the calculations and assumptions each time a promotion is considered.

Store level data needs to be considered

Companies should review store level data to understand the best promotions to implement. 

Other factors such as store level weather forecasts, social media sentiment/mentions, traffic data and so on, influence the effectiveness of these promotions. So take these factors into account too, to evaluate promotional effectiveness. For example, the overall revenue uplift from implementing a promotion for a beer brand when it’s raining will be far lower than when implemented when its warm, sunny and dry. Weather conditions around each store may vary and so need to be evaluated individually or in clusters. In fact, in this case, consumers are far more likely to stock up for a warm sunny day anyway, which means you lose a full price sale in the future.

The promotional uplift often results in fewer sales in the days that follow. Finance and sales teams at companies often consider cannibalisation of other SKUs that the company sells, during these promotional periods. But they rarely consider how the promotion impacts full price sales of the same product in the future.

Timing of promotions is another important variable to consider. Most companies know they should run promotions for special occasions like Black Friday or Back to School month. But in some countries, pay week is a very important time. If your target consumers are cash-constrained, then receiving a pay check means it is “shopping week”. That’s when promotions make a big impact. 

Evaluate promotions over a longer period than just the promotional period

When looking at promotional uplifts and incremental value generated, look at both the specific promotional period and the impact across the next 6 months. Also, the incremental volume from these promotions should ideally come from competition or through increasing the category volumes. 

If the aim is to reduce stock levels or deplete stocks that are close to expiry, you may not need to look at this. However, it is still important to know the impact of the promotion implemented to understand what you can expect in the next few weeks and months. 

In the next few months, an increasing number of brands and supermarkets will be rolling out promotions on their SKUs to meet customer expectations of value. When evaluating promotions, check to see which quadrant they fall into.

Stay away from the red quadrant! If you are seeking to drive volumes to get rid of excess stock or stock close to expiry, the orange quadrant is the place to be as promotional initiatives in this space drive volumes at the expense of profitability. However, if you are looking to increase value for the business, the right hand side is the place to be (the two green quadrants for those who are right/left hand side challenged, like I am!).

It goes without saying that the top right hand corner is the place to be and is home to the winning promotional mechanic(s).

If you have any questions or comments on how promotional initiatives should be evaluated or would like to learn how store level evaluations can be done at scale, email me on veena@salesbeat.co.

Climate change and FMCG sales

Climate change in the form of extreme heat, hurricanes, flooding etc. presents an inherent risk to FMCG companies. It disrupts raw material supply and logistics (roads buckling, flights unable to take off and ships tossed about), resulting in price increases.

British Retail Consortium and NAACDs published studies that establish that every one degree change in temperature results in a 1% fluctuation of sales. However, companies and retailers are still not prepared for this.

The recent heatwaves in Europe and the resulting out of stocks and overstocking of certain SKUs at stores, are proof that inventory management technology has not yet caught up with the problems of today. So how exactly does climate change impact demand?

Obvious examples of climate change impacting sales

Ice-Creams, beer, white wine, rosé wine, chilled carbonated beverages, barbecue ingredients and products, picnic food, sunblock and sunscreen are the obvious ones that retailers stock up on when there is a heatwave.

According to Majestic Wine in the UK, during this last heatwave in July, Rosé outsold white and red wines by more than 172,000 bottles in that week alone. One bottle of Rosé wine was sold every 12 seconds!

Research firm Kantar said, ‘Sun care sales were up 66% and ice cream 14% in the four weeks to 10 July’.

During cold waves, pasta, pasta sauces, soups, baking ingredients, red wine, spirits, lotions for dry skin, flu medications etc experience increased demand.

Regions at risk of experiencing tornadoes, cyclones, hurricanes or storms, or where there are flood warnings in place, are likely to see increased demand for basic necessities like tinned & frozen food (incl. vegetables), packaged soup & pasta mixes, toilet paper, soaps, shampoo and household cleaning products.

Some not so obvious ones

However, there are a few not so obvious SKUs that experience increased demand as a result of unseasonal weather. The impact is not immediately seen and so maybe masked by other factors.

For example when both temperatures and humidity levels are high, there is a delayed increase in demand for anti mould & anti fungal products, shampoos, body soaps, conditioners, anti frizz hair products etc as consumers use more of these up at home during this time.

Another not so obvious one is a (delayed) increase in demand for allergy medications following a period when the weather is hot and humidity levels are low. Pollen count and dust levels impact demand of this product too.

Planning for unseasonal temperatures and weather events

While inventory teams and FMCG sales people may be making plans for barbecues and outdoor picnics when these heatwaves hit, several times, they do not translate this into their work lives.

And, when they do, they need to make guesstimates of the right levels of stock of these products at stores. This is because their demand planning system is unlikely to have taken this heatwave (or cold wave/other weather event) into account.

However, you know what you do as a consumer. It is not a stretch of the imagination to assume others are likely to do the same. Use this knowledge to help prepare your supermarket/FMCG company to ensure there is enough stock of impacted SKU to meet demand/delayed demand.

Follow the weather and ensure you do not order too much of one SKU assuming seasonality still holds. An example is ordering a container load of red wine in December assuming robust Christmas sales, when warmer, unseasonal temperatures are expected for Christmas.

Also, check out our blog on how you can anticipate changes in demand in a VUCA world.

If you have any questions or would like more information on how you can better prepare for demand changes driven by climate change, contact me on veena@salesbeat.co



Nestle – Innovation & Employee engagement

Challenge

In November 2013, Nestlé asked themselves whether innovation can be fuelled by their employees. Inspired by initiatives like Apple’s Intrapreneurs, Nestlé wanted to apply this model internally, the first of its kind in the FMCG sector.

After all, employees are consumers too!

But what Nestlé realised is that the employees behind the ideas were just as important as the ideas themselves. So they aimed to develop their employees as intrapreneurs and not just focus on ideation. This gave their employees skin in the game and gave Nestle the opportunity to embed a value that they wanted to see more of, in Nestle – Agility.

Solution

The InGenius program was created. Employees submit their ideas to innovation challenges that Nestle posted through the program. A shortlist of ideas was then created and employees behind the idea were given the chance pitch their idea to senior management. The InGenius team invests heavily in employees who reach this stage by coaching them, helping them develop their concepts, and validating their idea/product prototype.

As a result these employees learn how to research, ideate, prototype, test, and pitch, with the aim of highlighting the business potential of their ideas. The ideas that are backed by senior management are then accelerated to pilot testing.

InGenius’s goal was to encourage ideas and to ensure there was a process in place to nurture the entrepreneurial employees who emerged from the process. And they succeeded. The program has been around for 6 years now!

They maintained momentum through the stories and videos created as a result of successful idea submissions. Employees and potential employees could see that Nestle not inly encourages employee led innovation, but also developed the employees who came up with these ideas to be better ‘intrapreneurs’. The InGenius microsite created a community of internal entrepreneurial talent.

Results

To date, 4,800 ideas have been shared, and 67 projects have been funded across the world.

Nestle’s real benefit was that of people development. Not only did a whopping 63,000 employees engage with this initiative, those who were involved as ‘intrapreneurs’ now bring a start-up mindset to the business. Others learned that collaboration and support for ideas is just as important as the ideas themselves.

InGenius’ success is evident in the stories and innovations that have evolved from the initiative and the increased employee engagement. Further, it is estimated that some of the problems that were solved and implemented through this initiative saved Nestle millions of dollars.

Today, companies need a way of engaging and retaining their top talent. Not only this, but companies also need to find a way to develop talent in a way that is in keeping with the culture the company wants to embed. Agility in the FMCG sector has long been a topic of discussion. While most other companies are struggling with this, Nestle has found a way to inspire their team to be agile and catalyse them to solving problems that Nestle faces – key for the coming months!

Regaining consumer trust – a 2022 focus for many FMCG companies

According to a recent report by Deloitte on the state of the Consumer Goods industry and key imperatives for 2022, increasing transparency helping in regaining consumer trust was top of the list for several companies.
Trust and transparency are intrinsically linked. Consumer goods brands that are not open and transparent are at risk of losing consumers’ trust, according to nine in ten executives that Deloitte surveyed. According to the report, most consumer goods companies are making an investment to increase the level of transparency for consumers and other stakeholders.

Increased transparency requires meaningful insights to be derived from raw data

For consumer goods companies to be transparent to all stakeholders and consumers, data needs to be sensed and captured.

The data collected should be shared and processed with other data sources to derive meaningful insights. Sharing an abundance of raw uncleaned data is likely to result in the opposite of what these companies are trying to achieve.

According to Deloitte’s report, intelligence, artificial or otherwise, is needed to do this effectively.

This includes supply chain transparency

55% of the execs that Deloitte interviewed for this report, cited out of stocks of products as a key reason for losing consumer trust. Another 48% cited stock outs of certain flavours/varieties/pack sizes of the brand as a key reason for losing consumer trust. Out of stocks at stores cannot be solved without transparency across the product value chain. Furthermore, it is critical that retailers and consumer goods brand owners work with the same demand/sales predictions to collaboratively ensure that there is enough stock produced, bought and stocked at stores, to meet demand.

Increased flexibility in stocking

Increased supply chain transparency enables consumer goods brand owners as well as retailers to be more flexible with their stock keeping policies. Most companies these days follow a just in time stock policy. However, when there are production related constraints like raw material supply issues or shortages or labour constrains at manufacturing sites, it enables consumer goods companies to make an informed decision to keep more stock(raw materials and finished products) when possible for future contingencies.

If the constraints are on the logistics side, it enables retailers to make an informed decision to stock more in their warehouses to ensure they do not run out of stock.

Without an understanding of expected consumer demand based on real time data combined with where there are constrains in the value chain, it is impossible for the different stakeholders to make a decision on what needs to be done.

Consumer trust and supply chain transparency

Speaking of stakeholders, consumer goods companies need to regain consumer trust by increasing supply chain transparency. By increasing supply chain transparency and ensuring availability of stock at stores, consumer goods brands and retailers can regain the trust they lost with consumers who experienced availability issues at stores.

What’s more, it gives consumers confidence in any sustainability claims the brand/retailer makes. According to the execs interviewed by Deloitte, 84% of them feel that consumers lose trust when brands don’t meet consumer expectations on ESG initiatives.

If you’d like to learn more about how to increase supply chain transparency and derive meaningful insights regarding demand from available data, email me on veena@salesbeat.co

Mayonnaise – how Hellmann’s became synonymous with giving new life to food

Hellmann’s, Unilever’s line of condiments, position themselves as solving a problem, not selling a product. Most food & beverage brands differentiate themselves from competition on taste & quality/use of ingredients. In the world of condiments, this is difficult as most consumers perceive this segment to be functional.
The Hellmann’s unique marketing strategy team at Unilever understood this and have long positioned their brand as one that encourages creativity in cooking and food. Over the last 3 or so years, they have been championing solving the food waste problem at home using Hellmann’s mayonnaise.

Bring out the best

In 2019, Unilever launched the ‘Bring out the best’ campaign in UK. The campaign by  Ogilvy UK & Unilever asked people to get leftovers from their fridge for Hellmann’s to transform into ‘new’ meals using their range. David Hertz, a celebrity Chef, transformed people’s leftovers into five-star meals using the Hellmann’s range.

Bring our the Best Campaign in the UK, 2019

This campaign is a great example of embedded marketing, where the potential of the product is incorporated into a strong social message. Not only did it receive organic coverage from news outlets, it was popular on social media too.

Previous success

Ogilvy and Hellmann’s had previously done a similar campaign in Canada in 2018, which informed Canadians that they waste enough food every minute to feed a stadium. In the advert, they showcased feeding a stadium full of people with food waste from grocery stores.

Delivering a fully integrated campaign pinned on the message, ‘more real food for real people’, the brand created a mini digital site where people can find food rescue tips, recipes and facts on food waste.

Feed a stadium campaign – Canada, 2018

The campaign earned 13.5MM+ impressions & influencer content achieved 2MM+ organic impressions (3.5x the industry benchmark). Their mini digital site with educational tips on reducing food waste had a view-through rate of +80% above industry benchmarks.

2020

Based on the success of their campaign in Canada and also the ‘Bring out the Best’ campaign in the UK, they launched the ‘Turn nothing into something’ campaign in Canada in 2020 and the Fairy Godmayo ad in the US in time for Super Bowl.

Turn Nothing into Something ad in Canada
Fairy Godmayo ad in the US – launched in time for Super Bowl, 2020

In 2020, as an initial step towards the larger vision to reduce food waste, the brand started the Hellmann’s Food Relief Fund. This has already saved 1.2 million pounds of food waste from farms and redistributed this food to communities in need. 

Embedding sustainability in the brand’s DNA

The Hellmann’s initiative, “Make Taste, Not Waste”, is part of Unilever’s “Future Foods” ambition, which launched globally in 2020 with two key objectives: to help people transition towards healthier diets and to help reduce the environmental impact of the global food chain. One of the key “Future Foods” commitments is to halve food waste in Unilever’s direct global operations from factory to shelf by 2025.

This initiative was also lauded by Daniel Balaban, Director of UN in Brazil who mentioned, “The idea is an extremely important wake-up call on food waste”.

Not only does Hellmann’s have a focus on food waste but they are leading the way in terms of how they are sourcing the plastic used in their bottles and caps. In 2018, they started making their bottles 100% recyclable.

Embedding the food waste cause deep into the brand’s image, has helped Unilever breathe life into what is otherwise a commoditised condiment. They have tapped into a segment of consumers who will stay loyal to the brand due to the causes the brand stands for, which is crucial for the year ahead.

FMCG conglomerate shake up underway?

On 21 June 2022, The Kellogg Company announced that they were planning to separate into 3 different businesses by end of 2023. As soon as this hit the news, I’m sure investors and employees of other companies are wondering which conglomerate might be splitting up next. According to Bank of America analyst, Bryan Spillane, the big food breakup “is already underway”. However we, at Salesbeat, think the FMCG conglomerate break up is what is underway.

Why now?

So what is happening now, that is accelerating M & As and separations? We’ve just come out on the other side of a longer than expected pandemic, which had a larger than expected impact on lifestyles and consumer buying behaviour. While certain trends accelerated during the pandemic, new ones emerged and solidified at an accelerated pace too. Remote working and remote education being two of those. While remote education is unlikely to continue in the short to medium term, remote working is here to stay.

As a result of remote working, a new trend/behaviour came into being – living outside the city. Pre-pandemic, everyone wanted to reduce their commutes and live close to work. Healthy snacking was a trend that accelerated during the pandemic and is one of the reasons why the Kellogg split happened.

Another reason for this is the rapid increase in supply chain costs. In this context, companies need to double down on efficiencies so savings can be realised in other areas. And one of them is the route to market.

What about economies of scale?

While you may think that these companies benefit from economies of scale, you’d be right, but only when it comes to manufacturing. When it comes to sales, marketing and strategy teams, each category is likely to have a different team. Also, transport and logistics costs are likely to be separate from other categories.

So FMCG conglomerate break up helps companies focus on growing sales/distribution of distinct categories that share both the route to consumer and manufacturing technology. For example, holding a portfolio purely in the snacking category or in the breakfast cereals category.

So let’s look at some of the other companies under discussion.

Unilever

Unilever is one of the few FMCG companies that owns brands across very disparate categories. The own and sell brands under the Beauty & Wellbeing, Personal Care, Home care, Ice Cream, Condiments, Soup and Plant based meat categories.

Not only do these categories not share the same route to market, but they also have different teams managing the various brands. Furthermore, these categories most likely have raw materials from very disparate suppliers which are manufactured in very different manufacturing entities.

Nestle

Another large Food & Beverage conglomerate that owns brands across very different categories ranging from Pet food to Coffee & Coffee makers.

While brands in the same category may share similar routes to consumer, manufacturing sites and suppliers, brands across categories do not.

General Mills

General Mills has brands across very different food categories and also in Pet food. Their food portfolio includes brands in categories ranging from tinned vegetables (Green Giant) to Baking (Pillsbury, Betty Crocker etc) and from the snacking occasion (Larabar, Bugles, EPIC, Yoplait etc) to ice cream.

FMCG companies with diverse portfolios that are not likely to split are:

PepsiCo

PepsiCo is another company that has come under scrutiny for the very different categories their brands fall under. However, PepsiCo is one of the few companies whose strategy took this into account to convert into a strength. There was a concerted effort from the PepsiCo team to create one route to market. This is one reason why splitting PepsiCo up does not make strategic sense for the company.

Mars

Mars is an FMCG company with a portfolio that ranges across confectionery, pet food and Food (Uncle Ben’s, Dolmio etc). While the same rationale as Nestle and General Mills applies to Mars too, it is unlikely that they’ll spin categories off into separate companies. This is because they are still a family owned business. As long as the family still believes in the company owning brands across disparate categories to manage their risk/return, they are likely to lean into this.

A case for not splitting some of these companies up

In the last 20 years, we have seen the creation of FMCG behemoths where the driving rationale has been more about portfolio diversification and less about lower costs from scale benefits. As long as these different categories and functions are treated as completely different business units for decision making, investors can still benefit from a portfolio of brands across categories during uncertain times. Similar to how a portfolio of stocks spread across companies across various industries help investors manage their risk, FMCG companies and their shareholders maybe able to benefit from a diverse portfolio if managed right.

Conclusion

5 years from now, it’ll be interesting to look at the mergers, acquisitions and divestments in this space and how these companies fare in the long term. While we could argue many different ways for and against splitting these companies up or investing in/developing new categories to manage risk, we live in times so uncertain that the benefits may go either way.