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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%.

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.

12+ months after Covid fuelled panic buying

Empty shelves due to consumers stockpiling in March/April 2020

More than a year after Covid fuelled stockpiling of necessities and grocery staples, we still see empty supermarket shelves.

Shelf stable food, confectionery & snack brands out of stock (April/May 2021) in UK

Many assume this is because of an increased focus on online sales by the large grocers, especially in the US, as evidenced by this article in Insight Grocery Business in March 2021. We’ve also seen similar instances in the UK, but in the UK, we’ve blamed these stock-outs on Brexit. There have been recent articles on similar instances in the Middle East & in several EU countries too.

An increased focus on online shouldn’t lead to empty shelves in store. Especially as those who pick stock for online orders through external providers pick products off the shelf currently. This is especially so if orders are placed on Instacart (US), Uber eats or Deliveroo (UK). And Brexit shouldn’t cause stock outs of brands made in the UK using materials sourced in the UK.

So what is really going on?

As we mentioned in our previous article on the 2021 Easter egg shortage in the UK, supermarkets, and brands that sell into supermarkets, typically use last year’s sales volumes as baseline for current year orders.

Buyers have exercised some judgement this year by not ordering sanitisers, cleaning products, kitchen cupboard products (pasta, rice, flour, canned vegetables etc), cleaning products & toilet paper in line with last year’s sales, when consumers were stockpiling in anticipation of supermarkets running out of these staples due to lockdowns. However, they did not exercise the same judgement when they ordered other brands/products (confectionery, small format beverages etc). Even less so when it came to the beer, wine & spirits inventory in store.

Despite increased sales across confectionery and beverages during the later stages of the pandemic, supermarket orders were placed for similar sales volumes as last year during the same time.

So now you see stock-outs across categories and markets.

The only thing in common across categories and markets is the impact of covid on consumer behaviour and choices.

As supermarkets still order on the basis of previous year volumes, they’ve had to exercise their judgement when placing these orders. This is difficult when everything the buyer knows about consumption habits has changed, after more than a year of living under pandemic conditions/lockdowns.

Example: Home made meals and breakfast at home are now part of the daily routine now for a significant percentage of people and expected to continue

A google search on habits and how long it takes to form a habit runs the gamut from 14 days to 54 days, with the most cited number being 21 days. A study by the University College of London found that it takes 66 days for a habit to form. If the new behaviours were easy, it took 20 days (the example they cite is drinking a glass of water after breakfast every day) and, based on how disruptive the new habits were, ranged to 254 days.

Many of us have lived in lockdowns/pandemic conditions for more than 254 days. Depending on where we live, this has ranged between 75 days and 270 days. Enough time for new habits to form.

Add in significant variations in weather due to climate change, and (almost permanent) changes to how and where we work and/or study. No wonder retailers/FMCG companies are struggling!

If you’d like to understand how best to leverage data to arrive at optimal order volumes for your supermarkets/brands, email me on veena@salesbeat.co

The rise and rise of the values/purpose driven consumer

This post talks about the importance of using data to create brands that consumers want. The post also includes a video summarising the content.

For more details, read on!

A basic tenet of branding is that consumers will not buy brands that do not align with their values. Millennials and Gen Z have given new meaning to this.

A study by IBM found that 40% of all consumers, are purpose driven consumers. These consumers have a global presence with the majority, in Europe, South East Asia and Latin America. To this group, the values represented by brands drive their purchasing decision and they are more willing to change their habits to reduce environmental impact than are value (not to be confused with values) driven and product driven consumers.

Then there is the brand driven consumer (majority in India, parts of the Middle East & Latin America) which makes up 13% of all consumers globally. This group stands out in that while the brand is key, this group is even more willing to change habits to ensure sustainability and reduce environmental impact than are values driven consumers. So 53% of consumers are sustainability & values focussed than 10 years ago when value & product driven brands were predominant.

Leading FMCG brands that were also Certified B-Corp, grew by 21% on average in 2017 compared to a national average of 3% across their respective sectors. (B Corp 2018)

It is clear that to drive growth and gain share, FMCG companies need to adopt AND live values that reflect those of their target consumers.

This makes data paramount for FMCG brands. Data on what consumers want, on consumer values, on the channels they frequent and on the boundaries of operation. Brands need to be developed in line with what customers want, like tech companies do with users, rather than how FMCG companies of old developed brands and then told their customers that the brands were what they wanted.