BRAND BLAZING
Brand tactics are key for those who survive and thrive
“To grow, one must first embrace change”. We think it’s fair to say the FMCG industry has run towards, rather than away from, the changes thrown its way in recent years.
Growth is a journey, not a destination, and for many brands in 2022 that journey was a positive one. Brand choices were up (61.3 brands per household in 2022 vs 60.9 in 2021). which is obviously good news for those who were able to push their way into the world’s increasingly competitive baskets. However, the growing trend of rising Private Label in 2023 means those brand choices may be substituted for Private Label alternatives.
Smaller baskets may also deliver tougher headwinds to shopper recruitment, particularly in markets where shoppers are less familiar with the impact of inflation on their purses. Our teams are spending a lot of time working with clients on this challenge at the moment.
In 2022, we saw shoppers basically making the same number (only 0.1% difference year-on-year) of CRP choices as the previous year, but they were clearly making different choices than they have in the past. As the report rankings show, they’re trying smaller and local brands. Plus, proportionally, smaller brands are growing versus the total market.
Market context
Unlike the COVID years, when growth rates soared by 10.6% in 2020, the growth we’ve seen in our latest examination of the global FMCG market comes not from demand driven by a population forced to stay home for months at a time, but by inflation. Food price inflation is above 10% in all regions except Asia, which is reflected in that region’s slower growth year on year.
The Food and Dairy sectors are driving the overall FMCG figures, while Beverages and Health & Beauty saw their growth slow. Growth was stronger in the second half of the year, and this may represent how the industry is likely to perform at least for the first half of 2023.
If this isn’t true growth, where are we really? The FMCG volume numbers help smooth out the story. Indeed, we have seen no bounceback from the volume declines we saw in the post-COVID period: sales are down, prices are up.
Food and Dairy
Beverages
Health and Beauty
Home care
But — and this is an important ‘but’ — we see a persistent and consistent common denominator among brands successfully recruiting more shoppers: Penetration. Our reality is that half of brands globally are winning, and half are declining, but 88% of those winning do so with improved penetration, up from 86%. On average, those winners are gaining 1.8 penetration points.
Of course, not all growth is created equal; profitable growth is one of the most elusive targets for brands and retailers of all sizes. We have seen this profit challenge reflected in some of the big retailer and brand earnings reports. We should also note, as you’ll see later in this report, that growth is behaving differently depending on where you are in the world.
For further context, the number of consumer choices (interactions with brands across categories) was essentially flat year-on-year, a first in the history of this report. But there is important movement within this metric that saw local brands gain in importance over global brands. Local brands saw a CRP share of 67.7% vs global at 32.3%, an increase of 0.6%.
Local brands saw a CRP share of 67.7% vs global at 32.3%, an increase of 0.6%
The implications of this seemingly small shift point to a larger trend. Local brands are continuing to find their place, and doing so when the frequency of brand engagement is down (-2.2%). We need to recognize that a 1% lift in local brands versus their global counterparts is seismic in the dollar terms of multi trillion-dollar industry.
A lift of 1% in penetration is adding 12 million households
We also need to recognize the household level investments here. We calculate that each household is worth USD $1,008 a year, and each brand chosen is worth an average of USD$3; up by 5% in this latest year of reporting. To put a value on that: a lift of 1% in penetration is adding 12 million households which equates to $36 million on average.
But to get that 1% increase, a brand needs to find 224,000 more households today than they did only last year to stay at the same levels of brand performance. Most of this extra work required can be attributed to a global population increase.
