Changing consumer choices
Changing Consumer Choices explores how businesses can demonstrate to retailers how their product will address consumers’ changing needs and lead to a wider
Changing consumer choices
How to get listed and stay listed
With change comes opportunity
With change comes opportunity
While consumer habits will always evolve, the extraordinary events of this year have shown just how disruptive a sudden change in shopper behaviour can be. The huge increase in demand for groceries prompted by the pandemic saw retailers rally to feed the nation. The grocers are now taking stock, reassessing their priorities and looking to streamline operations. For brands and private label suppliers alike, that means a renewed opportunity to develop new products, exploit emerging gaps in the market and justify their place on the supermarket shelf.
But how exactly can businesses do that?
An attractive offer is not enough – brands need to show retailers how choosing to stock their product will address consumers’ changing wants and needs and lead to a wider uplift in sales.
We know that retailers can see the potential new lines represent. We have seen levels of innovation decline across the board in 2020 but less dramatically in Aldi and Lidl. The discounters are already ahead of the game and widening the gap when it comes to the rate at which they refresh their range. The other grocers will be looking to catch up.
Given pressures on the UK economy and comparison with the record highs of this year, growth may prove harder to come by in 2021. Brands and suppliers must be able to show retailers how they can help to edge out the competition, with a compelling case for why they will be shoppers’ first choice, and how this in turn will drive up profit margins and help supermarkets gain market share from their rivals. Innovation is a central way to do that.
Aldi and Lidl launch more new lines than their competitors
Percentage of retailer sales through new products
The triple win
Winning over retailers, coming top of your category and attracting shoppers
It’s important for brands to understand the lay of the land to be able to sell their offer convincingly to retailers. This means establishing themselves within a category and wider portfolio, and ultimately identifying how their offer can drive category growth and retailers’ sales.
It’s the holy trinity. Retailers need to attract more shoppers, encourage them to spend more and, crucially, to hold on to them. Shopper numbers and trips are driven by the attractiveness of the categories on offer within any given store.
Typically, the fastest growing retailers are those that have the highest number of categories in growth. To take a pre-COVID-19 example, Lidl increased its market share by 0.6 percentage points in the 12 weeks to 23 February 2020 compared to the same period in 2019, while Tesco conceded 0.5. One of the key differences between the two was that 176 categories were in growth in Lidl, versus just 85 in Tesco. While the pandemic may have disrupted business as usual, it’s likely these more normal indicators of positive retailer performance will return.
So how can category success be unlocked? Well, it depends – for newer product lines, the key to driving sales is to attract more shoppers. But if the category is already a staple of British grocery trollies, the source of growth shifts to persuading consumers to spend more each time they buy. This is illustrated by the recent growth in the canned cola market. As we have all spent more time at home this year, our willingness to buy larger packs saw the average spend per trip on canned colas jump 14% from £4.65 to £5.29.
Brands need to show retailers that they understand the likely growth drivers for their category, demonstrating in turn how they will help to push up overall supermarket sales.
To justify its place on the shelf, a brand must define the role that it fills. But what’s the best way to do this?
1. Appealing to the right shopper
A key part of the groundwork in getting listed is to understand what demographic a brand caters to and if that demographic has a need that’s not being met. This can then be matched with a retailer’s typical shopper profile, whether that’s value conscious, family shoppers or those looking for a more premium offer.
The most effective way to convince a retailer that a brand will add value is to demonstrate how it will win back lost spend. Is a retailer missing out on sales because its typical buyer is purchasing a specific brand elsewhere? Could they be persuaded to get it in their store instead?
For example, people who purchase Aussie shampoo are closely aligned, demographically speaking, with Sainsbury’s shoppers. Yet, shoppers’ loyalty to Sainsbury’s doesn’t necessarily extend to where they buy the Aussie brand. Why shouldn’t shoppers get their preferred Aussie shampoo in Sainsbury’s? This indicates lost spend for the retailer.
Understanding and communicating demography and consumer behaviours like this means brands can position themselves as the solution to recovering spend by encouraging buyers to shift their purchasing habits.
2. Premium alternatives
At a time when consumers are likely to be turning their minds to best value, continuing to offer premium or luxury alternatives to those willing and able to trade up is crucial to maintaining average prices for a category.
Given current restrictions brought in by the pandemic, shoppers are willing to spend more on products that recreate out of home experiences. Take beauty as an example. The percentage of women colouring their hair at home is at its highest point in two years, representing an opportunity to capture shopper spend that would otherwise be parted with in the salon. Meanwhile, face masks are growing by 21% in an otherwise flat skincare market as people look for little ways to treat themselves.
3. Addressing shifting consumer needs
Consumption data can be used to point to shopper needs that aren’t being fulfilled by other products in a range and therefore how a rival brand can plug those gaps. For example, Kallo has carved a niche for itself as a healthier breakfast rice cake. In a similar vein, Italian brand Sacla is catching the attention and spend of time-conscious shoppers who still want to make their own meals by offering quicker preparation times compared with other cooking sauces.
If making it into the store is the first fight, the next step is for brands to deliver on promises made to retailers.
Once a brand is on the shelf, the work begins to convert shoppers. To do so, businesses must consider price, promotions and position on shelf.
1. Picking a price point
Establishing a price point relies on striking the balance between a brand being competitive yet profitable. Defining the category norm and where your brand falls within the established benchmark, as well as to what extent it’s possible to deviate from that, is central to this equation.
Only one in five FMCG products are sold at a price that is 50% above the category average – if a brand is to thrive outside of the accepted price parameters, it must be with good reason.
Only one in five packs sell at more than 50% above the category average
100 leading FMCG categories - % packs sold by price point expressed as a % of category average price in 52 w/e 23-Feb-20 (exc. Xmas)
All periods are indexed against the average category price in 52 w/e 23-Feb-20
Source: Kantar, FMCG Panel
2. Promoting with purpose
Current retailer strategies are squarely focused on everyday low prices. That means fewer discounted products and a renewed need for brands and suppliers to justify any and all promotional activity.
There’s a golden range for discounting. Promote too much, and you’ll eat into your margins. Not enough, and the product won’t be eye-catching for shoppers.
We know that offers regularly boost shopper conversion to a brand threefold. It’s important to note that the risk of not promoting is greater than the potential to “train” people to only buy at a lower price.
The key is that the sales uplift must be great enough to compensate for the discounts given away to shoppers. Deep discounts – typically those over 40% – mean that the boost in sales isn’t enough to compensate for the value lost from the category. The opportunities for those brands that get it right are clear. In an average FMCG promotion, 28% of the increase in sales volume comes from shoppers shifting from rival labels, a win for the promoted brand, while 24% comes from shoppers buying in greater volumes than they otherwise would have done, a success for retailers and brands alike.
3. Fighting for pride of place on shelf
Shelf positioning is the final piece of the puzzle, the aim is firstly to be in a prominent and logical place in a store. For example, are shoppers looking for Hobnobs snack bars next to the chocolate biscuits or the more health-oriented granola bars? Our data tells us that people tend to look for products arranged by occasion, rather than branding.
Once in the right section, the second mission is to achieve the coveted spot at the shoppers’ eye-line. Competition is of course tough and success here will come back to brands’ ability to demonstrate strong sales to retailers and contribution to wider growth.
Show you know what they want
Show you know what they want
There are opportunities for brands to innovate and expand but getting listed in stores requires a compelling commercial argument for retailers. Brands need to look up and out. Getting the consumer offer right matters but unless they can show awareness of a retailer’s strategy and how they fit, particularly in the context of a rapidly changing retail landscape, that offer will never make it onto the shelf.
This paper’s insights are primarily based on findings taken from Kantar's FMCG (take home grocery) shopper panel, which continuously measures the purchases of 30,000 demographically representative households in Great Britain [England, Scotland and Wales]. Food and drink consumption behaviour is measured using a subset of panellists through 11,000 demographically representative individual weekly diaries. We collect information on what food and drink they consume, what and who else they consume with, and why. Usage of personal care products is measured through a panel of 10,000 demographically representative individuals completing weekly diaries, recording information on who, what, when, where, how and why personal care products are used.