Industry coping strategies

5 strategies for FMCG to thrive on new realities

Five strategies for FMCG to thrive on new realities

With the critical situation in supplies of energy, raw materials, and other pre-products, it is more than likely, that inflation and instability will last throughout 2022. In June, the European Central Bank forecasted the annual inflation to hit +6.8% in 2022.

Nonetheless, even these difficult market conditions offer opportunities to thrive, which we have condensed in five coping strategies for FMCG.

STRATEGY 1

Dynamic and relative pricing

With budgets under pressure and 37% of shoppers struggling financially, price has obviously moved into focus: 56% will check prices (even) more, 49% will wait for promotions (even) more and 45% will lower their total basket value. To offer (perceived) value for money is imperative to counter the risk of shoppers’ down-trading or dropping out of product categories completely. This is especially true for products often subject to impulse purchases.

This budgeteering behavior offers opportunities for private labels, threatening product brands. However, while price and functionality are extremely important, investing in individual and perceived product benefits should not be underestimated – and we would like to include a word of warning here: Private label investment and innovation rates are outgrowing A-brands.

As accentuated before, brand investment is more important than ever, especially for challenger brands, as they run a higher risk of being switched out. The rules of growth are ruthless. Penetration drives growth, and availability drives penetration. What was true in 1995, in 2008, in 2012, and it is still true today: Being listed broadly, including at discounters, having a fair share of true innovations on the shelves, and being top of mind already pre-store, are longstanding adages, more pressing than ever before.

STRATEGY 2

Focus on key trends

At GfK, we have identified two major trends: One is “naturally healthy”, which proves to be resistant across all crisis groups. Shoppers are willing to pay higher prices if it serves a healthier lifestyle, as long as it fits their budget. Investing in products and categories that support preventative health, and nudging, especially the affected, to follow a balanced and natural diet, will help retain consumers.

The second trend – “glamorously green” – will be more difficult to serve, as the mainly eco-actives need to strike a balance between affordability and their green attitude. Keeping this trend going and “help” eco-minded buy green, requires for manufacturers and retailers to cooperate on reducing shopping barriers, including first and foremost value perception (= affordability), but also in-store findability.

as long as it fits their budget. Investing in products and categories that support preventative health, and nudging, especially the affected, to follow a balanced and natural diet, will help retain consumers.

The second trend – “glamorously green” – will be more difficult to

serve, as the mainly eco-actives need to strike a balance between affordability and their green attitude. Keeping this trend going and “help” eco-minded buy green, requires for manufacturers and retailers to cooperate on reducing shopping barriers, including first and foremost value perception (= affordability), but also in-store findability.

STRATEGY 3

Build strong brand identities

Manufacturer brands are under pressure. Not only from private labels but also from newcomers, who better address factors that drive brand choice today, which, besides functionality, especially encompass a credible balance of emotionalization and responsibility – aspects such as nature, integrity and hedonism.

The challenge is to build the right brand strategy and product portfolio to address the needs and expectations of different shopper groups.

Distinctive profile for winning brands

Source: DE Kronberg study - GfK Consumer Panel FMCG; Why2buy, value dimensions, YTD 11/ 2021

STRATEGY 4

Relentlessly work to meet shopper expectations

Customer satisfaction in stationary retail still outpaces any form of e-supermarket and quick commerce. But it should not be a question of either or. Omnichannel is key: Maintain a high level of in-store excellence and be sure to apply this with equal rigor to online. Providing a sense of good (added) value on total basket size is of increasing importance in the coming period.

STRATEGY 5

Re-think shopper segmentation in light of new realities

Confronted with new realities, shoppers will re-think and potentially revise their spending strategy and adjust their shopping behavior to the shift of their needs. As a result, marketeers will need granular analytics to evaluate their current shopper segmentation, constantly revise their shopping personas and be prepared for behavioral changes to dynamically adjust and plan product positioning, promotions and merchandising.