Can FMCG brands take the power back from TEGs?

The marketing sector can be a complicated place as new marketing tools and techniques are launched, almost on a weekly basis. Powered by The Drum Network, this regular column invites The Drum Network's members to demystify the marketing trade and offer expert insight and opinion on what is happening in the marketing industry today that can help your business tomorrow.

FMCG

The power of the Top End Grocer (TEG) has been a main stay for FMCG brands for a long while. Getting listed, being beaten down on the deal, having to spend marketing budget on in-store marketing you don’t really want, and the threat of a delisting are commonplace. However, in the future, can the tide change with the emergence of digital and social technologies, and more specifically e-commerce, m-commerce and s-commerce?

At the end of the day TEGs need to meet consumer demand and keep customers happy, after all they’re in an incredibly competitive retail market themselves. Therefore if a brand can create that demand via clever and effective digital and social marketing themselves, their position is obviously strengthened. More importantly, however, is the opportunity to think more laterally and bravely about new routes to market and connect and sell to consumers directly.

Infiltrating the shopping list

It strikes me that there is a massive disconnect between the desire to purchase a product and the ability to remember that you wanted it. Whether it’s an ad or a recommendation from a friend, our ability to connect that moment to the actual purchase has previously been quite fractured.

Take this scenario; I cycle a lot and a friend recommends a brand of peanut butter that has great nutritional value. Now how is that product going to end up in my cupboard so that I can then recommend it to other cycling pals? The traditional process would be for me to remember to tell my wife (sorry about the stereotype, however my wife does the shopping in our household) and she then needed to remember to put it in the online basket. Let me tell you now, that’s two significant barriers, and it’d take a long while, if ever at all, for that product to appear.

However, digital technology now enables us to prompt and remember more readily than ever before. Sure, I can send her the recommendation via Whatsapp or Facebook. Better still I can access the shopping list directly from my mobile and add it. However even better still I can use Siri or Alexa to add it to my shopping list as I remember it – hands free shopping list creation. My view is that these developments are going to become more prevalent to more people over the coming years. If Amazon Echo sold 5.2m units globally in 2016 (Consumer Intelligence Research Partners) and Google are coming to market then these technologies will evolve and eventually become a mainstay in every home.

So what does this mean for the FMCG brand manager? If there are a myriad of clever ways to connect and mend the fractures between awareness and purchase, then how can you take advantage and be smart in prompting consumers to use these methods and have a better chance of getting in the cupboard? Personally I’m not seeing a lot of brands taking advantage of this opportunity.

Selling direct

A few years ago we had a beauty client who was listed in Boots. Indeed, circa 80% of their sales went through the beauty behemoth. However there was a significant direct and indirect cost to this route to market. Profit was significantly eroded and they ended up spending over 50% of their marketing budget with Boots as part of the deal, and almost another 40% buying media that would placate Boots.

The other 20% of their very profitable sales were direct. Our advice at the time? Delist from Boots and rebuild your brand and business via a direct sales model. Take all the money you are losing and spending ineffectively with them and rethink your business model. Needless to say they didn’t take the advice and are still listed in Boots today and who’s to say who’d have been right or wrong. But I wonder if we had the conversation today whether I could convince them to take the other path? With the evolving sophistication of e-commerce and even social commerce, the opportunity for brands to sell direct has never been greater.

New routes to market

The trend for many years has been away from the big weekly shop towards smaller convenience and supplementary shops. This means that when I review my bank statements, the following retailers appear regularly:

Waitrose for the main weekly shop, M&S for a spontaneous shop when we’re in Kingston and the Co-op round the corner for when we forgot something/treats. More interestingly however, is that specialist brands are starting to infiltrate the list, as well as Amazon delivering products you might normally associate with a TEG. Cleaning (Method), health (Dorset Cereals), beauty (Molten Brown) and pets (Royal Canin).

These trends make me believe that there could be an opportunity for some brands to take more advantage and find new ways into my cupboard. If I regularly spend both large and smaller amounts on individual items for delivery from Amazon, Northface, SiS Sports Nutrition, Apple and Rapha then could that trend extend to certain FMCG brands and could those brands put more emphasis behind it.

The price point and convenience will still matter – it won’t be a bag of crisps - however it could extend to higher interest, specialist and higher price point products such as peanut butter, olive oil, wines, spirits and health products, as well as items that can be bought in bulk such as baby products, cleaning products, dental care, toiletries etc.

So in the future, could the habit of using one or two retailers for the weekly shop be disrupted and be replaced by multiple brands and retail deliveries? At what price point could that occur? Certainly not a tin of soup, but why not a £5 jar of peanut butter?

Create your own intelligence

In my experience most brands are incredibly reliant on the retailers for sales and other data for category and brand performance. However, does the opportunity exist for brands to use big data to uncover their own powerful actionable insights? How many FMCG brands are really focused on using data to effectively track consumer conversations, attitudes and behaviours?

With the emergence and evolution of listening and analysis software, never has it been easier for a brand to uncover their own insights and findings. And it surprises me how slow many brands (not just FMCG) are to jump on this opportunity and take it seriously, even though there’s a lot of evidence to suggest that the investment is worthwhile.

The benefits are numerous: refined communications strategies, product development and innovation, directly influencing the purchase journey, the list goes on. I feel that there’s an untapped opportunity for FMCG brands that could improve performance and again take some control away from the TEGs.

So realistically are FMCG brands going to wrestle power back form the TEG's? Put simply, not in the short term. However, could these brands start to be smarter in how they take control of their own brands within digital and social so that in the medium term they have a stronger platform for negotiation? Personally I think they have to. And then who knows what the longer-term might hold.

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Stephen Firth

All by Stephen