How FMCG brands can avoid becoming the next victims of the retailers' delisting purge
Being forgetful is a common consumer characteristic that can tarnish life’s little moments of pleasure. The Amazon Dash Replenishment Service helps overcome this by leveraging technology, so connected devices can order particular brands as they start to run out in the home.
It’s a great example of how organisations can work together to identify and solve a simple problem. And when it comes to range reviews, will these low cost frequently bought items with that little edge over competitors be targeted for the chop? Unlikely. The brand has helped create enough additional value to justify its place.
The grocers are a long way into their respective range reviews now. In no small part they are influenced by the success of Aldi and Lidl, now known as simpler supermarkets rather than just the discounters. They have rationalised categories which make the shopping experience easier, as well as reducing operational costs.
When all brands are equal, range reviews are a pretty easy task. Open a spreadsheet, squeeze the margins, whoever comes out on top stays on the shelves.
In theory, and in reality, it’s not this simple. Some brands functionally meet usage needs more effectively, others have genuine emotional appeal. But brand equity, whatever form it takes, is becoming more difficult to sustain.
The gradual rise of own-label has run many brands out of business, and remains a constant threat. This in turn impacts on brands’ propensity to invest in category defining innovation. Some myopic managers ask, why invest millions of pounds when the result will be copied? What used to have to pay back over five years may now need to realise a positive ROI within 18 months.
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These factors impact on the long-term health of brands. Take a look at any of the top 100 brands lists, and the presence of FMCG brands is worryingly light. The Google, Apple, Uber and Airbnbs of this world are the ones referenced in boardrooms up and down the country as ‘brands we want to be like’, not Persil, Twinings and Kellogg's.
The former genuinely improve user experience. They simplify a problem, often by subverting expected norms, and quickly become the default go-to when it comes to making a decision. The latter are becoming substitutable without a second thought based on what is on deal.
This is a problem. Not just for FMCG brands, who are having to fight for their place on the shelves of UK grocery chains, but for shoppers who are being let down.
One of the roles of brands is to make people’s decisions about stuff easier. They’re quick mental shortcuts to complex thought processes that would otherwise be exhausting. FMCG brands soak up a not insignificant amount of consumer spending every month, and UK grocery is one of the most congested and competitive sectors around. When FMCG brands are weak, they’re less of a default choice, which makes the category harder to shop.
Where there is a cocktail of high purchase frequency, huge choice and weak brands, there is a greater likelihood of a market that is ripe for subversion.
This has already happened amongst the retailers. The huge structural change in the market instigated by Aldi and Lidl has redefined expectations. Furthermore, these two retailers have built their corporate brands so shoppers have trust in them to create the right type of shopping choice. Let’s not forget, these brands have been a presence in the UK market since the early 90s; they’re not new launches that the other grocers didn’t know about.
They won’t be the last either. Look again at Amazon, currently trialling its Fresh service, waiting in the wings. These are retailers adapting to the needs of UK shoppers in a way that some grocers are currently failing to do.
FMCG brands now have a choice. They can continue to persevere with their current distribution models and their reliance on the grocers, which will require resilience against their programmes of range reviews and an appetite for building brands that have the equity to withstand them. Alternatively, they can think about how the category can be totally rethought, whether this is based on product, format, channel or the category itself. There is plenty of opportunity to do this, independently or in partnership with retailers.
Advances in technology and changing consumer needs demand a new way of thinking. If brands are to survive, let alone thrive, they need to invest in this to grow their brand equity and reconsider delivery systems that capitalise on technological advances. It’s time for FMCG brands to take the simpler shopping agenda into their own hands, rather than waiting for the retailers to swing the axe.
Professor Leslie de Chernatony is board director at Life Agency