FMCG Industry Report Spring 2018

The Current Situation• There has been a 10% decline in unhealthy snacking with

‘Healthy Junk Food’ being on the rise. 60% of shoppers now actively search for healthy alternatives.

• ‘Sweet Revenge’ is beginning to pick up the pace however; a trend which contradicts healthy eating via ‘Sweeter being Better’.

• ‘Friction Free Shopping’ (Smooth buying process from start to finish) is proving to be increasingly popular with modern consumers.

• DIY products are trending again with people posting their pride on social media.

• Unisex and ‘taboo shattering’ products are set to pave the way for the beauty industry.

How Trends Will Continue Through 2018

• Sugar is making a return to the market. Sugar rich food industries are offering ‘luxury’ treats in response. This means more dirty label products could overtake clean label products soon.

• With DIY on the rise, the consumer feels more control, independence and pride. A report by GlobalData states that 60% of consumers say products that they helped create are appealing. Meal kits which offer fresh and homemade food are the number one DIY trend in 2018. ‘Gousto’ and ‘Hello Fresh’ are leading in the market.

• Personal issues such as sexual health are being publicised like never before thanks to social media. Innovative new products such as VMagic (addressing vulvar discomfort) are entering the market.

How Trends Will Continue Through 2018

• ‘Glocalised’ (Marketing to both local and global considerations) products are becoming more popular. Big industries are struggling to deliver a local experience to each province, so regional products are often delivered instead. As a result, companies innovating local customs into their products are performing better,

• Alternative food such as ‘Jackfruit’ and ‘Moringa’ are growing in popularity. Meat is also becoming far less popular with vegan alternatives taking its position. Snacks using alternative ingredients such as ‘Lily Puff’s which use Asian Water Lilly’s are replacing the boring veggie options of the past and rapidly gaining market share.

Views on Gender identity have heavily shifted in the past 5 years and as a result, masculine and feminine products have begun to blend into one category. This has created a space for genderless products. The first makeup stores for men are appearing this year which will sell almost exclusively genderless products.

The health trend has lead to non-carbonated soft drinks adding carbon dioxide as to shun sugary unhealthy drinks. This includes coconut water and cold-brew coffee as an example.

With buyers having so much access to online shopping and ‘One Click Purchases’, friction-free shopping is becoming a ‘must’ for the FMCG industry. A recent and innovative example would be Cashier-less stores such as Amazon Go.

Naturally sourced ingredients for products are actively being chosen over chemically sourced counterparts. As a result, body care companies are switching their ingredients with new releases such as coconut oil body care. There is also a large emphasis on ethically sourced ingredients which has caused many companies to highlight this on their packaging.

As the world becomes more environmentally aware, plastic packaging is being shunned. As a result, sustainable alternatives are being used such as bamboo. There is a growing concern over microplastics in the ocean; making parents a lot less likely to buy products such as microbeads and glitter. Nestlé have now released ‘Pure Life Purified Water’ in bottles made from 100% food grade rPET.

How Trends Will Continue Through 2018

Shaping the industry

• If you haven't noticed the majority of these trends directly corelate with the views of the millennial audience.

• Millennials are reaching peak buying power and spend over £1 Trillion annually. Numbers are rapidly rising as the grey pound emigrate and millennial immigrants move to the UK. They now make up 25.1% of the UK population, competing against Gen X at 26.5% and Boomers at 27%.

• This is a generation that has developed in the prime years of innovation and thus expect each new development to outperform the last. They engage with brands far more extensively, personally, and emotionally.

• Millennials differ from previous generations through their unique spending habits, brand preferences, values, personalities, and general outlook on life

Shaping The Industry

• Millennials live for experiences and entertainment and use them as social currency.

• An FMCG brand needs to establish what’s at the heart of their product. A millennial can see straight through a false identity

• Content is key. Content is a lot harder for FMCG brands to provide which can be a struggle, however thanks to social media many FMCG brands are coping

• More importantly, millennials want to be delivered something useful which also derives from the brand’s values. This could include something educational, entertaining or functional. It needs to incorporate both brand values and consumer needs.

• Millennials may adore content but they value quality over quantity and often criticise brands who don’t follow this rule.

Shaping the industry

• Millennials follow the reciprocity principle, which means they expect their brands to have a relationship with them. They’re extremely likely to publicly both praise and criticise brands. This means they influence the views of other generations around them.

• The internet and social media have raised millennials expectations as they are exposed to new brands and brand ads every day. 46% of Millennials use google instore to research more about a brand.

• 43% of millennials also look for coupons and discounts on their phone before making a purchase and 52% actively post on the internet that they like a brand.

• Although millennials are not the largest demographic in the UK, they are by far the most influential, spend-happy, critical and demanding.

Health and

Beauty

Health and Beauty

• Apps such as Snapchat and Instagram have popularised ‘Facemask Selfies’ and promoted hashtags such as #Sunday Facial. As a result demand has risen for both Millennials and Generation Z. The market is getting smarter with body specific masks overtaking regular brands (using the DIY and Personalisation appeal).

• Masks are now being marketed for all body parts. An example of this is the ‘Hand Restoring Dry Mask’. Many countries have already adopted these trends and are often where they derive from. For example in South Korea they already have a ‘mask for everything’.

• Innovation is key with ‘micro-channelling’ patches being developed. Radara’s 3D-printed eye patches claim to erase crow’s feet.

Health and Beauty

• Body Skincare is becoming as important as facial skincare. Cleansers, serums, acid exfoliators and moisturisers with SPF are now being developed for the whole body. This is partly thanks to globalisation with many people taking a ‘Brazilian approach to anti aging’.

• Environmentally friendly packaging is a must as consumers are becoming more aware of plastic’s harm to the eco system.

• Less water is also being used in products as demand begins to outweigh supply. Lush now have a ‘Naked’ range which uses finer ingredients and less water.

Health and Beauty• Vitamin supplements may be on the rise but so are the new

and innovative ‘Skin Supplements’. ‘Beauty Complex’ is a powder which can be mixed into smoothies which uses anti-ageing nutrients and protects against oxidative stress and damage.

• Brands are shifting towards tackling extremely specific problems such as after-exercise skincare. This is becoming a trend on its own with brands such as ‘Pretty Athletic’ and ‘Clinique fit’ emerging. Exclusive products include developments such as sweat resistant mascara and a cheek pallete that won’t clog pores.

• There has been a steady rise in weightless foundations which use water-light textures to shift focus onto the complexion of skin. As millennials shun the unnatural facial definition derived from contouring, the all natural look has made a comeback in 2018.

Health and Beauty

• Portable beauty tech is on the rise. The ‘Derma Roller’ (345% increase in saves on Pinterest in 2018) removes dead skin from the body wherever you go and the ‘Neutrogena Light Therapy Targeted Acne Spot Treatment’ lets anyone mask acne within minutes. The SENSSE Eye Massager is a new piece of eyewear that uses sonic high frequency vibration to smooth smile lines.

• As previously stated, sexual stereotypes with skincare are also fading out. There is an extremely large focus on not shaping children's sexual identify by conforming them to gender rules. As a result many ranges of unisex children’s beauty products such as ‘Fresh Kidz’ (kid’s deodorant) have been released and many retailers such as John Lewis and H&M have removed gender labelling from their clothes sections.

Bespoke Beauty

Set to become the number one health and beauty trend of

2018, why is bespoke beauty becoming so

popular?

Bespoke Beauty

• The introduction of ‘Chat-Bots’ has allowed for a more tailored customer service experience. Gathering user data and promoting recommended products has also allowed customers to be pickier with their selections.

• ‘Dermalogica’s’ Face Mapping seeks to make all consumers aware of underlying skin conditions and what the best tailored products are. A professional skin therapist gives essential information about the subjects skin.

• Going even further into individualisation, many skincare products now use your DNA via swabbing to provide you with the most accurate products. ALLÉL are currently the leading genetic manufacturer.

Bespoke Beauty

• Many cosmetic companies now turn to questionnaires to gather user data. Companies such as ‘Trinny London’ have even gone one step further. By inputting five simple steps and matching your colour with ‘Match2Me’ technology; a personalised stack of products are lined up for you based on everything that makes your body unique.

• This isn’t only the case with makeup and skincare, even fragrances can be brought through a customisable online experience. ‘Penhaligon’s’ fragrance profiling experience selects a unique fragrance likely to suit you based on survey results. ‘Sniph’ even offers mail order samples of fragrances for you to try for £17.99 per month.

Bespoke Beauty

• Cosmetics à la Carte founder, Lynne Sanders predicts that ‘‘With research into our genetics and algorithms to understand it, we are undoubtably going to see more bespoke products.’’

• The number one threat to bespoke beauty is the increased price of products due to expensive technology and the time consumption that goes into delivering customised products. Less affluent millennials are often turning to DIY YouTube tutorials from Influencers.

Influencer Marketing

Influencer Marketing

• An influencer can be anyone from an A-list celebrity to a casual Instagram model. As long as they are influencing your audience, influencers can make or break your marketing efforts.

• Rihanna’s recent ‘Fenty Beauty’ range which launched foundation in 40 shades was extremely well received thanks to the personalisation it offered and of course the backing of a popular influencer.

• Previously, you would have to have a rather large budget to adopt an influencer, but thanks to the rise of social media, finding the right influencer has become more accessible than ever before.

Influencer Marketing

L'Oréal, Revlon and Benefit Cosmetics are three companies that

are heavily invested in influencer marketing. Revlon go as far as to judge agencies by the number of

influencers in their portfolio before engaging with them.

RESCUE used influential bloggers such as ‘A Clothes Horse’ to share stories about stress and promote RESCUE coupons. This resulted in 133M social media impressions,

more than 6000 clicks and a 258% follower increase (Instagram).

Influencer Marketing

• Social Media influencers are so effective because of the niche audiences they can so effectively target and because they appeal to the demands of the millennial consumer.

• Followers are important, but no where near as much as the level of engagement an influencer provides their audience. This builds a sense of community and causes the followers to well…follow the influencer.

• Social Media influencers not only create great content and PR for your brand but also a more effective reach in marketing campaigns.

Influencer Marketing

• An excellent case study for an engaging influencer that positively impacted an FMCG brand is Joe Wicks AKA ‘The Body Coach’. With recipes that can be made in 15 minutes and the hashtag #Leanin15, Joe has developed 2 Million followers (up from 530,000 in 2016).

• Engagement includes #Leanin15 selfies posted by his community and actively responding to comments and queries in his recipe video comment sections.

• ‘Lucy Bee Coconut Oil’ sponsors The Body Coach and he has also worked with ‘Total Greek Yoghurt’ and ‘Uncle Ben’s Rice’. All 3 are regularly mentioned in his Instagram feed and many recipes involve using the brands mentioned.

Influencer Marketing• Another excellent case study about how influencer

marketing has increased a brand’s sales is Bigelow Tea.

• Bigelow Tea wanted to promote their range of healthy products to millennials. They launched a campaign that showcased the emotional appeal and healthy aspects of drinking tea.

• Influencers incorporated Bigelow tea into their content using innovative and creative ideas. Some used it in recipes and some even made the packaging into DIY art.

• Influencer Ashley Thurman used Bigelow Tea for an iced tea recipe which also used lemonade ice cubes. Jess of ‘A Million Moments’ however, showed how to craft flower pots out of tea packaging.

• 32,000 blog page engagements were achieved, Bigelow Tea’s media value tripled and the brand experienced an 18.5% increase in sales.

• Upon evaluation, through the brand being integrated into influencers content as opposed to being directly sponsored; engagement was far higher.

Influencer Marketing• The 6 steps to finding the right influencer involve

• Identifying – Find the influencer that best appeals to your audience with the best number of followers to engagement ratio.

• Engaging – Contact your short list of influencers

• Negotiate – Create a deal with your chosen influencer(s)

• Executing – Begin your influencer marketing campaign with a clear call to action

• Evaluation – Evaluate your ROI with the influencer(s) and make changes you feel will benefit future campaigns.

• Repetition - Repeat the process for the next campaign

It is important to remember that influencer marketing has a learning curve and will not always go as planned first time and that evaluation will always be the most important step. In the age of social media, influencer marketing is proving to be one of the safer marketing options with high levels of success.

Supermarket Success

Super Market Success

• The volume of groceries sold in the UK’s leading supermarkets rose by its highest year-on-year rate for 18 months in February 2018. Non-Food retailers however, are receiving much weaker demand.

• This is primarily because unlike non-food retailers, supermarkets have not drastically increased their prices to deal with increased supply chain costs. Therefore, consumers do not feel grocery shopping is too expensive for what it is.

• Price cut/multi buy products have had a low spend this year; accounting for only 27% of all sales. Supermarkets have responded to this trend by focusing on themes such as M&S’s well received ‘Big Nights In’ campaign. This included offering customers appealing but cheaper alternatives to dining out.

Super Market Success

Tesco is leading with the best year-on-year performance with sales up by 3.1% in 2018. This is followed by Asda at 2.9%.

Iceland however, had the best growth figures outside of discounted offers at 2.8%

Supermarket strategies appear to be shifting towards improving ‘Like-for-Like’ sales and being less reliant on new stores for growth. Furthermore, they plan to reduce operating costs in order to lower their prices.

After some tough years in the early 2010’s, it looks as though Supermarkets are recovering appropiatley.

Supermarket Success

• Four years ago the German budget Supermarkets Aldi and Lidl began avidly competing against the ‘Big Four’ British grocers- Tesco, Sainsbury’s, Asda and Morrisons.

• Shopper habits have switched from demanding range to demanding convenience; with value being the number one concern.

• Unready for a price war, the Big Four stood back and watched as Aldi and Lidl became the 5th and 7th largest supermarkets in the UK respectively.

• In Q1 of 2018, Aldi controlled 7.3% of the UK grocery Market and Lidl controlled 5.4%. This is an almost 80% increase in growth since 2013.

Super Market Success

• Online grocery shopping has grown significantly and now accounts for 6.9% of all UK FMCG sales. 57% of online sales are made by millennials

• 40% of these purchases are also made on mobile.

• Millennials with children spend £96 more per week on online grocery shopping than those without.

• ‘Brick and Click’ supermarkets are pushing through and offer a significant advantage over competitors that only offer delivery.

• Traditional British foods are declining in sales whilst globally adored foods such as pizza are rising. This could be because of heightened immigration rates inflating sales and the influence of social media.

Online threats to FMCG brands

Online shopping has enabled many overseas brands to bypass tariffs which makes it much cheaper for them to sell their products in the UK. This has lead to more ethnic products in the market place which threatens many existing brands.

1

Once a product ranks highly online, it is often difficult for it to lose it’s place in a short period of time. This leads to other brands receiving less attention; especially if the brand is running a digital marketing campaign to remind consumers of its presence.

2

Classic grocery store tricks such as displaying confectionaries at the checkout and placing essentials at the end of an aisle do not apply online. This means many smaller scale brands which relied on these tactics will face the consequences.

3

Online threats to FMCG

• As users begin ditching desktops for mobile devices; a broader range of issues arise. Primarily, there is a far more limited product range available to view at one time due to smaller screen sizes. This means online FMCG brands must stand out against only 1-5 brands at a time.

• For sponsored products that appear at the top of a page, this is a huge bonus as there is less competition. However, for lower ranking products, there is a sea of competitors above them which impatient millennial’s will often purchase before even knowing these brands exist.

• It is therefore becoming far more expensive to keep your brand relevant.

• Auto re-order causes disorder amongst FMCG brands. Retailers now offer you the opportunity to automatically shop for the same items each month without needing to browse online. This leaves a lot less room for impulse buying.

• With the launch of Amazon Fresh, pricing has become a huge challenge. Amazon sells all generic products at a cheaper retail price. It is recommended for brands to promote their values through multimedia campaigns.

Online threats to FMCG

Online Trends

Online Trends

• The most searched FMCG terms are the staples such as milk, eggs and bread. Globally adored foods also appear here such as pizza but not traditional British foods.

• Gluten-free is the most popular specialist term.

• In the health and beauty sector, hair related products remain top priority with ‘Hair Straighteners’ taking the number one spot. General care products such as footcare and hair remover are also popular.

• The most searched for brands however are DR Scholl’s, Magic Minerals, Weight Watchers and Slim Fast. Luxury brands are also in the top 500 terms such as Dior, Makeup Forever, No!No! and MAC.

Online Trends

• Trade Marketing (marketing to specific retailers for in store promotions and displays) on average accounts for 40% of all marketing budgets within FMCG. Online shopping does not offer the same opportunities, which means this trend is beginning to shift and decline.

• The number one way shoppers engage online is through actively searching for coupons (43% of shoppers). Coupons are therefore beginning to catch up with trade marketing.

• Beginners to online shopping often buy just the staples. However, over time they get more comfortable and begin making impulse purchases. Surprisingly, fresh foods are brought more than pantry items which suggests shoppers care more about taste and their personal health than price.

The war on plastic

The war on plastic

• In a recent report, Jim McCelland (packaging sustainability expert) suggested that ‘The way forward for marketing is for brands to make more environmentally friendly choices easy to adopt and part of an enhanced service, which also delivers cost-saving and other tangible benefits’.

• Many FMCG companies are tackling the problem of waste and plastic through innovative design. For example, Rice can now be packaged in biodegradable beeswax and olive oil. This is encased in caramelised sugar and can be cracked open like an egg.

• Using natural resources not only appeals to environmentally aware consumers, but it is also a trend as using unconventional packaging adds a sense of personalisation to the product.

The war on plastic

• Stats on how bad plastic is for the environment are being released every day such as

• 95% of all plastic packaging is only used once.

• Just 14% of plastic is recycled.

• 8 Million tonnes a year leaks into the ocean.

• Barely more than half of plastic bottles per household actually get recycled.

With millennials being well-aware of these facts, it is no wonder plastic-heavy products are losing market share.

The war on plastic

70% of FMCG consumers state that packaging is their top concern whilst shopping, followed by animal welfare and GMO’s’. 68% would switch beverage

brands to one with better environmental credentials; provided the taste and price were similar,

“Sustainability was a niche consideration for most companies 5 years ago; today it’s a central part of

their positioning, solutions and go-to market strategies, not because of eco or ethical principles

but because they are responding to market demand” – Andy Hobsbawm – Founder of Smart Products

The war on plastic

48% of FMCG consumers believe that reducing packaging waste is more essential than reducing food waste.

However 29% of consumers do believe that environmentally friendly products are of a lower quality.

68% are willing to pay more for sustainable goods.

The war on plastic

• ‘Wrap’ (organisation that encourages practical solutions to improving resource efficiency) are working closely with major retailers in a new commitment to remove plastic from supermarket shelves.

• The CPC (Circular Plastics Commitment) will be the plastic equivalent of the ‘2025 Courtauld Commitment’, which was targeted at food waste. It responds to Prime Minister Theresa May’s pledge to eliminate “unnecessary and problematic” single-use plastic and significantly increase plastic recycling rates in the next 25 years.

• The CPC will involve many NGO’s, government bodies and waste organisations. It will cover all plastic packaging in the UK. Wrap have been tasked with “turning the tide against plastic pollution”.

• Wrap are working extremely closely with supermarket Iceland, who recently vowed to become the world’s first major retailer to eliminate plastic packaging from all it’s own label products within 5 years.

SWOT

S W

O T

STRENGTHS (+)

WEAKNESSES (–)

OPPORTUNITIES (+)

Environmental Laws pushing to go

green, e.g. Paris Agreement. 2016

Large millennial demographic in the

UK to target.

Biodegradable packaging is one of

the fastest growing markets. Plastic is

also becoming more expensive.

THREATS (–)

Environmental products merge with

social views.

Unique and innovative environmental

designs attract attention.

Going 100% green will make you one

of the first players in the Market to do

so.

Although Millennials will appreciate

an environmental approach, you

must still provide good content and

PR to engage with them.

Baby Boomers and generation X are

less environmentally concerned.

There is a challenge in adopting new

packaging techniques.

Established big brands are also

making the switch to going green.

Biodegradable products are receiving

some negative press (impacting

ocean bio-diversity).

The Biased Perception that

environmental products cost far more.

The New 5 P’s

The New 5 P’s

A recent report by Nielsen states that although ‘Product, Price, Promotion and Place’ are still important, they are becoming ‘fashionably old school’.

With consumers now being more aware, spoiled for choice, connected and disloyal, FMCG retailers need to adopt a new strategy.

The New 5 P’sPrecision

• Data-driven marketing is easier than ever before with so many easy to use tools at marketers disposal. Analytics, AI and algorithms allow FMCG businesses to run smoother than ever conceived.

• You can manage retailer fill rates, build look-alike digital audiences and respond to negative reviews in real time

• DMP’s (Data Management Platforms) enable individual and device-level activation of your brand message.

• Mass-Marketing is inefficient, expensive and less effective. It’s time for precision to take over.

The New 5 P’s

Purpose

• As mentioned previously, today’s audiences demand that their brand is relevant and has a key message to deliver to the consumer. A brand without a purpose, a mission or a social role is unrelatable and therefore obsolete.

• Millennials are incredibly vocal with their opinions and expect brands to engage with them.

• The brand message should be placed above the brand itself. For example, “We give malnourished children a meal using the money from your purchase”. This would be a better brand message than “When you buy our product we will give a malnourished child a meal” because the first message highlights that the brands goal is to feed the child whilst the second is for you to buy the product.

The New 5 P’s

Partnerships

• Creating the right connections with fellow businesses and influencers to corelate with your FMCG business model and brand messages is now the best way for a brand to push forward and also minimise their weaknesses.

• By staying open to every possibility for collaboration and through seeking out opportunities to partner with others, you portray your brand as open and comfortable, rather than closed and elitist.

• Partnerships culturally evolve an organisation (especially with ones that are not traditional within your industry) and create unique relationships that appeal to todays audiences.

The New 5 P’s

Pace

• Many of todays start-up brands such as ‘Slack’ reach billionaire status within less than two years – a previously inconceivable concept.

• Addressing the problems of today –today and the problems of tomorrow –tomorrow is essential in modern marketing as new issues constantly arrive and become solved thanks to the spread of social media. An issue that was present a week ago is likely irrelevant now.

• An Edison Research study found that 42% of consumers expect a brand to respond to their social media post in under an hour. 1 In 10 of these consumers expect a response in under 5 minutes.

The New 5 P’s

Personalisation

• Marketers can now use predictive analytics and AI to intimately engage with consumers and provide creative content and brand messages with absolute precision.

• We can accurately tell what consumers want and when they want it thanks to ‘Mar-Tech’ and vocal millennials-so personalisation allows you to give it to them and outpace other brands.

• Consumers keep demanding personalised experiences and the challenge is for brands to provide this as soon as possible. Can you provide the same experience for your consumers that you would expect from your favourite brands?

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