Now the dust has settled and the confrontation with Tesco and Unilever is all but over the question on our minds is – “Will this lead to ongoing differences and a bigger battle of the brands?”
We now know that the basic difference in this issue was around price increases and the acceptance of these by the supermarket giant but it got me thinking that this may merely nudge the brands to develop their options further. I mean we’re so familiar with these family brands that we tend to repeat the purchase of the preferred brand on a regular basis.
The major FMCG brands have a colossal might when you consider that over 60% of products in our supermarkets are owned by them, whether Unilever, Nestle, P&G or Mondelez and they supply everything from tea, chocolate, cereals, beauty and health, preserves, ice cream etc. Surely now is the time for them to develop a closer relationship with their consumers but not through more advertising and vouchers. If their ultimate aim is to build that lifelong loyalty and tie the customer in, protect the brand, and as we have seen protect their margins, then they have other options that the supermarkets cannot compete with and that is to develop a direct to consumer strategy. In other words, launching a channel where customers can purchase direct from the brand and they in turn fulfil the order directly cutting out the middle men.
We have already seen brands developing their own direct to consumer strategies. Take for example the huge success of Nespresso stores in high-end shopping locations and the launch of its ecommerce site but is there really an opportunity to take on the supermarkets with direct to consumer Pot Noodles? Whether they have the relevant data or not the brands will need to engage directly with those consumers that love them and where their product is the preferred choice in the weekly shop.
Unilever recently completed its acquisition of US Dollar Shave Club for a staggering $1bn which brings them a whole load more customers, mainly male – an entry to compete with P&G’s acquisition of Gillette – but bigger than that it brings a well established subscription model. Will this result in Unilever offering a regular subscription service directly to its consumers for loved brands? Shipping Ben & Jerry’s through the post may be a challenge!
In fact there are a whole raft of challenges covering a wide gambit of areas but they’re not insurmountable. When, rather than if, they develop these propositions, they need some basic capabilities – not just a number of flashy websites. Firstly, they need to focus on mobile as a direct channel; develop the understanding of demand, multiple payment options, enabling different inventory stocking policy to meet “eaches” rather than bulk; and work out the service and delivery options they need to consider – they’re a few of the obvious ones. I think it’s just a matter of time before I can get my preferred tea through a regular subscription which will determine my usage and suggested order each month.
In summary the FMCG brands will have to consider five key points
- What brands lend themselves to a direct to consumer model?
- What will be the economic model?
- How to engage directly with their consumers?
- How to optimise inventory through fulfilment, delivery service?
- How to maximise the potential channels and leverage the information garnered?
Hopefully the brands are deep in their bunkers/war rooms developing these options – the recent issue with marmitegate will only resurface through other inflationary elements which means the countdown has started for Battle of the Brands.
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