Confectionary brands defy COVID challenges to achieve significant sales growth on the back of product innovation

IRI has unveiled the key strategies and tactics used by confectionary manufacturers to survive and thrive during and post COVID-19.

Sydney, Australia – 25 September, 2020 - IRI®, a global leader in innovative solutions and services for consumer, retail and media companies, today shared some positive news for the Australian food and grocery sector – outlining the type of growth that can be achieved through the use of key strategies.

IRI has identified and developed four key growth strategies for the FMCG sector that will bolster business into the post-COVID world.

The four key strategies are:

  • Use pricing to maintain and strengthen brands
  • Invest in marketing and advertising to bolster ‘mental availability’
  • Adopt a shopper-led total store view to holistically understand customers
  • Streamline, rationalise and innovate your product range

“The magnitude of the COVID-19 outbreak is apparent from two crises playing out concurrently, unlike the experiences of the 2008/09 financial crisis. There is the virus itself, and the economic downturn it has prompted. Our research reveals that most Australians are bracing for over a year of economic impacts and appear to think the collateral damage economically will be longer-lasting than the health crisis,” IRI Chief Commercial Officer for Asia Pacific, Alistair Leathwood said today.

Although the impact is severe, there are still opportunities to grow

“Overall we are likely to see many suppliers delay, or permanently cancel, new product development (NPD) in favour of optimising core ranges. But during a recession, new products have a vital role. Because new product activity typically slows in recessions, well-executed NPDs have a higher chance of gaining visibility – and ultimately paying off – as competitors streamline the NPD funnel.

“Our research has demonstrated that more buoyant consumer segments, as well as those that are more time and cash rich due to COVID-19, will appreciate the novelty and experiential qualities of affordable luxuries. In fact, many Australians will want to alleviate the monotony of buying the same things throughout their extended period at home.”

To showcase this, IRI has created a case study drawing on the IRI Shopper Panel comprising of over 13,000 households to provide insight into the sales and shopper behaviour that changed as a result of the continued focus on innovation during challenging times. The data that was examined in this study compared shopper purchasing information from 21/07/2019 to 19/07/2020.

“The chocolate category in Australia within the grocery channel is worth $830 million and has been identified as a recessionary category that has responded well to attract additional spend from shoppers seeking smaller indulgences to enjoy as they live in lockdown but also seek to save money as we move into a recession,” Leathwood explained.

Within this category Cadbury and Darrell Lea have taken the opportunity to dial up their innovations and bring shoppers a breadth of new flavour-extensions or flavour-rotations despite the pandemic and recession. During this time Cadbury has released their Marble and Caramilk range, and Darrell Lea has introduced 10 unique new chocolate block flavours. The innovation through the introduction of new flavours has not only attracted new shoppers to the category to try but increased the total spent on chocolate compared to 2019.

According to IRI, some of the key findings of the study include:

  • 32 percent increase in the spend on chocolate as a direct result of NPD, compared to non-NPD shoppers spending only 14 percent more.
  • Darrell Lea did not change their price, but new NPD has increased spend on the category by 24 percent.
  • Cadbury Marble attracted 760,000 new shoppers to the category, and 420,000 from Cadbury Caramilk.
  • Of the Cadbury Marble new shoppers, 13,560 were new to Chocolate confectionary altogether. In addition, of the 420,000 new shoppers of Cadbury Caramilk, 14 percent were new to purchasing Cadbury.
  • Pre and young families have been responsible for 17 percent of the total monetary spend on blocks compared to just 1 percent last year.

“From these findings we have been able to determine that shopper behaviour has not only changed as a result of NPD in that shoppers are purchasing chocolate when they previously didn’t, NPD also  encouraged trial amongst shoppers. Innovation has not cannibalised the category, rather it has added additional spending to the category through existing and new shoppers,” Leathwood emphasised.

Four key recommendations on streamlining, rationalising and innovating their range during a recession

According to Leathwood, IRI has four key recommendations for businesses looking to activate growth post-COVID by streamlining, rationalising and innovating.

  • Limit the depth of assortment and focus on higher velocity SKUs

“Recessions are a great opportunity to streamline your product range and trim the fat off your product range. Recessions provide the opportunity to rationalise your range and recover costs to invest in new innovations. Many flavour and size extensions erode core brands. Cutting back on the SKUs drives supply chain efficiencies and aids efforts to get stock on the shelves for consumers, which will help meet demand and shopper expectations,” Leathwood said.

  • Commit investment to innovation in attractive demand spaces.

“As less capitalised companies hunker down during the recession, it is a great time to invest in research and development. If you have the capacity, invest in innovation while your competitors aren’t. You want to be ahead of the pack as soon as the recession finishes, so the work you do now will definitely matter,” Leathwood added.

  • Make big-bets on trend/country/category firsts

“Most businesses cut NPD during a recession. As a result, the businesses that make big-bets on current trends can tap into a lot of opportunity. Whilst everyone else is pulling out, you’ll be taking advantage of the new opportunities and conversations that are hot in the media,” Leathwood said.

  • Seek opportunistic acquisitions to bolster brand portfolio

“When employing innovative NPD, it is a critical time to seek opportunistic acquisitions for your brand. The time is ripe for out of the box partnerships,” Leathwood said.

Leathwood believes many more businesses will experience strong growth during the pandemic by adopting IRI’s strategies for success.

“Shoppers still buy products during a recession.  In the current COVID led recession, the spend is being moved from activities such as dining out to indulging in and this is where quite a bit of opportunity lies for the food and grocery sector.  The key is to know what shoppers are thinking and how they are behaving, and this is where we can help,” Leathwood said.

“Our IRI Shopper Panel along with a range of other data can be synthesised to tell us all sorts of interesting things that brands need to know in order to drive growth with razor sharp precision.”

Learn more about the impact of COVID with IRI’s report “ FMCG In The ‘COVID-Quarter’
& Preparing For Recession” at https://www.iriworldwide.com/IRI/media/IRI-Clients/IRI-Australia_Coronavirus-Impact_Industry-Update-Part-2.pdf

About IRI: IRI is a leading provider of big data, predictive analytics and forward-looking insights that help CPG, OTC health care organisations, retailers, financial services and media companies grow their businesses. www.iriworldwide.com   

About the IRI Shopper Panel: The IRI Shopper Panel consists of demographically and geographically representative Australian household panel members. This panel uses an in-home scanner or mobile scanning application to provide their purchase and shopper information. IRI applies proprietary analytical tools to measure the Shopper Panel data to assess volume and share trends based upon what is happening in the home: who is buying, where, how often, the level of brand and retailer loyalty, and the impact of shopper promotions.


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