IRI has unveiled key strategies and tactics that must be adopted by the Australian food and grocery sector in order to survive and thrive during and post COVID-19.
Sydney, Australia – 10 August, 2020 - IRI®, a global leader in innovative solutions and services for consumer, retail and media companies, today announced that research by IRI has identified key areas of risk for Australia’s FMCG sector and the urgent action required to ensure businesses survive the COVID-19 pandemic. Strong growth is possible for many businesses in the FMCG sector over the next 12 – 24 months.
IRI’s two-part report ‘FMCG In the ‘COVID Quarter’ and Preparing for a Recession’ has identified and developed four key growth strategies for the FMCG sector that will bolster business into the post-COVID world.
The four key pillars 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
These strategic pillars of growth will help Australian FMCG retailers and brands to achieve the goal of sustained growth throughout this period. The foundation of the four key pillars has the purpose to help retailers and brands redirect costs to invest in bold new opportunities.
According to IRI, Australian shopper FMCG spending is less discretionary than other forms of spending. For example, people must purchase food regardless of economic conditions. This means that it is more recession-proof than other industries.
“The instinct among a lot of businesses will be to retreat and protect their revenue, but to thrive you will need to get out of your comfort zone. The demand for products necessary to daily living sustains itself during recessions. As a result, businesses that can position their products as necessary expenses will manage the recession well,” IRI Chief Commercial Officer for Asia Pacific, Alistair Leathwood said.
IRI’s growth pillars explained:
- Use pricing to maintain and strengthen brands
Pricing is core to a brand’s proposition and positioning. Within FMCG there are varying levels of price sensitivities, and a recession impacts each retail aisle and category differently. Shoppers will be spending less in 2020-21 and will have a greater focus on price. Evaluating the product portfolio as a whole and segmenting by price elasticity will help decide on which pricing strategy is right and to focus discussions with retailers.
“Businesses must avoid a broad-brush approach to cutting prices. Segment each of your portfolios by level of elasticity and make decisions based on nuance. Try to strengthen the brands with lower elasticity,” Leathwood said.
“Meanwhile, use promotional strategies to draw consumer attention to brands with higher elasticity. Try to leverage ways of boosting values that extend beyond price cuts. Price cuts should be your last resort.”
- Invest in marketing to bolster ‘mental availability’
IRI has identified that the consumption of media has grown through COVID-19, and there is an opportunity to increase marketing efforts. Increasing spend in a recession can help brands tap into new opportunities.
“Business leaders are always pressured to cut marketing spending during a recession. What they forget is that marketing can be vitally important during a recession,” Leathwood said.
“Most businesses cut marketing costs during a recession. As a result, the businesses that ramp up marketing can tap into a lot of opportunity. Whilst everyone else is pulling out, you’ll be taking advantage of the new opportunities. Meanwhile, media tends to be cheaper and people spend more time in front of their screens, be it television or mobile.”
Whilst increasing activity is desired, ensuring that a brand’s message hits the mark is key, otherwise the opportunity is wasted. According to IRI, 70 percent of consumers believe that a brand’s response to the pandemic will impact the likelihood of them purchasing that brand. 78 percent of consumers say they have a stronger affiliation to brands that go ‘above and beyond’.
IRI has identified a number of ‘no gos’ for marketing in the COVID-19 era: inauthentic pretenses to care, melancholic music, self-interested messaging, generic inspirational advertising, gimmicks and disconnections to historic brand values.
- Adopt a shopper-led store view to holistically understand customers
In deciding which marketing tactics to employ, it is a crucial time to monitor consumers’ changing perspectives. While the unique backdrop of a pandemic might not be reflective of their true beliefs and attitudes, understanding how consumers and shoppers are changing will uncover opportunities of untapped needs, or repurposed product benefits in a different category. The time is ripe for out of the box innovation.
“Investing in tracking how Australians are reassessing priorities, reallocating budgets, switching between brands and product categories, and redefining what represents ‘good value is more important than ever in navigating the path ahead. The current pace of change makes it more critical than ever to continually understand consumers’ changing attitudes and behaviours,” Leathwood said.
“Harness technology and analytics to make better strategic and day-to-day decisions by understanding what shoppers are buying now and will likely buy next.”
- Streamline, rationalise and innovate your range
“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,” Leathwood added.
“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. Efficiencies in range and supply will help meet demand and shopper expectations.
“Recessions are a great time to invest in research and development as other less capitalised companies hunker down. 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.”
About the report
This report combines multiple sources of data and research inputs to provide a comprehensive view of the behaviour and perceptions of Australian FMCG shoppers from February to May 2020. It therefore, captures changes during an unprecedented timeframe: the ‘COVID-quarter’.
IRI believes it is a crucial time to monitor consumers’ constantly changing perspectives. The analysis includes the results of two waves of dedicated COVID-19 themed surveys put to IRI’s Shopper Panel:
- Wave 1 included 5,799 respondents surveyed between 1st and 15th April
- Wave 2 included 5,566 respondents between 19th and 24th May
Also included is select retail point of sale data across channels, and ongoing data collected from IRI’s shopper panellists who have been recording their elevated purchase levels throughout. Because of the mixed sources of data, the specific timeframes vary but are clearly stated on each slide.
For more information about the impact of COVID-19 in Australia and globally, visit IRI’s COVID-19 hub.
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. For more information, visit www.iriworldwide.com.
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