There are several common threads that are typically evident across our client work and present in multiple market sectors: appetite for profitable revenue growth and sustainable value creation; desire for clarity and cut-through in increasingly complex markets; and responding to disruption in markets, usually caused by changes to regulation, technology and consumer behaviour. In this article, Associate Nick Parkes reflects on disruption in FMCG categories for brands and grocery retailers.

Tesco’s recent performance has highlighted their improvement is based on offering shoppers less choice whilst improving availability and customer service, significantly demonstrating that success vs. the limited assortment discounters (LAD’s) is possible in the current economic climate. This fact surely heartens the senior management in their direct competition, no more so in Bradford where a similar strategy backed by quality improvements in the top tiering especially has delivered similarly positive results.

For the previous 5 years, intense competition from the LAD’s, who have grown exponentially via shopper gains and improving basket spend, has shone an uncompromising light on price based competition from a more limited range and has significantly changed shopping habits across the food retail channel. The result has demonstrated like never before that less can deliver more and this has resulted in the big Grocers cutting breadth and choice in ranges in order to deliver a simplified experience for the shopper, improved their ‘at shelf availability’ and created standout in categories that have been mired in too much clutter for years.

In this new reality, it can be increasingly difficult for both new ‘venture brands’ to gain a foothold and for established brands, who have for years relied on range extensions, to gain listings. In this environment, there is beginning to emerge a new imagining of the old brand / own brand split and the existing 3 quality tiering system, no longer is it relevant for us to think that an Own Brand only has the retailers name on it. Exclusive brands are giving retailers and suppliers alike, the opportunity to talk in a different way to regular shoppers.

Similarly, in the branded arena, price competition focuses uncompromisingly on the big FMCG brands that have become as commoditised as a sack of potatoes or a bag of sugar with omnipresent distribution and a share of voice that simply drowns out the smaller competition. However, there are opportunities in this environment, if you know where to look. As the branded arena fractures into sub segments where venture brands will provide shopper excitement and recently established new brands will begin to provide revenue and margin streams for retailers as they grow presence and distribution.

The key to finding these pockets of growth is in a well thought out response to a consumer need, having the right category strategy and the reach to get in the door of the big grocery retailers, in this way innovative venture brands can find gaps and open new opportunities for those manufacturers brave enough to try and well resourced enough to gain entry and growth.

In an environment where retailers are demanding more from their FMCG suppliers, more investment, more insight, more availability but less range and less “selling”, it is those entrepreneurial venture brands that can achieve cut-through and demonstrate a profitable opportunity that will gain traction and listings as a result, opening up potential new and lucrative distribution in the process. For the more established suppliers, they can deliver valuable and new insight for the category that will appeal to retailers. Those suppliers that genuinely can talk the language of the category, the shopper and their customers, will secure longer-term success based not only on selling and negotiation.