Free Subscription

  • Access daily briefings and unlimited news articles

Premium

Only $39.95 per year
  • Quarterly magazine and digital
  • Indepth executive interviews
  • Unlimited news and insights
  • Expert opinion and analysis

FMCG industry trends

business man hands show internet concept"Elemen ts of this image furnished by NASA"

The Internet of Things and building agile organisations are top of mind for Australian FMCG companies this year.

Private-label products continue to improve in quantity and quality, and supermarkets will prune ranges further as consumers want “less choice”.

Here, a group of the industry’s most influential players talk about the main trends shaping the future of the sector.

#1 Rise of the Internet of Things 

Technology has never changed at such a fast pace. CEO David Pollock of field-marketing company Smollan Australia says companies are starting to realise how imperative it is to keep up if they want to stay competitive.

“Big data to me is almost like messy data,” he says. “To actually affect change, you really need to be able to have the analytics skills to be able to piece it together.”

The Internet of Things gives businesses the ability to join the dots, and actually use the data to benefit the consumer (as the end user), the retailer (to get the return on their space) and the manufacturer (to know more about their product at retail).

The dream? According to Pollock, to see merchandisers wearing Google Glasses and companies using the Internet of Things to source and analyse data on the spot.

#2 The future “shelf”

Tech innovations will fundamentally change how consumers shop over the next 10 years, and creative agency IdeaWorks MD Danny Lattouf names sentient stores and smart products as the biggest disruptors.

“Sentient stores, including reference to the integration of beacons, relationships between the physical store and our mobile phones will certainly impact our experiences,” he says. “Stores with smart shelves will better understand space management and stock weights, and be in a position to predict behaviours and requirements and adjust offerings accordingly.”

So, what does the store shelf of the future look like?

“From Amazon, we see innovations such as the Dash button, Dash wand, and Echo, where we select products via highly convenient means as forms of contextual commerce – embedding commerce into the device or occasion where a need first occurs. As an evolution, the newly launched Brita water pitcher will automatically ping Amazon. com when a new filter is needed, and re-order itself.

“Such innovations are changing the retail game as we know it.”

#3 Investment is key

As the economy’s mining-led growth slows, the food and grocery sector will become one of the key growth sectors for the future, according to the Australian Food and Grocery Council.

“There was a 28 per cent surge in Australia’s food and beverage exports in 2014-2015, underpinning growth in the food and grocery sector despite challenging economic conditions,” says communications director James Mathews.

“Strong growth was recorded across a wide range of food and beverage categories, which underlines the diversity of Australia’s food and grocery sector, from beef and dairy to biscuits and confectionery.

“The conclusion of the Free Trade Agreements with an emphasis on increasing markets access and focus on promotion will provide new opportunities for Australian exporters.”

One area of concern is the 9 per cent decline in capital investment.

“To fully capitalise on improved market access and growing demand from middle-class consumers in the emerging economies of Asia and the Middle East will require a step change in investment in the food and grocery sector, and government policies to stimulate investment will be key,” says Mathews.

#4 Owning our health

Blackmores CEO Christine Holgate says Australians are becoming far more health conscious, citing the ageing population and the influence of Asian culture as two main reasons.

“By 2030, around 33 per cent of the population will be older than 60, if not 65, and they are going to be the largest population group,” says Holgate. “People are living longer, and women are having children later. People are really conscious about looking after themselves because they want to do things much later in life.”

Asian culture’s main influence is the strong belief in looking after one’s health. “I never philosophically have to argue in Asia about the benefits of natural health – they are born believing it. It’s part of how they live,” Holgate says.

“We are embracing Asian culture: we can see it in our food, we can see it in our people. We are closer to Asia, and it’s our future in terms of economic trade.”

#5 Loving private labels

Aldi has legitimised private-label products, and major players are now being forced to lift their game, says senior lecturer Dr Gary Mortimer at Queensland University of Technology’s business school.

“Where once private-label grocery products were considered a ‘cheap and nasty’ alternative for branded products, supermarket quality-assurance teams have changed this mindset,” he says.

“Today’s supermarket branded products offer quality on par with national branded alternatives, with some so closely resembling the market leader one would be forgiven for grabbing the wrong box.”

Business intelligence company IBISWorld predicts the private-label products share of grocery sales in Australia will reach 35 per cent by 2020, still behind the likes of the UK where the proportion of private-label sales is almost at parity with branded products.

“Our supermarkets of the future will have more and better-quality private label products and lower prices,” says Mortimer.

#6 Fresh is best

Consumers now use supermarkets like a pantry.

Lifestyle changes, food choices and demographics are creating a shift in consumer food preferences, and Brandon Miller, director of strategy and innovation at Wiley, an organisation that designs, builds and maintains food manufacturing processes and facilities, says FMCG companies will need to adapt.

New research shows that consumers are more likely to shop several times a week as opposed to a traditional weekly shop.

“Consumers are shopping on average three times a week, with as many as 80 per cent of Australians buying fresh vegetables multiple times throughout the week,” Miller says. “These trends can be attributed to an increasing desire for fresh products and convenience.”

More Australians are experimenting with cooking, which means grocery shopping is the start of the journey.

#7 Value is more than price

As more retailers look at range rationalisations, it is imperative that brands have a strong value proposition.

GSK Consumer Healthcare ANZ’s head of category and shopper marketing Keri-Jane Jacka says that getting this right starts with understanding the shopper, and acknowledging that value is not just about price.

“Unless we have really strong propositions that add value to a category, we are going to lose out,” she says. “It’s not just about competing with private labels, it is about asking if your product warrants being in the range to ensure category growth.

“If a retailer is looking for significant range reductions, we have to have a compelling shopper rationale as to why our product is needed on the shelf.”

Jacka says price promotions take a brand only so far, so it is important for them to tailor their offer to what is relevant to each retailer and its shoppers.

#8 We want less choice

When it comes to choice in the supermarket, some is certainly better than none, but more is not necessarily better than less, says Dr Gary Mortimer.

“For many years, Australian supermarkets promoted their vast ranges of brands and products, believing that broader, deeper ranges would satisfy shoppers. However, recent research suggests that, psychologically, this assumption was wrong. In fact, shoppers with excessive choice found it difficult to choose and were less likely to buy.”

He confirms that less choice saves shoppers time, is less confusing and satisfies most.

“Where German discounters like Aldi or Lidl have entered the market, incumbent supermarkets have slashed range. Recently, Tesco cut 20,000 product lines from their 90,000 range; similarly, Coles in 2012 reduced its range by about 7000 products.

“While this strategy responds to customers who are looking to make their grocery shopping more efficient, it also reduces supply-chain costs for supermarkets.

“Our supermarkets of the future will provide less range, but satisfactory choice.”

 #9 Create a responsive, nimble workforce

Having an agile organisation will increase the chances of a business being able to successfully compete in volatile markets.

And with a big focus on “doing more with less”, scalable workforces will become a priority, says Labour Solutions Australia MD Ed Hinschen.

“There needs to be an operation or business model that adapts to scalability, peaks and troughs, seasonal demand and also last minute requirements,” he said. “Every workforce hour needs to be accountable to production levels.”

Ensuring you have the right people in the right job is also crucial to increasing efficiency. “Each job needs to be scoped in terms of what type of person or professional needs to work in that particular area of the business,” he says, “Then that needs to be implemented into any recruitment or sourcing methodology within the business.

“You don’t want to try to fit a square peg into a round hole, and you don’t want a round peg into a square hole.”

This article appeared in the April edition of Inside FMCG. Subscribe here.

You have 3 free articles.