“Our ambition is to be the best performing, most trusted and respected consumer products companies in the world – ensuring we play a positive role in society is at the heart of this.”(Diageo Annual Report 2016)
With its 9.4% market share on volume (2015) Diageo is absolutely the leading company in the alcohol market, ranking always as first for the past eight years. Its market share is almost double of Pernod Ricard, the second market leader. Diageo strong market supremacy doesn’t surprise since the company operates in more than 180 countries and owns 20% of the world top spirits. For example some famous and well known Diageo brands are Guinness, Smirnoff, Baileys.
In the medium term the global beverage alcohol market, that generates today around 300 billion Eur of net sales, is expected to grow. This trend is driven both by a rise in global incomes and a growing legal purchase age population. On one side the beverage alcohol industry benefits from margins that are higher than for the overall consumer goods market, on the other side this market is one of the most highly regulated in the world with regulation varying widely between countries and jurisdictions.
However, despite of the great market supremacy reached in the past years Diageo seems now to be victim of its own success. The sluggish growth of the company has turned red with a 2016 negative performance of -3% on its global net sales. The brand portfolio has been recently revisited, some brands sold and now it focuses only on the most important areas of the company: Scotch, Beer, vodka, rum and other liqueurs.
It is clear that now Diageo cannot play the same expansion strategy used in the past years. The fast growth achieved thanks to expansion in white spaces market is now not repeatable anymore having reached almost entirely the market saturation.
For Diageo executives a direct competitors fight is now approaching and in order to continue gaining market shares their strategy is diversification through clear areas and a cultural steer towards responsible drinking.
There are already example of big multinationals who have been able to diversificate effectively in the FMCG market. One is Unilever that is investing in a sustainable living bringing “a brighter future, a better business”. The Unilever sustainable living plan focus on three main points: improving health and well being, reducing environmental impact and enhancing livelihoods. Another one is Coca Cola who have expanded its portfolio towards sugar reduction entering juice and water categories through different acquisitions. For example, a famous one is Innocent brand.
How diversificate in a market where alcohol is considered by the consumer almost like a commodity?
According to US National Institute of Health, in 2012 alcohol consumption have caused 3.3 million deaths in the world. Alcohol misuse reaches the fifth place as leading risk factor for premature death and disability. However, moderate alcohol consumption may have beneficial effects on health. For instance decreased risk for heart disease and mortality due to heart disease, decreased risk of ischemic stroke and decreased risk of diabetes.
Problems caused by alcohol are of great interest for governments who are continuously putting in place restrictions in the sector, who differs by country and making de facto the most regulated and difficult market to operate. Moreover, consumers – who are the first who pay the sour bill – are becoming more sensitive on this topic.
Diageostrategy focus strongly on responsible drinking. This is comparable to the sustainable living plan of Unilever. In the long run, this approach will educate people to a correct use of alcohol and bring a reduction in diseases and deaths caused by alcohol.
Ivan Menezes Chief Executive of Diageo states that sustainable efficiency will bring to the company £500 million savings in the coming three years.
The company is assessing responsible drinking as a performance. In its annual report three KPI out of eleven are based on this: creating a positive role for alcohol in society, building thriving communities and reducing the environmental impact of its products.
Diageo is the first company in the industry investing strong commitment on responsible drinking. Moreover, by putting high level of information in the hands of consumers, demonstrates its true desire in helping consumers making informed decisions and at the same time confirms its position as market leader.
In 2016, 335 programs aiming to reduce harmful drinking were sponsored by Diageo. This year DRINKiQ.com was launched in 12 languages. This is a website with best practices about responsible drinking, list of allergens and sustainability symbols. Moreover, compared to 2015, the company has reached 12% improvement of water efficiency through its supply chain and production process.
Responsible marketing commitment:
“Diageo was in breach for a Smirnoff television advertisement on the grounds that depicted dependency on the presence of alcohol. We were also found in breach for a post on the Guinness Facebook page because it suggested that drinking may have therapeutic benefits. In both cases, the content was immediately withdrawn.” (Diageo Annual Report 2016)
However, the area where Diageo has made the most breakthrough step compared to its industry is with Johnnie Walker, a whisky scotch priced at a similar amount per serve of main competitors. Johnnie Walker Red Label is the first global brand to provide serving alcohol content and nutritional information on-pack. Indeed, a consumer who buys alcohol will never find on any bottle nutritional information. This is quite an anomaly, considering even something as simple as plain bottled water always has ingredients and the chemical makeup of the product on the label.
Diageo has chosen this exact brand and portfolio range because by value Scotch whisky is the most important area in which the company has 24% of total net sales, owning a total of five brands.
Following very positive market critics and feedbacks, Pernod Ricard follows now Diageo pioneering step. Indeed, it announced in February 2017 that will provide nutritional information on all of its spirits products. Consumers will be able to access this information by scanning a QR code that will be present on the back labels of all its bottles. This method also if different by the traditional adopted by Diageo, will enable consumers to quickly display all main info on their smartphones.
The trend started by Diageo is going to have big effects for the alcohol industry. First of all, this will enhance transparency between producer and consumer. A buyer entering a shop will trust brands who put on black and white calories and direct effects of consuming a glass of alcohol. Secondly, will strongly promote responsible drinking in the society improving as well relationship between key stakeholders such as government and regulators. Thirdly, this will boost sales for companies who will adopt this strategy, differentiating brands between other competitors and at the same time winning market shares in the market.
Sources:Euromonitor, Diageo, US National Institute of Health
Best practices to remain sustainable in the Food Industry
Best Practices with Edible Insects Novel Food Law
Exporting food has an environmental cost so is it really impossible to remain sustainable while consuming it? What are the best practices then ?
My last interview with Risteco’s co-funder Isabelle Lacourt and Thanaphum Muang-Ieam, a Thai edible insects entrepreneur were edifying.
Environmental cost of international export, especially between different continents seem fundamentally not sustainable.
Eating bananas from Australia would generate about 1.4 ton of CO2 since planes pollute 3 times more than cars. Moreover, that would deprive local farmers of jobs. Furthermore, consuming exotic food would promote an irresponsible consumption way.
So, should we stop eating bananas ?
On the 26th of october a conference involving the European Commission and the National Bureau of Agricultural Commodity and Food Standards (ACFS) evokating edible insects future legislation took place in Bangkok. This novel food law should enter into force by 2018 to make edible insects business legal into the European Union. According to the regulatory expert of the Public Federal Service of Public Health in Brussels, edible insects from Asia and other continents might be legalized if they respect specific conditions.
However, we can expect these Asiatic insects to be sold at a lower price than the european one. As a result, we could expect those bugs to be the main consumers choice in the coming years.
Then are edible insects still going to be a sustainable food?
“Exporting is not always a bad thing” Isabelle Lacourt, cofounder of Ritseco says . It actually depends on the conditions the products have been made through. For instance, lambs from New Zealand actually revealed that exported food was sometimes healthier than the french ones.
In Thailand firms dealing with edible insects prepare to get into the European Market. They plan to produce this future food by huge amount. Is that wrong?
“Producing at a high scale is necessary in order to be profitable otherwise it is too expensive” Thanaphum Muang-Ieam co-funder of Global Bugs, answers.
Therefore the best practices to remain sustainable are:
Increase your production to get into global markets
Reducing your crickets breeding space
Develop a local farmer learning and support model
Anticipate future sustainable development hurdles
” It is wrong to make huge firms based on a vertical integration process. We need to separate the different supply chain activities to reach a better quality food »Dr. Yupa Hanboonsong said.
« Mass production is never conducive to biodiversity » Isabelle Lacourt added. Indeed, single supplier, concentration & production cost’ permanent reduction work are not sustainable.
Promoting sustainable food is a great opportunity to provide billions of people with high quality food standards. It should not be seen only as a business opportunity. If business is the key point of any sustainable activities, long-term effects of any opportunist approach might lead to a poor food quality.
Discover my three months edible insects’ investigation and best practices here.
Brankrupcy, Closure, social plans, are only few of the worrisome words traditional grocers are blooming everyday, thinking to their future.
Grocers seems to face a disruptive 2017 year. After all, competitors aroused from the internet world are entering the game since few years and are showing appetizing growth! Like other monopolistic sector grocery retail is consciously being disrupted by the numeric foodtech rupture and the business war coming worth the effort. Indeed, this huge market of 11.8 trillions dollars, forecasted for 2020 by igp, is supported by increasing affluence, urbanisation and rising population. However traditionnal grocers seem unaware of this huge upcoming opportunity and keep trotting while outsiders are accelerating!
Grocery Retail Will be Seriously Tackled
New comers arise from the digital world and are holding the right weapons to presents themself before the grocery challenges. These weapons are called innovation, entrepreneurship and disruption. These three marks are displayed as a war trophy on the shield of recent actors like AmazonGo, Google or Uber eat. Having the Digital and technological advantage, these outsiders currently use their expertise to take over Walmart, Tesco, Carrefour as well as other grocers. Besides their frightening expansion, the catering sector is also experiencing an insolent growth in urban centers and captures grocers’ market share.
We are gradually seeing a recomposition of the food retail landscape that leads to the establishment of new distribution platforms answering real needs.
New Catering platforms will appear
Along with Exki, Pur or Dubble, who have all bet on organic and healthy products, “healthy diet” is on the rise. The dishes, balanced, are homemade and composed of 100% natural products. All at affordable prices: from 2 euros for a starter, a salad or a pasta dish, and 3 euros for a meat dish. On the architectural side, Nostrum restaurants are decorated in a modern style, with a special emphasis on “natural” with, in particular, a strong presence of wooden elements. And to further develop the turnover of each establishment, a home delivery service will soon be set up. Such a service should take market share of traditional grocery retailers.
IOT will care about your well-being, your body and your health.
They connect your hair brush to multiple analytical capabilities that will provide you with all the products your hair needs to be healthy. These platforms can be operated by brands or distributors working with multiple varieties of sensors and data acquisition tools. The share of customer data is the instrument that could naturally emerge from these initiatives in order to measure the competitive power of a particular actor. We also foresee lots of emphasis on robust analytical models and tools being used on the data analysis side, for instance the consumption frequency with Amazon dash button.
Vertical integration platforms
To control the whole value chain in order to increase flexibility and cost. There are still quite a few who have ventured there, but with Amazon private label production and distribution, the first results are convincing. Indeed, Amazon Elements wipes have seen 266 percent year-over-year growth, and customers who view Amazon’s product are three times more likely to purchase than the category average, according to 1010 data report. A report from The WSJ in May 2016 detailed Amazon’s expansion of its own brands, with new launches in the categories of Happy Belly, Wickedly Prime, Presto!, and the above-mentioned Mama Bear, for example. Happy Belly now offers food items, like nuts, trail mix, tea, coffee, and cooking oil. Wickedly Prime will be snack foods.
3) Relation With Customer will be more important than ever
Re-enchanting the hypermarket is a fad, it didn’t really work because nobody did it properly over the past years. Preferring to rely on organic development, it is more than probable that the conquest of the customer must now be done by the emotional connection that retailers are able to create. Retailers have invested significant amounts in the renovations of outlets in recent years. The decor is therefore set. But how to bring vitality when most of supermarket are turned into stone. I am struck by the dynamism of our industry. After a decade focused on cost optimization, we are stepping into a true desire to see the top line grow. It is about innovating, testing, failing and trying again. The extension of the field of distribution will necessarily involve a broader view of the role of the distributor and the creation of emotions that will differentiate them from pureplayers coming exclusively from the digital world, without physical advantage.
Announced on January 20, 2017, the Virtual Dash Button will allow Prime customers to order products directly via their smartphone or from the Amazon site.
Amazon will further simplify access to brands by launching Virtual Dash Button that will allow, via the website or application, to directly order the products with one click only. Concretely, the interface will propose shortcuts (free) that will be added one another. Customers will have 30 minutes to cancel their order. Launched in March 2015, the Virtual Dash buttons are a real success for the American e-commerce giant.
On the most popular products marketed by the platform, they represent more than half of orders made, according to Amazon
VR Buttons yes, but to do what?
First concern: which buttons to choose? If some seem obvious, like the buttons “Pampers”, “Whiskas”, or “Bounty” for example, others are less clear. Who really use the “Doritos” button? Going along with Clorox, Energizer, Gain, Honest Kids, L’Oreal Paris Revitalift, Lysol, Peet’s Coffee, Playtex, Seventh Generation, Slim Jim, Snuggle, Vitamin Water, Zico Pure Coconut Water, not everyone in a household shares the same domestic needs: You may have run out of Doritos, while your kids want the new famous Springles innovation. Users have complete control over the buttons, and can sort (most-needed to least-used), label (“Bran’s favorite”), and delete them whenever they want. As with the physical buttons, customers receive a notification with every order, and can cancel within 30 minutes if they make a mistake.
Tiny Products assortment behind some Amazon Dash buttons
The “Bounty” button allows me to choose a Paper Towels Roll, sold in packs of eight, but could also allow me to order paper Napkins. There is some choice, but the range remain tiny and not deep enough. We are very far from the diversity of choice of products available in supermarkets! While target is offering 27 bounty products on its website, I do not see why Amazon, which offers 100 times more references than a supermarket, does not offer the whole range of products of a brand, to be able to associate them with its buttons.
Amazon Dash Button: the beginning of the future
In conclusion: Amazon Dash Button is a connected object that really has chances to be part of our daily, tomorrow. But the lack of references available behind each button disappoints, even though the products are available on Amazon. Despite this, Amazon is serious about its Dash Buttons, and said customers are on board. Last fall, the program expanded in Austria, Germany, and the UK where customer can choose from more than 200 physical Dash Buttons, priced at $4.99 each. With the innovation presented in this article, whenever you register a Dash Button device, Amazon will automatically add a virtual button for the same product.
Dried vegetables, protein-rich yogurt, burger without beef. These products are not only the core of organic shops, they become alternatives increasingly popular with consumers who aspire to a generally healthier diet … even if sugary is still a venial sin assumed. Overview of these top 10 food trends observed in Europe with Innova Market and Nielsen insights.
1 – Go with Transparency
27% of Europeans would like to stop eating transformed products. Consumers want a clear list of ingredients and transparency of the recipe. Some supplier don’t hesitate to highlight the recipe. In France, Marie made the brand name of one their product “All Simply “, where the ingredient list intends to be as short as reassuring. In US, for jerky products, local producer, Wild Merman, highlights the nutrition facts.
2 – Go with Flexitarian
The soft vegetarian which consume meat in small quantity, has grown by 25% between 2011 and 2015. Vegetable Nuggets for kids, vegan salami and other alternatives are under expansion. Retailer like Carrefour adopted this trend with its private label “Carrefour Veggie” in France. In US, Hilary’s Mediterranean vegan burgers were recognized as a lighter and healthier version of a fried falafel.
3 – Go with“0%”
There is now 12% desired gluten-free products, with an increase of 30% between 2011 and 2015. If these customers still a niche, the image is such that some products naturally gluten or lactose, even boast of his absence! The offer is growing, Innova Market’s insights noted, indeed a huge 26% increase of products bearing the words “without” the last four years. Recently in UK, Coca cola launched its new brand ‘Coca Cola Zero Sugar’ to highlight the fewer calories. In 2020 they target more than 50% of their sells from Diet coke range. Bjorg, widely known for their Gluten-free assortment, are present in 1/3 home in France.
4 – Go with Natural Process
Key success is to enhance naturalness of the products, betting on natural and ancestral manufacturing methods. Fresh prepared goods are highly valued by retailers. Nestlé yogurt brand “La Laitière” use this image of ancestral fabrication indicating that only the fermentation participated in rendering its dairy product. Private label as “Carrefour Lunch Time” highlights this natural made image.
5 – Go with Vegetables & Fruits
These plants have never been so good news! If their benefits are globally well communicated, its hegemony is now spread in many product categories. For example fruit juice, a quarter of new products marketed in 2015 has at least one vegetable in their composition, against 16 % in 2011. Another trend that follows, the soup acquires acclaim . In Spain, the cold & hot soups are increasingly premium, like the brand Tio or Mucho Gazpacho
6 – Go with Labels
The origin is a new recurring motif in the marketing of food products. Recognized labels linked to the origin of products tend to comfort consumers. The development of protected geographical indications (PGI) help brands to seduce shoppers. In France, as each year, Herta (Nestle) and Fleury Michon still the most loved brands, their labels play a large part of this success.
7 – Go with Local
Local taste preference dominates: Local companies often have a deeper understanding of consumer tastes in their market and can respond more quickly to changing needs. Local products are a great way through which to differentiate, able to reinforce the link with local farmers and producers and provide a guarantee of food security. Retailers know how to link local farmer to shopper mostly through private label. Carrefour has one especially for Italy (Terre d’Italia) and France (Reflets de France). Virginia Tea company is a popular start up which promotes the American East Coast tea with an exclusive local sourcing.
8 – Go with Protein
Rich-protein products keep healthy. These products, originally created to satisfy athletes, are now desired by the mass market. Rich protein yogurt are a good example in terms of diversification as Danone did with Light & fit assortment. In a more local format, Think Jerky got funded in two month in 2015 by proposing a creative and healthy snack offer.
9 – Go with Fun
In 2020, Millennials will be the largest group of shoppers worldwide. Global mobile penetration will be 70% and the main influencing device will be online video. Buzz create an emotional link with the product, well-executed humor appeal, enhances recollection, evaluation and the intent to purchase. Doritos Roulette is a famous case, containing some ultra-spiced chips, makers claims they are the hottest sold in the UK. Jelly Belly is also well-known among younger in this concept, they even created a board game with their candies. In YouTube they are both doing the buzz with more than ten millions views.
10 – Go with Exoticism
Discovering new foreign flavours still a famous trend and constantly renewed. Exotic products remain a niche market which contributes to renew the offer. It’s important for retailer and supplier to find the exotic touch of the moment. As Asian flavours are quite trendy in Europe nowadays, Unilever with his local brand Conimex in the Netherlands and global brand, Knorr Asia.
The physical interpretation of what Time Out does best. What’s hot, right here and now!
We had the chance to visit the famous “Time Out” food market in Lisboa: Opened in 2014 in Portugal’s capital, the Time Out Market Da Ribeira is an original concept that creates food and cultural experiences based on editorial curation from Time Out magazine. Born from local knowledge, independent reviews and expert opinions and put together by journalists, this concept is a world first. Whether taking fine dining and making it casual or searching for street food Time Out Market’s mission was to get the best of each city and bring it together under one roof.
Food & drinks are made in front of you
Food & drinks is served quickly and the quality is very high. All ingredients for success have been combined together to create an attractive place and an unique experience: Fresh juices & coffee corners, local & international premium foods, wine & tapas space, cocktails bar, renown chefs, table with chairs, library, Wifi, payment facility, arts expo. The place arranged with large wooden tables (made in Portugal) is encouraging sociability and exchanges with locals and tourists or students and families
Time Out market affirms they receive two million visitors a year and became the number one tourist attraction in Lisbon (by no means a small feat in a city with 800 years of history).
In less than 2 years, the reviews are impressive
End of July they reported revenues up 106% year-on-year in the six months to June. Recently the magazine announced they plan to use the £90 million it raised to open more food market like this model. Time Out targets places where they already have a strong presence such as London, New York, Berlin, Paris or Miami.
From the exterior they conserved the Portuguese architecture
The Democratisation of Fine Dining
Lisbon, Madrid, Rotterdam, the modern Food markets fit really well into the disruption, as people are looking for more fresh premium products (See top trends) and also a socializing place to go. As we predict, this is a good example of pure player going bricks. Time Out knows very well the consumers, they are in 107 cities across 39 countries and its monthly global audience reach over 100 million across all platforms. They smartly used their own data and locals journalist to create this Food Market 2.0. Time Out is now the only magazine that you can read, eat and drink.
Renowned local chefs are available
When the E-influencers are smartly going brick, we can expect interesting similar surprises , mostly with millennials. Imagine Tripadvisor or Lonely Planet opening a food market…