Consumers are looking for premium brands and premium brands are the most successful worldwide. Premium products grew by 21% in Southeast Asia, by 23% in China between 2012 and 2014 and 26% in the USA from Apr 2015 to Apr 2016 across the home care and personal care categories, (Nielsen, 2016a). Different factors helped the growth of premium products:
- Economic growth of middle class: Middle class is massively growing especially across emerging countries (Brazil, China, India, Indonesia, Mexico, Malaysia, Thailand, Vietnam, etc) and by 2030 (Reuters, 2012) will almost count 5 billion people worldwide (two times the current middle class population). This will encourage people to access a many different products and to expand their shopping basket with highest probability to trade up for premium products.
- Urbanization: many people will move from the countryside or rural areas to cities and towns (from the current 2 billion to 5 billion by 2030, Nielsen, 2016b) gaining access to more services who will help to raise the premium products consumption. For instance, even more people will access Internet to be informed and buy and even more people will access convenience store or specialised stores to purchase premium products.
- Digitalization: At the beginning of 2017 more than half the global population uses a smartphone, almost two-thirds has a mobile phone, more than half of all mobile connections are now ‘broadband’ and arond 20% of the world’s population shopped online in the past 30 days (We Are Social, 2017) Thanks to this data and thinking about the massive digital future growth more and more consumers will be affected by the effects of the omnichannel. The combination of different and many touchpoints any time and anywhere will make information more accessible and, as a result, many consumers more influenced by advertising, educational information, promotions, etc.
- Wider offer available (private labels and brands). If in the past only manufacturers offered premium brands in last 10 years we saw a new phenomenon showing how even retailers could launch premium labels on the market moving from aggressive promotion and discounting to better and higher quality in their offer (especialy on food and beverage).On top, we can also talk about the rising of local brands and smaller countries which, although a different impact depending on the countries and regions, massively contribute to increase the percentage of premium products on the market.
1. What are consumers looking for?
According to Nielsen (2016a) many reasons encourage consumers to buy premium products. Results are different across different countries, regions and consumers generations:
- Overall there is no always a correlation between highest incomes and premium products purchase rate. Indeed, the study (Nielsen, 2016a) shows how in many countries and regions a better salary doesn’t always influence the attitude to spend more.
- Price is not the only attribute consumers link to premium products. Only 31% of global respondents declared to think about a premium product when the price is high. On the other hand quality and performance are considered a plus. Quality and performances change depending on the product category we are talking about. For food quality is made by the ingredients used to make that product, while for a home care product by the effectiveness of a formulation. Other factors are the design or the brand name. The bottle design for a detergent or the brand awareness might be decisive to encourage consumers to purchase a product in a certain category regardless the quality and the performance. Even sustainable attributes are relevant especially among the youngest generations (Millennials and Generation Z).
- Social aspirations and status are important: many respondents, especially in emerging countries, declared that buying premium products increases their self-esteem, feel them better or more confident about themselves as individual or as members of social groups.
2. Private Labels vs brands: what’s the status?
The relevant growth of the premium fmcg products on shelf has been also facilitated by the launch of premium private labels. From the report (Nielsen, 2014) we can see how Europe, North America and Oceania, are the main region wolrdwide in terms of private labels presence. In Italy (Il Sole 24 Ore, 2016) premium and bio private labels products generated €1.32 billion (13.2% of the total private label segment value of the market in Sept 2016, respectively + 14% and +16.1%, vs Sept 2015). On the other hand low cost private labels lost share (-22% in value vs Sept 2015) only representing 2.6% of the total private label segment.
Figure 1: Premium Private Labels products in Italy, branded “Top Esselunga”
Local retailers massively invested in brand management and innovations in recent years building a high brand equity across different categories, with the main goal of creating store loyalty and getting better trade terms conditions vs manufacturers. However, there are categories (such as personal care) showing highest and similar value share across different regions around the world.
For brands the premium fmcg path is almost mandatory. Brands should continue to raise investments in brand management through marketing investments in communication and innovations, to better communicate the uniqueness of their value proposition and make their brand equity stronger. In order to do so, heavily marketing research investments looking for new and unmet needs among consumers are required to get the right consumer insights.
However perception of brands vs private labels even for premium products changes depending on the region and on the country. In Europe, Latin America, North America and Oceania, there is a high qualitative perception of private labels, considered as key SKUs able to drive brand differentiation and store loyalty. On the other hand the situation is completely different in Africa, Asia and Middle East, where consumers show the highest willingness to pay premium prices for brands. Most of the respondents still consider buying private labels too risky.
3. Management Implications
- Only some products can be upgraded (Nielsen, 2016a): Personal Care is the main category across many regions showing highest differentation and innovations rate vs other products categories. Regardless this trend, differences and opportunities across categories are different depending on the country and on the region. Premium perceptions are not the same worldwide for all products and categories.
Figure 2: Premium’s Value share per Category across different global regions (Nielsen, 2016a)
- Think global act local: Differences are relevant depending on the market and the region we are taking into account. This implies how even marketing strategy should be locally adapted to support the launch of a premium product on the long-term, depending on the market area to be served.
- Focus on digital and optimize your in-store visibility: In order to get highest results and makes the product successful an excellent quality, distribution or price are not enough. Firms and professionals need to find the right communication. Depending on products peculiarities firms need to find a balance between touchpoints showing highest awareness and trials (typically TVCs and high store visibility) and touchpoints showing a high degree of persuasion (e.g. digital). In many cases both brands and private labels are still struggling to achieve these goals.
Il Sole 24 Ore (2016), Private Label, la corsa è premium, December, http://www.ilsole24ore.com/art/impresa-e-territori/2016-12-09/private-label-e-corsa-premium-110740.shtml?uuid=ADFrDIGC
Nielsen (2016a), Moving on Up, December
Nielsen (2016b), The Dirt on Cleaning, April
Nielsen (2014), The State Of Private Label Around The World, November
Reuters (2012), The Swelling Middle, http://www.reuters.com/middle-class-infographic
We Are Social (2017), Digital in 2017: Global Overview
Health tech received a major boost, as manufacturers unveiled a slew of snackable wellness solutions and advanced trackers that keep the whole body under surveillance. Consumers’ continuing pursuit of wellness is taking a new turn: the wellness digital. As they seek to create wellness cocoons that can protect them from threats to their health, environment and emotional state – wherever they are. These 12 innovations will be use in the future by the grocery industry. Indeed, nowadays the consumers are paying attention to the wellness and their wish is to improve the quality and well being of their daily life. In this article you will see how modern technologies and can improve the consumer’s sleep, sportings activities or even mental health !
Fitness and sportswear
Example: Activity listener– Misfit Specter
Benefit: Tracks activity and sleep, and syncs with Misfit’s mobile app over Bluetooth
How it works: Details of pricing and availability have not yet been confirmed.
Example: Ombra by Canadian sportswear startup OmSignal
Benefit: Measures and reports back on fitness metrics such as distance, heart rate and calories via the company’s OmRun platform
How it works: The OmBra gives instant feedback to the user via the accompanying app, allowing them to measure the effects of their training and workouts
Pocket health check/monitor
Example: Refit Card
Benefit: Lets users check their pulse and stress levels when the card is behind their smartphone.
How it works: The batteryless, near-field-communication based ECG monitor – a world first. It is developed by by South Korean health-tech company Solmitech. Price: $49
Example: San Francisco-based Sproutling, has developed a health sensing wearable device for babies. The device retails for $299, but the site currently shows that its sold out. Users area able to put their name in for a device on the waitlist.
Benefits: Designed to give insight into a baby’s wellbeing and predict sleeping patterns.
How it works: It tracks a baby’s heart rate, skin temperature, motion and sleep position. This is possible thanks to a wearable sensor in the form of a hypoallergenic anklet. Besides, it monitors room temperature, humidity, sound and light. Then it provides clear indicators of the optimum environment for sleep, as well as sending real-time updates to smartphone app.
Treatment and therapy
Example: Quell, a wearable band. Lets users check their pulse and stress levels when the card is behind their smartphone.
Benefit: That relieves pain, measure sleep duration and quality
How it works: Relieves pain by stimulating the user’s nerves, has been updated with an Overnight Therapy mode that will measure sleep duration and quality
Example: Fineck by Beijing studio Veari, is a wearable for the neck that tracks subtle movements via an app.
Benefit: Targeting people who experience neck strain and discomfort, tracks the neck activity and warn consumer when they are in a bad posture for too long. It also encourages consumer to adjust and exercise their neck muscles via app-based games and prompts.
How it works: Based on motion sensing.
Smart sleeper thanks to wellness digital
Example: Sleep Number’s bed mattress
Benefit: Track your heart rate, breathing and movement during sleep, and recommend when to go to bed and when to wake up to gain the most benefit
How it works: It Bed features sensors that track movement, heart rate and breathing, and then suggests ways to improve the user’s rest patterns – such as improved levels of firmness, comfort and support for their mattress
Example: A San Diego-based startup company, Hush, consists of 3 engineers have create the smart noise cancelling ear buds.
Benefit: To help deliver a peaceful sleep regardless of our surroundings.
How it works: Hush reduces sound in two ways: The sound eliminating foam provides passive noise reduction as a first sound barrier. The in-ear speaker plays a track to mask any residual sound that the earplugs do not block out.
Mood and mental health
Example: Brain-sensing headbands –Muse, created by Canadian tech company InteraXon
Benefit: The brain sensing headband helps you get the most out of your meditation practice by giving you real time biofeedback of what’s going on in your mind.
How it works: The headband uses brain-sensing technology to measure whether your mind is calm or active, and translates those signals into guiding sounds. Use the app to monitor your progress.
Example: Simi hormone-tracking
Benefit: Help women predict their future moods and fertility.
How it works: A saliva-based monitor and app analytics, through its calendar interface, the prototype can issue a warning when the user might be grumpy – handy for important meetings.
Example: Oxie – the first, smart, neck-worn air purifier
Benefit: It purifies the surrounding air from smoke, microorganisms and allergens.
How it works: Sleek enough to fit under your shirt collar, it places you in an “invisible bubble“
Example: The coiled Fervent Carpet rug, Dyson
Benefit: Fight Allergy, Mitest kill, bacteria kill
How it works: The rug is fitted with hydraulic connections that plug into domestic radiators, allowing it to heat up to 60⁰C every few month to kill off dust mitest. Soon to be released in Japan, British brand Dyson’s latest humidifier combines its bladeless technology with ultraviolet light to kill off 99.9% of waterborne bacteria.
So, the disruption in terms of wellness is everywhere and the digital is definitely the future of the grocery market !
Amazon started selling its own private label range in the U.S:
Since June, the e-commerce giant is launching three different ranges of product with their own specialty offer. “Happy Belly” becomes a food & beverage brand offering snacking, tea, coffee and different oils for cooking; “Wickedly Prime” will be devoted for Meal-to-go, “Mama Bear” will contain a wide selection of baby products. Once again this offensive will fortify the dominance of the company in the e-commerce landscape.
According to the Wall Street Journal, Amazon targets also selling spices, housewares, vitamins, detergents and even layers. For Amazon, Millenials consumers not only have much better opinion on private-label brands than older consumers, they are also more likely to purchase grocery products online.
This move could prove to be significant event in online food retailing
Therefore this could have serious consequences for competitors and for brands. Because the giant obviously has leadership positions in sales and niche sectors, generating the best profits, as did the modern trade before him. This new offensive should allow Amazon to get ahead of its current suppliers for at least two reasons:
A mastered launch with data insights
First, the company is already popular enough and will not need to spend millions of dollars in marketing and advertising. Second, Amazon has a phenomenal database that allows it to predict what products will be best seller. The giant e-commerce platform can thus launch its new brands with low risk.
Amazon Prime has about 50 million members.
These new brands are reserved exclusively for Prime service’s subscribers, which is positioning itself increasingly as the Amazon’s main growth engine. In addition to private label, Amazon Prime offers already benefit with digital content, free restaurants delivery, online Video platform and exclusive products.
We can be sure these launches will be closely watched by the CPG industry as a whole !
Gululu levels up your baby beverages
It may have an original design, but make no mistake about it, Gululu is the first connected gourd destinated to kids. An interesting challenge for the parents with kids who distaste water as they do for green vegetables .
What better than a toy to track the water consumption?
Bowhead Technology launched the Kickstater project Gululu offering interactive Gululu Connected Gourd to encourage water consumption in children. How? A sleek design bottle combined with a Tamagochi-like smart toy that keeps kids hydrated and healthy. The water needs and goals are set automatically depending on the age, weight and activity of young users.
The object is connected via wifi to a smartphone application dedicated to parents. This will allow them to follow the volumes consumed, and no possible cheating since Gululu is equipped with several sensors that can detect if the water was used to water the dog, for instance.
Tamagotchi back to life!
Flasks are equipped with a touch screen with a concept approaching the tamagotchi. As the child drinks, the virtual pet develops, collects treasures and explore a submarine world. A good way to position itself as THE child faithful companion.
Gululu has many others features
Shaking gourds will push nearby animals to play play together and children can compare their scores while expanding their social circle.
More than a product, a real universe
The universe of this Connected Gourd should be motivating enough to face the water needs of the young. The project was fully funded, the gourd is already pre-order. The release is scheduled for September we are eager to see if the goal of drinking fun will be achieved!
Keep innovating for childcare !