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
Danone and Nestlé Waters, the world’s two largest bottled water companies, have joined forces with Origin Materials, a startup based in Sacramento, California, to form the NaturALL Bottle Alliance. Together, the three partners aim to develop and launch at commercial scale a PET plastic bottle made from bio-based material (i.e. 100% sustainable and renewable resources). The project uses biomass feedstocks, such as previously used cardboard and sawdust, so it does not divert resources or land from food production for human or animal consumption. The technology represents a scientific breakthrough for the sector, and the Alliance aims to make it available to the entire food and beverage industry.
Teaming up to accelerate development of 100% bio-based bottles
For decades, both Nestlé Waters and Danone have been committed to sustainable business practices, notably by continuously improving their environmental performances and promoting the development of a circular economy. A large part of these efforts has focused on developing innovative packaging solutions that are recyclable and made with renewable resources, as well as the promotion of recycling. After identifying the unique approach of Origin Materials separately, the two companies decided to team up to accelerate development of this promising technology.
“Our goal is to establish a circular economy for packaging by sourcing sustainable materials and creating a second life for all plastics,” declared Frederic Jouin, head of R&D for plastic materials at Danone. “We believe it’s possible to replace traditional fossil materials with bio-based packaging materials. By teaming up and bringing together our complementary expertise and resources, the Alliance can move faster in developing 100% renewable and recyclable PET plastic at commercial scale.”
Danone and Nestlé Waters are providing expertise and teams, as well as financial support, to help Origin Materials make this technology available to the entire food and beverage industry in record time.
This next-generation PET will be as light in weight, transparent, recyclable and protective of the product as today’s PET, while being better for the planet. The exclusive use of renewable feedstocks which do not divert resources or land from food production is the Alliance’s main focus area. The R&D will focus initially on cardboard, sawdust and wood chips but other biomass materials, such as rice hulls, straw and agricultural residue could be explored.
“Current technology on the market makes it possible to have 30% bio-PET,” noted John Bissell, Chief Executive Officer of Origin Materials. “Our breakthrough technology aims to reach 100% bio-based bottles at commercial scale. With the help of our Alliance partners, Origin Materials will be able to scale up a technology which has already been proven at the pilot level.”
A packaging revolution for all
The NaturALL Bottle Alliance partners consider that everyone should benefit from this new material, so the technology will be accessible for the entire beverage industry. This unique approach demonstrates the allies’ commitment to open innovation and sustainable business.
“It’s incredible to think that, in the near future, the industry will be able to use a renewably sourced packaging material, which does not compete with food production and contributes to a better planet,” commented Klaus Hartwig, Head of R&D for Nestlé Waters. “It therefore made perfect sense for us to join forces through this Alliance to develop this innovative technology in a large scale and in the shortest time period possible. This is an exciting journey and we are proud to be part of it.”
A packaging revolution in record time
Origin Materials has already produced samples of 80% bio-based PET in its pilot plant in Sacramento. Construction of a “pioneer plant” will begin in 2017, with production of the first samples of 60+% bio-based PET to start in 2018. The initial volume goal for this first step is to bring 5,000 metric tons of bio-based PET to the market. Thanks to their complementary skills and shared vision, the NaturALL Bottle Alliance aims to develop the process for producing at least 75% bio-based PET plastic bottles at commercial scale as early as in 2020, scaling up to 95% in 2022. The partners will continue to conduct research to increase the level of bio-based content, with the objective of reaching 100%.
Source: Medium.com / Nestleusa.com
Top 10 food trends in Europe:
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.
Source: Innova Market Insights, Nielsen, Kantar TNS, top 10 food trends
For this new year, TG team provides a retrospective look at the last top trends in Spirits and Liquor. It has been a period epitomised by transformation in the drinks industry and this can be examined under six broad categories :
Top trends in Spirits and Liquors:
- Ultra Premium
- Pop up store
- Virtual Reality
The CES 2017 in Las Vegas was the opportunity for Pernod Ricard to introduce Opn, a super futuristic machine which mixes cocktails and is controlled through an app. The cocktail connected machine has a particular design, materials and textures inspired by the book universe.
The Pernod Ricard Opn, originally unveiled the prototype in 2014 under the name Project Gutenberg and the multi-component device platform theoretically will help consumers to customize cocktail recipes, adapting them to available ingredients. Coaching features guide through the spectrum of recipes and techniques to help build skills, for cocktail classics and more elaborate concoctions.
Pernod Ricard will install 200 Opn in Paris apartments during two months to obtain more insight. The French group is still wondering about the purchase mode (cash or subscription) but would launch the commercial version of Opn early 2018. A true breakthrough innovation for the spirits industry that Pernod Ricard’s competitors will probably look very closely.
Ultra-Premium: Rémy Cointreau
Rémy Cointreau acquired its first whiskey in 2012: Bruichladdich, a top-of-the-range single malt distilled on the island of Islay, Scotland. End of 2016, RC acquired an ultra premium brand in the French alps, Le Domaine des Hautes Glaces, which develops an organic whiskey. Recently, Rémy Cointreau turns to the United States with this third whiskey acquisition, Westland.
This investment will allow Rémy Cointreau to expand its portfolio in the segment carrying single high-end malts. Established in Seattle, Westland develops high quality single malt whiskeys, which are marketed between 70 and 125 dollars (between 65 and 117 euros approximately).
The group, which is pursuing a strategy to upgrade its portfolio, saw its profit jump in the first half of its 2016/17 fiscal year to 76 million euros.
Rémy Cointreau holds international and top-of-the-range brands, including Rémy Martin and Louis XIII cognacs, Cointreau liqueur and Metaxa, Mount Gay, St-Rémy, Bruichladdich, Port Charlotte, Octomore and The Botanist spirits.
One of the most important top trends in spirits this year is the drive-to-store operation and technical challenge. Old Nick proposes an unprecedented operation. On the occasion of the launch of a limited edition in linear, called Edition Color, the first rum in France offers to the consumers the technology of visual recognition with Shazam on six bottles.
By scanning the sleeve of the bottle via the camera function of the application, the consumer accesses encapsulated content dedicated to the brand. This operation, carried out with Sleever and the teams Shazam / Madvertise, had to take into account various constraints, such as curvature, shine sleeves and the presence of transparent areas, hence the technological prowess.
Content refers to a game registration form and exclusive recipes with the brand universe. This device benefits from an activation campaign via banners in the application of musical recognition. Choosing Shazam seemed obvious to connect the brand to its current or future consumers. The target is similar, the use is also or even simpler than that of a QR Code and with close of 9 million active users in France. The operation, which aims to transform the Old Nick Edition Color bottle into a real point of contact with consumers, participates fully in the re-enchantment of linear products.
Bacardi Martini installed the “Marché Bleu” in Paris. A kind of original shop in shop during three weeks in December.
On the ground floor of this wine merchant in the center of Paris, the Marché Bleu is characterized by a special welcome: Hostess invites shopper to take a basket to drop off purchases that another hostess will pack a little bit later. Here it’s not a question of buying a simple bottle of premium vodka but of discovering the whole universe of the brand and also the ingredients of its two flagship cocktails: The Fizz, a rather feminine cocktail that combines Gray’s almond notes Goose with the flavour of the Saint-Germain elder liquor (which also belongs to Bacardi Martini) and the dry Martini, a rather masculine cocktail, based here of Gray Goose and vermouth. The Marché Bleu also offers all the objects (shaker, doser, specific glasses …) useful for making these drinks.
With its blue market, Grey Goose seeks to be part of the “social gift” trend, a strong trend among Millennials, to stand out, especially by offering an original and personalized gift when invited. Outside France, Grey Goose did similar initiatives in New York and Moscow
Virtual Reality : Beefeater
Video has become the perfect ally for brands that want to convey values and arguments to their consumers. And technological advances are used by firms like Beefeater to create alternative realities thanks in this case to the development of virtual reality glasses. VR tech is among the top trends in spirits this year with this operation.
“We want to be specialists in video and virtual reality to create immersive experiences,” said Paco Recuero, Marketing Director of Pernod Ricard recently, within the framework of the New Video conference. In fact, the company is already promoting Beefeater product with virtual reality glasses.
In particular, Recuero has told how the #BeefeaterXO campaign was articulated by David Muñoz, a character that fit perfectly with the gin brand because of its close ties to London: “We prepared a lot of the meeting with the chef. The script and create the experience, we put some glasses of virtual reality and we encouraged him to enjoy. ‘Vanguard or die’ was his answer, “he points out.
According to the director of Marketing of Pernod Ricard, in front of the traditional advertising campaigns that do not look for to tell stories, they prepared a press conference in Peep Show. All the media could be introduced through the glasses of virtual reality in the dream universe of David Muñoz. The impact of communication was enormous.
Last Christmas in Spain, two centennial brands have joined together in a joint project: the launch of the new Santa Teresa with Anis del Mono.
The brands are presented as a “unique product” in which the stories of two leading brands of the Spanish gastronomic culture converge, according to both companies. Both are the only two gastronomic brands that have reached our days
- Santa Teresa, whose experience in the elaboration of yolks goes back to 1860, continues to elaborate the authentic yams of Santa Teresa according to the original recipe.
- On the other hand, Anís del Mono also continues unchanged its form of production from its modernista factory of Badalona. A product whose history is full of curious anecdotes, related to its unmistakable bottle with diamond and its mysterious etiquette that includes the dubious monkey of humanoid features with similar thing more evident with Charles Darwin.
This alliance of both complementary brands increase sales and awareness as consumers seek to learn more about this new combination. Cross merchandising is definitely one of the top trends in spirits recently.
Thanks to the technology at our fingertips, people are more thoughtful about what they eat and consequently consumers are getting more and more skeptical about product’s ingredients. With the easy access to internet we can ask, read, solve any possible doubt we have and probably end up having new more questions. It is a popular habit to pick up the smartphone and quickly look both for product info and for other consumers’ reviews while you are at the supermarket, buying grocery online or discussing with your friends and family.
Millennials drive the change of the food industry
According to the report by Jeffries Alix Partners that looks at the impact that the generation born between 1982 and 2001 (otherwise known as ‘Millennials’) will have on the grocery market, Millennials are much more willing to pay more for specific attributes in food, such as organics and natural (See top 10 food trends). More over they have much less brand loyalty and are more willing to engage in different distribution models to find food. This generation is not afraid to purchase food online and to look outside of the traditional grocery store to find what they want.
It is possible, having a look at the shelves of all the supermarkets, to understand how quickly brands adapt their food’s ingredients to this trend to be more attractive to consumers. The growing demand for more great-tasting, sweetened drinks and food that contain ingredients from natural origins, as well as fewer calories, incentivized companies to invest in R&D to dive deeply to propose new offers on the market.
From aspartame to a natural sweetener
In the 80’ soft drink consumers were gravitating to low- or no-calorie brands, and companies’ business in the U.S. were struggling following years of inflation and rising costs. Coca cola launched Diet Coca, first with saccharin, the only approved non-caloric sweetener at the moment, then with aspartame.
The rumors claiming that aspartame caused a number of health problems, including cancer and the consequent intense controversy behind this ingredient probably produced the dramatic drop of consumption of diet soda by more than 27% — a loss of 834 million cases in USA since 2005. Seth Kaufman, senior vice president of Pepsi and Flavors Portfolio, said in a statement:
“Diet cola drinkers in the US told us they wanted aspartame-free Diet Pepsi”
After hearing requests from consumers, in 2014 General Mills took out aspartame from its Yoplait light yogurt replacing it with sucralose, another artificial sweetener, and claiming the product “Aspartame free”, implying that it was not safe and opening the door to scrutiny to the use of specific sweeteners for the brand.
The challenge that the consumers were proposing to the brands encouraged them to drive innovation by investigating and investing in more natural propositions.
In 2014 a report from Mintel and Leatherhead Food Research highlighted the opportunity for such plant-based sweeteners. Indeed, while the value of stevia, a natural, zero calorie sweetener with different health benefits, as an additive for use in food and beverage manufacture totalled $110 million USD in 2013, Mintel and Leatherhead Food Research forecasts this to grow to $275 million USD by 2017.
Many brands took the stevia’s opportunity
Worldwide: Coca-Cola Life is a lower-calorie version of Coca-Cola, using stevia and sugar as sweeteners.
USA: Halo Top use organic stevia to reduce the level of calories in its ice cream
France: Danone uses stevia to sweeten its Taillefine yogurts, aimed at younger diet-conscious women
Italy: Perfetti Van Melle launched Vigorsol Stevia, a sugar free chewing gum with extract of stevia
UK: Ketchup maker Heinz has introduced a new stevia-based version of its tomato ketchup in a bid to lower the sugar in it by half.
The stevia trend is the an example that nowadays consumers, and in particular millenials, demand more than just low calories. They are looking for added value through functionality and this is the challenge that companies need to take into account.
The agribusiness giant is launching in the US an organic version of its sports drink, under pressure from consumers. He had to remove artificial additives from gatorade and change its manufacturing processes.
The vogue of bio enters the segment of energy drinks
PepsiCo has yielded to pressure from some of its sports customers by launching an organic version of Gatorade. Intended to promote endurance during sports practice, this drink is not in fact totally natural. It contains water, inorganic salts as well as artificial sweeteners , colorants and other adjuvants. To fit the bio mode, PepsiCo has adapted its recipe based studies and research conducted for two years, says Bloomberg. To get the certification issued by the US Department of Agriculture, the agribusiness giant needed to remove artificial additives used overseas and completely revise its manufacturing process by limiting to seven the number of its ingredients.
The organic version is sold a little more expensive
“We heard the message from the dressing rooms and nutritionists we work with that there is a growing interest in organic products among athletes ” said Brett O’Brien, vice president in charge of energy drink.
Bio version, called G Organic (organic) is sold overseas in three flavors: strawberry, lemon and mixed fruit. Its distribution is currently limited to linear of the Kroger supermarket chain where it is marketed at a price of 50 cents (40 euro cents ) more expensive than its non- organic equivalent in Gatorade.