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.
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 highqualitative 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.
Focus on Drone delivery: The next disruption in grocery
Pizzas could arrive from the sky in New Zealand and perhaps soon in Europe. This is not science fiction but reality. Indeed, Domino’s Pizza Enterprises has announced its partnership with Flirtey, leader in drone deliveries, to launch the first pizza deliveries drone service in the world. The two companies celebrated their alliance by organizing a demo in Auckland, New Zealand on 25 August 2016.
This event marks the end of the approval process by Flirtey and the beginning of this experiment from a Domino’s restaurant in New Zealand.
Pizza delivery drone becomes a reality in New Zealand
New Zealand was chosen for this experiment because of its regulation, which allows companies to use delivery drones. According to Don Meij, Domino’s Group CEO, the company’s growth in recent years has increased significantly the number of deliveries and Domino is constantly seeking to innovate in pizza home delivery. The use of drones as a means of delivery is designed to complement Domino’s current fleet in the field.
They will include control systems and GPS online. The Pizza chain invested heavily to equip their restaurants with various delivery vehicles, such as electric scooters, electric bikes and even pizza delivery robots (DRU), the latest innovation.
For supplier it doesn’t make sense to have a 2-tonne machine delivering a 2-kilogram order. The DRU DRONE is the next step in Domino’s expansion in artificial intelligence field. It will enable them to acquire new knowledge and adopt new technologies in the business..Drone delivery allows to expand their supply zone by removing barriers such as traffic or accessibility and to provide faster and reliable delivery system.
Drone delivery could be soon possible in Europe
The first test flights will take place this year after summer in New Zealand. Domino’s will offer discounts on shipments by drone in the early stage of the test to perform later more substantial deliveries in terms of size, weight and distance, depending on the initial results and the Customer feedback. The group announced the possibility of extending the experiment to its six markets, namely: Australia, Belgium, France, the Netherlands, Japan and Germany.
Drone Delivery: The next disruption?
Except for security matters, we think Drone delivery allows companies to reach more rural customers and to reach urban customers in a much more efficient time. Moreover delivery cost would be cheaper and eco-friendly. This year, we saw many companies investing in drone delivery, among them, retailers such as:
Amazon in UK: The government permitted them to conduct drone delivery tests
7-Eleven in U.S: The convenience store chain managed a trial with drone delivery for the first time in the country
Google in Australia: Delivery drone has been tested in order to reach consumers in rural area
Did you know?
Domino’s Pizza is ready for the disruption
Domino’s Pizza makes your local pizzeria a loser, half of the company’s U.S. orders are digital. Its stock hit an all-time high in 2016 because Domino’s Pizza has aggressively courted Millennial stomachs by upping its online game and allowing young people to order via texts, voice recognition, connected voice and also tweets. Traditional pizzerias lost 21% Market share during the past decade.
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.
Freshly is your new healthy meal prepared by chef and weekly delivered
Freshly is addressing the problem that lot of household are facing nowadays. Cooking a fresh homemade meal is becoming a luxury! First, you need to decide what you want as dinner. Then going to your closest store, select and buy fresh groceries. Cooking and, in the end, cleaning up. People are trying to look for different solutions to save time such as picking up grocery products at metro stations and Ooshop meal box.
How it works
First you need to select how many meals per week you need. There are four options: 6, 9, 12 or 21. Then you select which dishes do you want to be shipped choosing from depending from the a weekly basis menu. It consists of main entrees and breakfast. Once you have filled in your details and dietary preferences your subscription is activated.
Freshly deliver simple, classic and traditional foods that are healthy, make you feel better and taste delicious. By a selection of nutrient and fresh ingredients the outcome is an outstanding balanced meal that tastes delicious and have the right amount of calories. The philosophy is paleo-inspired. This means that by eating natural and healthy foods the body is able to burn fats easier, build immunity and cleanse toxins. Ingredients chosen are primarily: high quality proteins, gluten free, carbohydrates, heart-healthy fat.
“to make you happy, healthy and more free to pursue your passions”
Freshly has achieved it working towards the fulfilment of four areas:
Convenient. Every meal shipped makes the customer saving at least one hour in shooting, cooking and cleaning
Healthy. A selected selections of fresh ingredients
Delicious. Starred chef at your service
Sustainable. Only recyclable containers are used
The advantage of this new service is that it solves the problem to arrive at home and find a fridge full of high quality meal ready to be eaten. Despite the many food delivery company who deliver single meals at high shipping fees and not possible controlling food quality, Freshly offers a new and easy way to live an healthy lifestyle. The business is quickly expanding and today is possible to order it from more than 20 countries.
Carrefour Eat&Shop: Focus on fresh healthy food for now or later.
Opened since end of June in Milan, the first Eat & Shop Carrefour Express with a compact sales area of 250 square meters is a new proximity style in Europe. The format is dedicated to fresh food & drink lovers, to reach out especially the need to search for different fast and tasty meal solutions, but with a specific shopping experience:
People can’t resist to drink freshness:
One of the new point of this format is definitely the impressive Juice Corner, whose goal is to present the freshness and focus on quality of the store. To meet all customer needs, smoothies, centrifuges, yogurt and flavoured waters are chosen and prepared on site. The sale takes place both in the shop and on the road directly through a special showcase for immediate purchase.
Customers can compose their own meal and eat local & seasonal foods:
In the adjacent area, customers can choose ingredients for a salad, a fruit salad or a yogurt, to be eaten in the store or takeaway. The shop includes also a fast food section offering a daily assortment of seasonal and high quality products. For traditionalists, a bakery offers warm bread and pizza and there is even a gastronomy zone with local cheese and meat displayed in a modern style.
Convenient service and equipment make shopper stay longer in the store:
The shop offers a dining space with tables and chairs open daily from 8.00 to 22.00. There is also free high speed Wi-Fi, a charging station for appliances and home delivery service.
The grocery part presents a large food range, mostly the ones we presented in our top food trends report (Bio, vegan, 0%, gluten-free and takeaway products). Other particularities present in the store the “bottle shop” with beer, spirits and special wines including biological ones. The non-food area is relatively small, offering personal care (Fragrance, body care…) and household cleaning products.
Carrefour adapted the convenience format to the disruption
This new Carrefour concept meet the growing needs for convenience, speed and fresh food in urban areas. As millennials are permanently looking for meal solutions, but accompanied with a careful selection of fresh and healthy products to be consumed quickly.
Carrefour is launching its first television advertising campaign for Bio food!
From 20 March, Carrefour launched its first TV advertising campaign, especially dedicated to the Bio food. It follows the movie manifest “I’m optimistic ,” released earlier this year. The new spot will be available in digital and press. It presents all of the organic supply of Carrefour ( food, textile and cosmetic ) and echoes of the last Nielsen survey that places like Carrefour first general distributor in France for organic products.
See the Carrefour Bio food advertising:
A pioneer in the organic food
For 20 years , the distributor is engaged in the marketing of organic products. As a pioneer in the democratization of these products, Carrefour launched the first offer in 1992. Today, Carrefour offers 5 000 references of organic products, including 18 000 in Carrefour brand. In addition, in late March 2016, Carrefour have 6 outlets in Paris.