“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
2016 is promising a huge change for the virtual reality and will totally modify the market. According to the Super Data Research, the benefit from VR will reach more than 860 million of dollars during the year. Possibilities for the brands are multiples and some of these have already begun to benefiting from it.
Carrefour – Using the virtual reality to enhance the experience in-store
Carrefour is running an immersive experience across 228 hypermarkets in France, from 6 September until 3 October, making virtual reality widely accessible to its customers.
For the price of EUR3, customers can buy a cardboard virtual reality viewer. Using Carrefour’s virtual reality smartphone app, they will be taken on a journey through Russian mountains aboard a shopping trolley. The ride passes through five worlds filled with products. It includes an ice cave of fresh produce, an enchanted forest full of grocery and a futuristic world of high-tech. This is a fun initiative which should encourage positive interaction with shoppers, at an affordable price.
Oreo – Using Creativity and Imagination
Engage readers through integrating imagination and fiction into your VR experience. For example, Oreo created a 360-degree video that welcomes viewers inside the “Oreo Wonder Vault.” Once inside the vault, the video explains the magical origins of the company’s cupcake-flavored Oreo cookies. In the B2B marketplace, you may not be able to welcome viewers into “imaginary vaults”. Yet, you can use some fictional elements (and even humorous themes) to keep viewers engaged and entertained by your brand.
Merrell Shoes — Launching a New Product
When launching a new product, whether it’s shoes or new software, spreading awareness and getting the word out is key. Potential customers must know not only that your offering exists, but also how it solves their largest problems. Merrell Shoes leveraged VR when launching its new hiking boot, the Capra.
The company’s agency designed a VR experience called “Trailscape,” that took viewers on a challenging, dangerous hike in the Dolomites, in Italy, complete with an avalanche. The audience (virtually) travels to a set that is specifically mapped to the virtual experience. Finally, the campaign was successful in spreading awareness, capturing 12,396 YouTube views.
Everything is possible with the virtual reality and the future will be incredible! Innovation is everywhere and VR will help the brands to highly develop the experiential marketing in to the stores.
As most of you already know within the FMCG industry, retailers show a greater power. This high power reflects in a growing bargaining power that might be explained in different ways. Firstly in the distribution power both offline and online; retailers, owning thousands and thousands stores with different formats and warehouses, are a sort of “mandatory choice” for manufacturers in order to access to the final market. Secondly in the size. Indeed many retailers, nowadays, show a larger size than manufacturers. In this way they can spread their fixed costs over a greater range of outputs. Thirdly they have a higher financial power than manufacturers, since they can get fresh cash from consumers and use that cash to grow their business (e.g. investing to open new stores, to improve their online presence, to make more efficient their logistics, etc.). This “cash surplus” is explained by the fact that retailers get cash for final consumers in the last stage of the distribution channel and pay suppliers with an upstream extended payment with longer and more convenient terms (typically 90 days). This situation is a sort of a particular way of sourcing fund which facilitates retailers.
In addition they have access to million of data generated by consumers visits (offline and/or online) by getting access to million of data regarding their buying behavior that they can use to create their own product and selling strategies. Last but not least they launched their own “brands” (i.e. private labels) increasing, in this way, their distribution power. Moreover, regarding private labels over the years they modified their strategies, increasingly focusing on premium products and targets, especially on foods items (e.g. pasta sauces, fresh fruits, vegetables and snacking like Amazon did).
Indeed, if in the past private labels showed a very good price/quality ratio being around 30% cheaper than brands and 10/20% more expensive than discounters labels, nowadays, especially among traditional retailers, they show higher prices, differentiating their products claiming freshness, country of origin and taste (all essential attributes for food and beverage items as seen in the top 10 food trends).
Carrefour private label Reflets de France is local, fresh and premium oriented
The Power of brands: Innovation
The situation is different for other categories as personal care and home care, where brands seem still having a higher power. It is no coincidence that the two biggest worldwide conglomerate companies (P&G and Unilever) are increasingly divesting from food and beverage. P&G recently sold all its food business and Unilever shows more growth perspective within the Personal Care and the Home Care categories than the Food one. In a Nielsen (2014) report are listed the main reasons that might help to figure out the relationship between brands and private labels across different categories.
Below, it is explained why brands are still stronger than private labels in the personal care category:
High innovation rate: product in personal care (but i would also include home care) require higher investments than food and beverages. This makes harder for private labels being competitive, since most of their suppliers are still small and medium companies which don’t have access to the same assets and resources of manufacturers.
High product differentiation: brands still show a better level of differentiation than private labels. They still spend more money on marketing research than retailers. This implies that usually private labels tend to copy a branded item as soon as it will be rolled-out in the market.
Stronger brand awareness and equity: this elements still represent a point of differentiation with private labels. Indeed, consumers say in Nielsen (2014) researches that they are willing to spend an extra and premium price for shampoos because “it’s worth paying extra (Nielsen, 2014).”
Longer purchase and heavy promotional activity: the buying process for personal care and home care products (although specific and sporadic differences) is longer than other FMCG categories (e.g. edible products). Moreover, it is frequent and heavy the promotional activies and as a result lower the price difference between brands and private labels.
DIW econ Economic Bulletin (2011), The Power of Retailers, No 3
Nielsen (2014), “The state of Private Label around the world”, November
How the disruption in sustainable packaging can drive brand preference
Each second, 2 550 kilos of packaging carton is used in the world, it means 80 millions of tones every year.
The importance of sustainability in the decision
Awareness of packaging is tied to the daily lives of consumers in terms of disposal and use. Consumers understand sustainable packaging primarily in term of its back-end environmental effects and impacts (what happens to the packaging after using the product). It is the familiarity with and knowledge of this back-end impact that influence their decision. In 2016, 22% of consumers say that minimal and ecofriendly packaging is primordial when they buy a product. As they look to extend the life of the food products they buy, 81% of consumers say they would choose resealable packaging over non-resealable packaging, and more than half (54%) would pay more for packaging with added features, such as being resealable or portion controlled. However, food packaging recycling is far from a universal behavior, as just two in five (42%) consumers report recycling most of the food packaging they use.
Disruption in sustainable packaging is everywhere!
In order to help and encourage consumers to recycle their products, the French start-up Uzer had the idea to develop an intelligent trash: “Eugène”. Equipped with a scanner, Eugène can recognize the products discarded by their barcodes, and whether the user has to sort or not.
Roxane Group has already illustrated virtuous innovations in packaging: lightening the weight of its bottles, choice of 100% PET, or recent installation bottle collection points on supermarket parking. Cristaline now equips water bottles 50cl of a new cap called “Snap Click “. A cap easier to open, but also easier to sort due to the cap directly attached to the bottle. Finished the caps throw out anywhere!
The Fountain Yogurt, a brand of Yéo group (subsidiary of Sodiaal Union), specialized in the design and manufacture of yoghurt and fresh cream, has set up a drinking yogurt in Doypack format (See our article on this product). This environmentally friendly packaging reduces waste. The environmental impact is a reduction up to 40 % of plastic packaging.
To go even farther in this approach, two researchers of the U.S. Department of Agriculture (USDA) have developed a film made from a milk protein that can be eaten with the cheese. Which means that it may not be too long before we have a wrapper we can eat—one that’s also healthy.
While considerable progress has still to be made, consumers are more and more attentive to the packaging used for their purchased goods. Much better collective efforts are needed but progress is being made, the disruption in sustainable packaging has started.
DGCCRF controls of anomaly on fruits and vegetables have revealed an abnormality rate of 11.7 %!
For anomaly in fruits and vegetables, the main shortcomings concerned the marking of products ” price display default, absence or incorrect indication of category or caliber , absence or incorrect indication of origin, scales of rating default ” list the body control.
This Worldwide issue costs 1 000 billions $
The United Nations Food and Agriculture Organization ( FAO) estimates that one third of the edible part of the food for human consumption is lost or wasted worldwide. This represents 1.3 billion tonnes per year, which means more than 160 kg per year per capita . The direct cost of 1.3 billion tonnes of food lost or wasted is 1 000 billion dollars ( 143 dollars per person).
Food wastage takes place along the value chain
Food waste around the world takes place, according to the FAO, for 54% during the production, handling and storage stages. And 46% in the processing, distribution and consumption stages. In developing countries, the losses occur mainly during the production, transport and storage, owing to the lack of tools and sufficient and adequate infrastructure. In contrast, in rich countries, the waste is mainly owed to consumption. In Europe and the United States, the consumer is the main responsible of food waste throwing out short dated products. According to a 2010 study by the European Commission, the homes are the cause of 42% of food waste in Europe, neck and neck with the food industry (39%), restaurants and other food services (14 %) and the trade and distribution (5%).
The UGLY fruits and vegetables
The truth is these products are discarded due to anomaly in fruits and vegetables. This is related to the esthetic education we face when it’s a matter to fill our own cart in supermarket. Indeed, fruits ands vegetables are the more often discarded because of uncalibrated products, dull color or odd aspect. Hopefully, some retailers have already started the food wasting fight.
Intermarché, third biggest french retailer, used common sense to put these uncalibrated products on the spot. Their operation named “The ugly fruits & vegetables”, first allowed consumers to experience and taste these products through soup and orange juice.
Individuals are all concerned by food wasting global issues and wish to act more against it
After the success of this marketing campaign, they decided to push these products in store, allocating a dedicated space beside the calibrated similar products along with a special label on the checkout receipt.
These actions show that is possible to improve the retailers brand equity giving a social sense to marketing operations.
The supermarket is dead, long life to the supermarket!
While I was waiting the digital new upcoming innovations, I really thought that the supermarket was dead! But in reality, supermarket is moving faster than expected! Many consumers love having groceries delivered to their door, but there is still a huge number of shoppers that love going to the store and personally select their products. It is clear that the “digitization” of the store is becoming a key issue in many sectors of distribution and the Grocery retail is not being outdone. Several technologies and techniques are promising in the context of “digitization” of supermarkets, provided they are well controlled. Bellow, find the Techingrocery selection of the 15 most disruptive innovation to change the face of supermarkets as we know!
1. IBeacon Reinvents Proximity!
This technology uses Bluetooth transmitters. It locates smartphones or tablets customers and send them offers, discounts or contextualized information depending customer geolocalisation. This technology is driven by Apple but it is available on all Android devices ( from 4.3) equipped with a Bluetooth 4.0 chip. We can interact with the customer via the application on his smartphone. Platforms like Rover, Bealder or Beaconstream address this kind of personalized content. Here a short video to understand the IBeacon technology:
Why people are getting crazy with this innovation?
Brick-and-mortar retail stores are particularly excited about this technology. Location sensitivity allows physical retail to push deals and coupons to those nearby and heat map visitor concentration to track which displays are generating attention and which are being ignored. Enhanced traffic tracking and the ability to precisely target nearby users will bring to physical stores advantages once held only by online retailers. Target, the second largest general merchandise retailer in the U.S embrace this technology and started beacon implementation in 50 of its stores nationwide. But the mains groceries retailer leader as Tesco, Target, Walmart, Waitrose, Auchan seems to be enthousiast about IBeacon.
2. Improve your Experience with Augmented Reality Glasses…
The chain Intermarché ( Les Mousquetaires ) set test a prototype of glasses connected ( Wuzic of French origin ) , proposed by the Digitas agency. They allow the consumer to be guided to the shelves according to the list of previously entered races and to receive information on demand.
3. Or Skip the Glasses and Draw your Smartphone!
Ads Reality ( A.i.Solve , UK ) is a mobile application to highlight products or retain customers and analyze data. Another app ‘ Interactive Environments ” plans advertisements on very large screens or specially equipped shop windows to display images in augmented reality.
4. Kitchen Connected
Be connected to your supermarket from home! This remote device allows the consumer to add articles to his shopping application through the barcode or by vocal recognition. Amazon Dash, hiku by chronodrive, Pikit by Carrefour or Api by Intermarché want to take this innovations wave and introduce the day to day of their customer.
The main 3 reasons why you should provide this service to your customers!
According to an internal survey of Hiku, 69 % found it very convenient. In addition, 77% would recommend it to a friend or relative.
New Chronodrive customer spend on average 40 minutes on the internet’s first order, this decrease to 16 minutes for regular customers and less than 5 minutes for Hiku users.
The Kitchen device own a scanner for barcode products as well as an integrated microphone which use voice recognition. In the test, 70% of requests was made by voice!
5. “Everything Bar code”: Soon a new Standard!
Digimarc and GS1 US are collaborating to expand their barcode around the world. Printed everywhere on the product, the invisible global bar-code allows a faster collection of products in the cashier line. This increase the efficiency of the store but it’s not all. The printed code can be combined with 2D codes or serial number allowing authentification, direct marketing or redirection toward information, photos, vidéos ect…
6. Electronic Labels
On the supermarket shelfs are emerging IT solutions , such as Nutri Info, for developing recipes. The tool is based on a database of all ingredients, salt contents , sugar, fat, additives, allergens … On a radius of sale , the system allows users to edit labels with the composition as if it were industrial products.
7. Connected Labels to Push Promotions
Based on NFC (Near Field Communication ), it allows the consumer to get its smartphone product information, to shop and to enjoy discount coupons. It’s also a solution for supermarket with pickupstore services to help the employees save time during the preparation.
8. RFID to track each Step of your Supply Chain
RFID makes its way into the distribution , especially for critical sectors , such as meat, requiring foolproof tractability. RFID tags are affixed to the packaging as on pallets . They capture and provide information that can check during all stages of the distribution chain without the possibility of hijackings or incursion. It remains to miniaturize chips and optimize their interconnection with a remote communications.
9. Tracking Customer Buying Journey
Publicis Shopper ( France ) tracks the customer buying journey (in opt- in). They recently won two marketing prize (Atedem and POPAI) with “Share a Coke” campaign in supermarkets about shopping experience in-store of Coca cola. Same in UK with Ditto for Shoppertrak.
10. Measuring the Traffic Flows Instore
Bumbee Labs (Sweden) has people positioning systems. The IOPS application ( Indoor outdoor positioning system) measures the flow of traffic in malls or public space.
11. Best before Date Management to Reduce Wastage
Checkpoint developed a new system based on RFID label technology which help stores to limit their food wastage while making money. Mostly used on premium product due to the price of RFID labels, the solution allow the real-time updating of the stock after being scanned on the cashier line. An inventory of soon to be expired product is created and the shelf manager can use it to run some promotion to push them. According to checkpoint, The bêta version succeeded in decreasing loss from 35% and increasing sales from 7%.
12. LocalEyes & Mobeye Mission your Customers to Help You
These app allowing consumers to some accomplices to be paid by the marks so they took pictures on the location of the marks, on prices displayed on the juxtaposition of competing products , etc. – A solution already adopted if tested by Danone, Heineken.
13. Robots & humanoid Are Coming!
We Robots ( Attraktion company , Austria) have 3D sensors, and a display with keyboard . Mounted on wheels , they move independently and offer customers practical assistance : map of the store special requests on keyboard , etc.). See also Sephora -other models.
14. Wipro controls Your Shelves Filling
The indian company Wipro Technology proposes an automated system to control your shelves are well filled. In this purpose they use a robot similar to an Ipad up on a gyropode which reviews regularly each shelf. It detects if a product is missing to trigger a replenishment, misplaced products are target and the information is sent to the shelf manager to replace them. It could also allow to the brands like Nestlé, Danone ect… to monitore their product placement from the headoffice, but this will surely be depending the retailer…
15. Toshiba Invents the Instant Cash Checkout
Based on the use of three 3D cameras, the machine identificate firstly the customer, then scans the whole cart. Each packaging is identificated helped by 500 differents characteristiques dots to allow this performance.