IGD Insight and Impact Event
One of our directors, Clare Otridge, attended the Insight and Impact event hosted by IGD on Wednesday. This event was a gathering of some of the most strategic thinkers in the industry, looking at the challenges that the grocery sector is facing to win over shoppers today and tomorrow. The event was for category, commercial, customer insight, marketing and supply chain managers to gain an understanding of the latest trends, innovations and framework to meet the needs of the UK shopper during one of the most challenging times faced by the industry.
Clare summarises the event below and we look forward to sharing some of the deeper insights and thought leadership specific to our clients and contacts over the coming weeks. Please get in touch if you have anything you would like to discuss.
What you need to know about consumers
Dan Gillet, Shopper and Insight Manager (IGD) provided stats that demonstrated the IGD shopper confidence index (a study undertaken monthly with an IGD consumer panel of 1000 since 2014) remained low and that despite a general trend towards food getting less expensive – more so in the UK than the rest of Europe - the falling value of real wages means that food is a significant contributor to bills in 2023. The average consumer is now £4,300 worse off than in 2021 and spending 26% more on food than they did 2 years ago.
Price remains the driving factor for many consumers – though there is mounting industry interest in ethics. Things like carbon and air miles are less important to consumers than packaging and waste as they feel removed from the issue, believing that it is the responsibility of companies to assume responsibility for these issues. However, a status quo remains in this area as those who care, care more and those who didn’t care, care less – so the ethical balance and opportunities for marketing based on ethical and sustainable credentials still remain.
Something that all of the industry players are seeing is that the money saving tactics that have been adopted in the cost-of-living crisis are not something that will disappear on recovery of the economy – the perma-crisis has borne a generation of shoppers for whom savvy spending habits have become ingrained and everyone from growers and suppliers to retailers must be prepared for this long-term behavioural change.
Ian Morley of Procter & Gamble demonstrated that their audience was broken into three sectors – struggling, managing and comfortable - and gave examples where P&G had responded to shifting patterns. He also outlined that understanding consumers presents opportunity for those who look for it. P&G were able to capitalise on more people staying in by innovations in washing up liquid, whilst increase in dog ownership meant NPD in the pet control space, and rising energy prices meant that there was an opportunity for a washing enhancer to take away the musty smell of clothes that had been air dried indoors. He urged the room to adopt a growth mindset and be prepared to fail…then gave a brilliant example of where P&G missed the mark.
Brands must add value or be traded down. Consider that Pampers nappies are sometimes 4x as expensive as own brand nappies. However, Pampers is selling ‘a good night’s sleep’ through leak-proof technology and superior innovation, which is why it is a premium product. There isn’t a parent out there who wouldn’t at least consider the trade up with the promise of a good night’s sleep! Move the conversation away from price and onto value.
Debbie Robinson CEO of Co-op discussed the benefits of a customer loyalty scheme. The question was posed that customers are understanding the value of their data and if they are giving it to you they expect a tailored approach. Knowing the supply chain like we do, I can’t help but have concern that the operational effectiveness of the food supply chain will be unable to keep up with the real-time data feed that consumers are used to, and there is potential for disappointed customers should tailored offers be out of stock or promotions unavailable due to a lack of integrated data. The M&S Sparks card loyalty scheme is an interesting example of this, members of our team have commented on the lack of availability of offers they have received and promotional offers that do not seem to be tailored to them, and these are comments we see repeated frequently when conducting research in this area. Where real-time data and customer tailoring is not taking place, these loyalty schemes lack differentiation and will not keep customers returning for more. It seems that, for now, Amazon shopping might have set unrealistic expectations when it comes to customer data management.
Debbie also had advice on stock – she said that in order to appeal to shoppers, Co-op had adopted an approach in the smaller stores where they pair the top seller with the category newcomer – rather than the second best seller. This way, shoppers who were coming in 2-3 times per week would feel they not only had the product they were looking for but had a new and exciting product presented to them and providing them with options. She did not, however, address how to overcome the disappointment shoppers may feel when they found their favourite new item had then been delisted from their local store!
Health was a key part of the afternoon, IGD took us through figures that supported a particularly wide ‘say – do’ gap when it came to healthy eating. Most people feel they are eating well, however only 1/100 actually eat in accordance with the Eatwell guide. 82% of consumers admitted to being somewhat in denial about their health and 62% of UK adults are now classed as overweight. The UK ranks 29th on global life expectancy, which is falling.
Consumers prioritise taste over health – this is important for brands and suppliers in the healthy eating space, where 51% say taste is the most important and only 24% say health is the driver of their choices.
All of the industry representatives on the panel about health promoted the concept of consumer choice as being paramount to maintaining demand. However, if there has been a rise in unhealthy behaviours that is directly correlated to the rise in choice, the argument that retailers are supporting consumers in their own health goals by improving choice is contested?
What you need to know about the industry
The industry is running to standstill (James Walton, Chief Economist IGD). There has only been one occasion of price deflation since the early 70s and as the very nature of the food supply chain and the associated lag in prices falls behind the faster recovery of energy and other areas that have seen double digit percentage rises – food is becoming the statistical outlier as other prices fall. 82% of manufacturers stated they had absorbed costs and it is now becoming a real situation of ‘pass on or perish’. Protecting shoppers from the inflated prices is stalling investment in sustainability, waste reduction, and consumer health that will have impactful consequences in the long term.
As the prices have increased, volume of production has decreased. Production currently sits 3% below where it was before WW2 and the population has grown since then. Volume recovery will be a painful but essential process that will bring its own new battlefields in retail and manufacturing – IGD predicts savage fighting for the base as well as a fight for the middle class consumers.
The four horsemen of the apocalypse when it comes to food – Ukraine war, Climate change, Brexit and UK Farming challenges are impacting the industry’s ability to react.
How the industry is utilising data sources is changing. Steph Cullen, Circana, pointed out that the industry traditionally spent 80% of it’s time looking back and only 20% forward. While the balance is more like 60/40 now, the real benefactors of effective data usage are those that can forecast effectively, and this relies on much more integrated data sources. 70% of sales will be digitally influenced by 2027 and the grocery industry must look to close the loop to understand which channels are effective when it comes to knowing what is working. It is also important to have an understanding of adjacent category performance to better understand relationships such as that between fresh and frozen.
We saw some interesting figures on pipelines and manufacturing – there was a clear difference in the positive scores as you moved down the pay grades from C-Suite and across roles within organisations. For example, when scoring their NPD pipeline, those in insight roles scored it at 9.5 , while those in sales scored 5.2. Suppliers and retailers must make sure their strategic alignment is a priority and they are getting the fundamentals right when it comes to meeting deadlines and nurturing their relationships with buyers. When it comes to the shop floor, retailers must focus more on the subconscious shopper than the conscious one. Clarity and simplicity, location of product and messaging and utilising tech to gain attention are all going to be key in ‘the shop of tomorrow’. Shopium noted that there will be a greater convergence of brand marketing, shopper marketing and sales.
The grocery supply chain is in a 4 way tug of war between affordability, value (as perceived by the consumer), sustainability and health – Hugo Mahoney, Samworth Bros., advocates for nudge activity to influence shoppers and a win/win approach as taken by Samworth Brothers when it comes to addressing their health targets. Samworth Brothers have evaluated and reviewed the top 150 selling products in Tesco and adapted the ingredients without sacrificing taste – saving over 50bn calories over 4 years. It’s not all positive, though – a cottage pie prepared with ‘healthier’ ingredients not only costs 28% more to produce, it was also met with reduced consumer demand compared to the 'normal', less expensive alternative. Brands cannot make all products healthy. Hugo pointed out that the ‘average’ product lines sell 30x more product than the healthy alternative.
To understand where brands can maximise listings, IGDs noted that they must look to aligning their products with retail targets and be ready to adapt. Products must be aligned to how, what, where and when retailers are measuring if they are to get a permanent listing.
Finally, Jason Tarry, CEO of Tesco and President of IGD, called for the industry to collaborate more closely, using the Covid response as an example of this. However, while the war on price, provision and people exists, it will be hard to win hearts and minds of the grocery sector.
So, how do these align with our own research findings?
It was really interesting to attend IGD and have our own research findings from our Insight with bite consumer trend tracker corroborated at such a high-profile event.
When it comes to a focus on health and wellbeing, in the current climate 60% of the consumers we surveyed have reported that they are focusing more on cooking from scratch and eating more fruit and vegetables, with 63% stating that they are increasingly trying to eat more healthily. However, when asked to score their diets out of 10, these desires are not always reflected. Consumers self-reported an average median score of 6.4/10 for achieving their 5 a day, 6.7/10 for the nutritional variety of their diets, 6.6/10 for the perceived healthiness of their diets, and 5.8/10 for how sustainable they felt their diets were. It is clear that the desire to increase the amount of fresh produce within their diets, improve their overall nutrition, and make healthier, more sustainable choices is there, but brands, retailers, and producers need to take action to support consumers in turning these choices into reality.
Similarly, our findings with regards to sustainability here is often a lot of assumed knowledge about what consumers want when it comes to the fresh produce available to them, and brands are sometimes at risk of channelling all their marketing budgets, and efforts into areas that are not of prime importance for consumers.
This also comes down to the way brands talk about their produce. Whilst supporting locally grown and British produce is within the top 3 factors of importance to consumers when thinking about what influences them to make a purchase, food miles as a consideration are way down with just 9% stating that this is important to them. Think about how you present your produce, if items are British grown and produced, get your messaging right and talk about this in the context of supporting local farmers, not in the context of reducing food miles. Aligning product positioning with the consumer mindset could be the difference between a customer making that purchase or not.
Similarly, sustainable packaging, carbon neutrality, water usage, and B-Corp status are not featuring heavily for consumers when it comes to the factors that influence their purchases. That’s not to say that they’re not important, consumers simply expect brands to be making sustainable, ethical choices as standard, not marketing these as a USP. It is all in the messaging, and these are not hooks for consumers, but are contributory factors to wider purchasing decisions when the key factors, price, promotions, and being of British provenance are on the money.
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