Shifting tides in the Fast-Moving Consumer Goods industry
Unilever, Kraft Heinz, Kimberly-Clark, Nestlé and Diageo. Just a small selection of the heavyweights that have benefitted from the success of the fast-moving consumer goods industry over the last decades.
These companies have achieved success by leveraging strong retail relationships and driving down costs through mass production. But as consumer behaviours and habits shift towards the personalised products and subscription-based services that e-commerce is able to offer, these big players are faced with stiff competition. The question has to be asked; can the fast-moving consumer goods industry keep up?
The rise of e-commerce and products personalised through data
E-commerce has skyrocketed since the turn of the century, bringing access to new, more flexible production and distribution methods. With this comes demanding customers that desire instant gratification while having ethical concerns about the products they use. The fast-moving consumer goods industry has had to adapt to this new, hyper-connected world.
Increased connectivity has created many opportunities for fast-moving consumer goods companies. For example, greater access to customer data helps them better understand their customers’ purchasing habits. Using individual purchase data, FMCG companies can offer tailored promotions and services to their customers. Creating these types of intelligent offers can result in increased brand loyalty and boost sales by up to 74%.
FMCG growth slows as consumer driven products muscle in on market share
But it’s not all positive. Growth has slowed considerably over the last 15 years as consumers become wealthier and demand different products from those mass produced. Between 2012 and 2016, FMCGs reported annual growth rates of 6%, but adjusting this figure to solely focus on organic growth shows just 2.5% CAGR. The largest players have it worse at only 1.5%!
Meanwhile, direct-to-consumer delivery has rushed in to plug a demand gap. Fast-growing FMCG brands such as Graze and Dollar Shave Club have been able to disrupt by leveraging big data management. This results in a detailed understanding of the individual shopper journey and buying habits, leading to personalised recommendations and more direct offerings. The convenience and brand loyalty this generates is proving able to topple over the fast-moving consumer goods monopolies currently held by the heavyweights.
Leveraging data trends to innovate and grow
Subscription-based healthy snacks business Graze has been around for over 10 years. After 3 years, they boasted 100,000 subscribers and grew quickly from then to enter supermarkets and other high-street retailers. How did they grow so quickly? The answer lies in data.
As the company moved from digital to traditional distribution channels, they saw a market that was too large to ignore. Graze constantly asks their subscribers for feedback on their products vs. those of competitors and as a result the company sits on a database with over one billion ratings of global snacks. Off the back of this comes the ability to understand market demands, trends and spot opportunities early.
By combining this dataset with Graze’s product development and market research, Graze can target and focus investments better, understanding that their products will have an increased chance of success. This agility enables Graze to quickly alter products at every stage of development. For example, the group started manufacturing a triple pack of protein bars that underperformed and within six months they had altered the ingredients and relaunched the product as protein bites.
Customer feedback drives their next subscription, and an algorithm constantly tries to match consumer preferences with nutritional data to develop the subsequent iteration of products. As a FMCG and food processing company, Graze is shaking up the industry with data.
“Data has been at the heart of what we’ve done. As we’ve gone on, the complexity of the data has increased, but with that, our ability to use it to drive forward has improved.” – Andy Gibbs, Graze CFO
Acquire or compete?
This understanding of the power and value of data to drive decision making has paid off. Earlier this year Unilever picked up Graze for a reported £150m, with the group continuing to operate under the same management team. Key rival Proctor and Gamble has been busy making its acquisitions such as This is L and First Aid Beauty, largely due to their direct to consumer businesses; demonstrating the power of data to compete with established firms.
With these large, cash-rich, players acquiring smaller, more dynamic organisations it seems that there is a fundamental gap between the innovation powers of the super weights and the start-ups.
Healthy snacking is not new, and Graze was certainly not the first company to introduce the concept. Graze were one of the first companies to understand the value of their data. They were able to recognise that their data is just as valuable an asset as their recipes and manufacturing process.
By leveraging and integrating these intangible assets, they can develop a competitive advantage and deliver sustainable long-term value for customers. This understanding of their data assets led them to outperform a crowded marketplace and deliver long-term returns.