FMCG Faces Its Watershed Moment

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Glance at any FMCG-related news from the last few weeks and you’d be hard pressed to spot any significant differences to this time last year.

Hand-wringing about new upstart competitors, promises of a more measurable digital marketing model and talk of game-changing innovation on the horizon abound. The sense of déjà vu would be funny if it wasn’t all so concerning.

Around the world, FMCG brands are battling sluggish growth rates as rising household costs create a far more discerning customer base. 2018 is a crunch year for FMCG marketers – and here’s why agonising industry thought pieces and empty promises to do better ‘soon’ simply aren’t enough anymore.

Instore and onscreen rivalries

Competition remains fierce, not just among brands themselves but also from external players.

Supermarket bargain own brands are already an issue for FMCG and it only looks like this will continue as discounters such as Aldi and Lidl ride a wave of recent success. The discounter market is expected to rise by an extra £8.6 billion over the next five years, and much of this could be taken from the pockets of FMCG brands. Economic uncertainty and tightening household belts could see an even sharper drop-off in FMCG sales this year, as nearly half of consumers admit they would switch to cheaper own-label alternatives if their weekly shopping costs were to rise by as little as 3%.

The discounter market is expected to rise by an extra £8.6 billion over the next five years, and much of this could be taken from the pockets of FMCG brands.

FMCG should also beware Amazon’s ambitions. Last year’s Whole Foods acquisition provided a brief glimpse into the future, and the ecommerce giant has already dipped its toe in the own-brand market with food and clothing lines. All signs point to more Amazon own-label products beginning to feature by the end of 2018. When this happens, brands that have chosen to partner with Amazon rather than strengthen their own channels will see sales suffer as the ecommerce giant rigs its digital shelves in its own favour.

Of course, the FMCG nightmare scenario is an Amazon acquisition of a discount retailer – the combination of a bargain supermarket’s own-label products and logistics with Amazon’s traffic and power could be seen as a death knell, not just for FMCG brands but the traditional big four supermarkets too. An Aldi takeover seems unlikely in 2018, but when in recent times has Amazon’s expansion been anything other than rapid – and at times unexpected? With competitors gaining ground in supermarket aisles and online, brands must become more ambitious in expanding their own digital sales channels – before it’s too late.

We’re all sick of the digital ad model

It would be far easier for FMCG to take a more adventurous online tone if the digital marketing model wasn’t broken to begin with. All sides are becoming bored by a digital ads model that devours spend with little return – customers don’t remember them and most find ads intrusive, while brands are slowly waking up to P&G’s realisation: ads as we know them are largely ineffective, so why not save the money?

While these early signs indicate that 2018 could be the year that online FMCG marketing receives a much-needed shakeup, I can’t see real change on the horizon until we put old debates to bed. No, viewability isn’t an effective measurement and even in-vogue attention-based metrics aren’t the answer.

Brand awareness means almost nothing when it comes to marketing FMCG online – you may grab attention for that flashy digital ad, but you’re still effectively crossing your fingers and waiting for the customer to remember your product the next time they browse.

With brands now coming around to what consumers have known for years, 2018 could be the year that ads become useful. Technology to include add-to-basket, buy-it-now or incentive opportunities to digital advertising is already out there. It’s a model perfectly suited to the replenishment-reliant FMCG market – all that’s needed is great creative to support it. The benefits can be tremendous: brands receive more accountability linking ad spend with sales, while customers are met with ads that provide a convenient purpose rather than an eyesore while they browse online.

Innovation Illusion

In a year when FMCG needs to focus on getting the basics right, incessant talk around innovation could lead many to distraction. Investing in ways to harness new tech like Voice Activation or VR may win PR plaudits in the short term, but will it really shift more product in 2018?

Brands are investing in this tech, yet mass adoption is still some way off. There is an argument that finessing now in order to capitalise later is smart, but FMCG in particular has a long way to go in nurturing their relationships directly with consumers – costly endeavours that endear you to the few while doing nothing for the many don’t seem like a wise use of spend to me.

Even when this technology does take off, past habits will dictate FMCG success – people will shout at Alexa for ‘loo roll’, not a brand name, so any AI will rely on previous online purchase history in order to make decision. Brands need to grab virtual real estate on favourite lists now, or risk falling off the radar once technology such as voice activation becomes mainstream.

These threats shouldn’t come as a shock to most, but that’s surprising in itself.  FMCG marketers have been treading water for some time and while sales may have remained steady for most, risks have been left to escalate.

However, it’s not all doom and gloom. Mounting frustrations and aggressive competition are the ideal prompts for an industry to re-evaluate itself and make the changes required to succeed. But those changes need to come this year – or these issues, concerning enough on their own, will converge to spell real danger for FMCG.

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