- Industry Type: Education, Health, Food Processing
- Author: Andrew Newby
- Service Area: Advice
- Date: 20 Jul 2011
The 2011 Australia Food and Grocery Council (AFGC) Highlands conference has come and gone and left behind a feast of insights into our current and future food landscape.
Wiley was among the industry players who attended this information buffet and director Andrew Newby serves up an overflowing plate freshly supplied by the food industry’s leading minds.
This year’s conference theme was Winning Tomorrow’s Consumer and it soon became evident that retailers and manufacturers can no longer rely on the traditional use of clever advertising and promotions to win over the consumer of tomorrow. The new challenge for retailers has less to do with communicating to people but rather focuses on the driving need to connect – or more precisely create a platform for transparent and relevant interaction – with their customers.
While retailers are gaining a better understanding of today’s consumer by analysing historic data captured through use of reward card programs, the ongoing challenge is to understand tomorrow’s consumer – the so-called smart shopper who is making choices and developing shopping habits based on a vast range of inputs.
According to George Pesutto, media director at Roy Morgan Research, who discussed the shifting media landscape and changing media repertoire of consumers, tomorrow’s consumer spends a lot of personal time watching television or on the Internet, with one in three Australians chat about food products online. When eating out we like to eat Chinese, Italian or Thai, but we like to buy Australian food.
Tomorrow’s consumer is less conservative than past generations, has a positive sense of self and is health conscious, which, in food terms, means we avoid alcohol and carbonated soft drinks and prefer to eat additive-free and low-fat foods.
Patrick Medley, managing partner of IBM Global Business Services, informed us that future consumers are digital natives. Research conducted by IBM revealed 59 per cent of some 2000 people surveyed in Australia rely on their family and friend’s online conversations for product information and reviews and only 12 per cent of them trust retailers. He also noted a change in shopping processes, with people buying more frugally, for need only, and that the shopping process has become more fragmented (more frequent, less items at a time and less predictable).
Erik Peterson, managing director of AT Kearney’s Global Business Policy Council, commented on the ageing population, tagging it as an ‘age-quake’ and, though he forecast the population would stabilise and even decrease in the future, he predicted that 93 per cent of the population will live in urban areas and almost half of the population will be living under severe water stress by 2030. Water will dictate human health, economic opportunity and geopolitical stability, all of which would impact on the food supply chain.
Peterson told us to consider the transformational events – geopolitical, economic and natural – that have recently changed the world and to prepare for fundamental shifts in the global economy which would inevitably impact on global consumption. By 2016, China will be the new super-power, superseding America, although the US will remain in the top three joined by India. He added that markets will be defined by consumers in emerging economies.
He went on to describe four ways to engage the emerging consumer:
- Enhancing the in-store experience
- Creating an explosion of consumer touch points
- Expanding the use of social media but with content designed as a two-way interaction between producer/retailer and consumer.
- Introducing customer-driven supply chain and inventory management i.e. pulling stock on demand, rather than pushing stock not wanted.
Peter Burgen of Woolworths said that over 90 per cent of consumers are promiscuous with their shopping habits. The power has shifted to the consumer and retailers need take themselves out of their marketing decisions – it seems the customer is still always right.
INNOVATIVE CONNECTION POINTS
A highlight of the conference was the presentations from manufacturers and retailers on the innovative approaches they are using to connect with and win tomorrow’s consumer.
Technology provides a platform to connect with thousands of customers at the same time, as demonstrated by Glenn Cooper, chairman and director of marketing at Coopers Brewery. He provided an outline of how Cooper’s has made a unique connection with its consumers in order to compete against other brewing giants. The brewery’s website encourages customers to join the Order of Coopers which is a society of master beer drinkers and brewers born of the love of Coopers. Once submitting yourself to the Order, you recruit your mates and form your own Local Chapter. Coopers Brewery works with the publicans to ensure the head of each Order is looked after with discounts and other incentives when visiting the local pub.
Sanitarium’s CEO Kevin Jackson stated there is a clear convergence of food, healthcare and pharmaceutical trends and products. He said Sanitarium is strengthening its connection with the consumer not only via online social technology, but also through its newly-opened Sanitarium Sanctuary – a health and wellbeing ‘village’ in Sydney’s suburb of Pyrmont, supported by a web portal that gives customers direct access to a complete health plan from multiple health professionals.
Woolworths is working on getting to know its millions of customers better through the Everyday Rewards Card program which tracks what customers buy and how they respond to promotions. This enables Woolworths to be targeted in its communication with that customer.
Looking at examples from overseas markets, Japanese convenience retailer Lawsons has segmented its operation in direct response to its consumers’ needs, creating different stores themed around health, parents, discount shoppers and so on. In this way it continues to tailor its business to appeal to different customer groups. European retailers are promoting themselves as being consumer advocates based around being frank about price and environment – a ‘your values equal our values’ approach.
Smartphone technology is also being widely adopted for store locations, promotions and price comparisons. British supermarket chain ASDA is taking this further, promoting product transparency with its ‘chicken cam’ and ‘cow cam’, showing how its chickens and cattle are handled to comply with animal welfare practices and legislation.
Technology is not all about competition, there are emerging apps demonstrating how technology can provide more open and useful information. Manufacturers struggle to fit all the legislated information on labels, while preserving adequate space for brand promotion. They may find some relief with the GS1-developed smart phone app Go-Scan, which was launched at the conference. The app scans the bar code of a product to provide accurate data on ingredients and nutritional information (see News, p.8). There are similar web-based sources of information but there are challenges arround sourcing accurate data.
THE SOCIALLY RESPONSIBLE CONSUMER
Retailers are using a multitude of approaches to win over the consumer. IGA’s strategy is to promote ‘how the locals like it’, which governs the way the independent retailers in this chain do business (see p.15). Central to ‘being local’ is providing channels for local suppliers and producers, localised store formats, unique offerings that meet demands of the locals serviced by that store, and championing the local community through fund-raising and donations.
Coles’ promotions have centred around the Channel 10 television success story MasterChef which encourages consumers to cook more often and be creative with their cooking. The Feed your Family Curtis Stone promotion provides a how-to guide to select, prepare and cook using the ‘best ingredients’, which are of course available at Coles. The no-added hormones at no-added cost to you promotion of Coles meat is a response to consumers wanting to know what is in their food (as already identified, this is a strong requirement of tomorrow’s consumer).
The discussion on pricing and private brands was led by Silvestro Morabito, CEO of IGA, who claimed the supermarket price war everybody’s talking about does not exist, it is in fact an intelligent marketing war. He reckons that the discounting that’s happening on a few staple items, like the $2 milk, is not affecting the profits of the two majors. IGA regularly surveys a sample of 2500 lines from its rivals and between 70 and 90 per cent of these products are in fact seeing a steady price increase. The discounting action is being reinforced by a strong drive to introduce higher margin private-label products across most categories.
As a presentation by Tom Sherlock, supply chain strategy leader of IBM Global Business Services, highlighted, manufacturers face escalating future competition from retailers, not only from the expected increase in the percentage of private labels sold in supermarkets, but also the shift from plain packaging to home brands that closely resemble the attractive packaging of branded products. He stated that Home Organics, a retailer’s home brand, is currently America’s largest organic brand. In this case the retailers themselves have become the competition.
After years of poking fun at the heartless and shallow world of marketing and advertising, the joke is now truly on the retailers. Consumers will no longer be conned by the smoke and mirror mind games of traditional marketing and great ads. The world at large is calling for a fundamental shift by which retailers are driven to make real efforts to connect with their customers – retailers must become real-tailors (customising interactions for consumers that resonate with the individual’s wants and desires) in order to survive and thrive in tomorrow’s consumer market.
About the author
Andrew Newby is the Business Development Director at Wiley and can be contacted on 1300 385 988 or email firstname.lastname@example.org.
Share your challenge
Wiley launched our What’s your Food Industry Challenge? at the Highlands Conference. We are stepping up and connecting with our industry peers about the challenges faced in daily business and how we can shortlist, workshop and improve them. Register at shareyourchallenge.wiley.com.au and share your challenge.
This article was published in Food & Drink Business Magazine.
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