What mega trends are set to shape the global FMCG industry of the future?
I believe that the world is changing. In past centuries we saw that the producer of goods was the market leader, and this then shifted to the suppliers / shippers of goods overseas. Today we are living in an era where the consumer is the leader of the market.
Living in the information age (internet, digital and social media), acccess to FMCG products and services is availabe to consumers in seconds. Comparative data with scientific, financial, medical, utility, costing, availability, and more importantly company reputation and image analysis is readily available, allowing for easy comparison of all options on the market. Thus consumer choice remains the top factor governing the FMCG industry.
Another key factor is the pricing of FMCG products in the market, which should be in line with the buying capacity and priority choice of consumers in a particular market. This is tricky indeed, but requires a very careful analysis of consumers.
In a nut shell, the following can be classified as the mega trends for the global FMCG industry for the future:
- The reputation management of the FMCG company (as a top priority)
- Pricing (market level and global compatibility)
- Sustainability for quality (both for goods and services)
- Continuing renovation and innovation for all product lines
- Responsible sourcing
- Access and availability of product details to the consumer in a transparent and ethical manner (be it ingredients or scientific reasoning); compliance with regulatory or mandatory industrial law alone is not enough.
- Strategies which prioritize volume sales for top line and bottom line achievement will lose in the long run, and companies competing for winning consumer trust and product of choice will win.
A lean business model, as excessive costs incurred in production are ultimately paid for by the consumer – and the consumer is aware of this
What role are big data and social media set to play in the future of FMCG?
As previously mentioned, the company reputation is the top priority. We live in an information age where news travels faster than can be comprehended or responded to by most organisations. Consumers will go for a good company image rather than a bad company image. My 12 year old son knows in the super market that we will not buy certain brands because they have certain ingredients in their products, which are bad for health or other reasons.
Social media is a highly interactive medium, engaging people from all walks of life and all age groups, nationalities, and gender. From Dad to Mom and from Grandpa to grand daughter, everyone has an opinion, and these opinions have a lot to be shaped by social media.
Social media is now a double-edged sword and can make or break your business with one single negative campaign by a single dissatisfied consumer (due to any reason – justified or otherwise).
Thus FMCG companies with good vision must continue to invest and engage consumers, opinion makers, and the general public to keep them informed of their product line and to provide answers to concerns regarding ingredients, scientific facts and other related factors which are frequently challenged and debated. Excessive amounts of anything is negative, but a constant and balanced presence on social media is a must.
What strategies will middle ground retailers employ in order to fight back against the current dominating trend of price discounters and high end retailers?
This is a debate in which even governments are involved, debating small and medium retailers versus mega super markets and price discounters.
I believe that this has to do with a careful analysis of the consumer shopping habits in any market. For example, in the US people are accustomed to shopping in mega malls, with discounts and time spent, whereas in India, Pakistan, Thailand or other Asian or African markets, consumer shopping habits also depend on distance and travel – thus going to a small retailer nearby is easier. Getting home delivery via the internet is becoming increasingly popular in developed nations such as the US and China, but again, in many developing or underdeveloped nations, the small and medium retailer is still in good focus for consumers (primarily for reasons of convenience to the local consumer).
Good strategies of large FMCG maufacturers or marketers do focus on both primary and secondary sales channels for price dicsounts, and have to take good account of small and medium retailers, as in most developing economies, the SMEs account for more than 75% of overall sales, a fact which cannot be overlooked.
How will increasing consumer awareness of health concerns affect the FMCG industry?
The FMCG industry has to adopt responsible sourcing and utmost compliance to health regulations, both for their employees and their consumers. The value chain (both upstream and downstream) has become a critical factor for all FMCG manufacturing companies, and it is crucial to remember that providing limited information about your product ingredients will not hide undesirable information, as there are other information mediums available to consumers.
Health concerns surrounding the ingredients in every FMCG product is a very current issue. There are debates on GMO-based versus organic products in F&B, there is debate over food colours and preservatives, levels of pesticides and insecticides, and even packaging of PET, Plastics etc., and the use of colours, batteries and so on in children’s toys.
Companies of today‘s modern times must engage the following principles:
- Transparency in diclosure (for ingredients)
- Scientific reasoning must support your ingredients. Companies with in-house and third party R&D validation for ingredients are better off; this is not an excess cost, rather a necessary investment into R&D for quality assurance
- Addressing health concerns on labelling (transparently) is the need of the day, particularly for the food and beverage industry, and it is advisable to adapt to this scenario sooner rather than later.
What is the outlook for manufacturing and production within FMCG?
As the world population grows, so does the FMCG industry. The global recession has had an impact to varying degrees, with the majority turning to a “need to have“ concept versus “nice to have“.
I will summarise the outlook as follows:
Operationally: The outlook for the FMCG indstry is challenging yet positive for those who are willing to invest in sustainability, excellence, transparency in dislosure, responsible sourcing, continued renovation and innovation, lean structures, reputation management, and outward market analysis, paying attention to consumers‘ opinions and evaluating the market economy before launching new products. Moreover the dynamics of the US, European, Asian/ Afro Arab and Latin markets are entirely different from each other— balancing your product with the market economy, peoples‘ employment situations and GDP, as well as supply chain optimization and prioritizng peoples‘ needs are essential for success.
Geographically: in known human history of 10,000 years, the Greater China region (as the „middle empire“) , and India, Pakistan and Bangladesh as well as South Asian Countries, Persia (Iran) and the far east sub-continent accounted for two-thirds of the world‘s market economy for more than 9,500 years. History is now repeating itself; the FMCG companies who embrace change and adapt to and engage with the emerging markets will thrive. Resisting these changing opportunities is no longer an option.