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Today’s Consumers Don’t Value “Cheap” – They Value Ethics, Quality and Fair Price.

Business News
Today’s Consumers Don’t Value “Cheap” – They Value Ethics, Quality and Fair Price.

As a recruitment firm in the FMCG and Food sectors, we are in a unique position that allows us to gain a deep insight into them, one that often stems far from solely the recruitment angle.

Often we are required to work alongside both HR departments, as well as department managers and we are observing first-hand, the current challenges that firms with these sectors are facing, and how they need to drive change.

It is this insight that led us to create our latest whitepaper; the Vision Shift Report.

You only have to look at the media to know the uncertain times that the food and FMCG industries are facing; the result of the European Referendum has led to much uncertainty for brands, retailers and ultimately, consumers. This ambiguity has led to a ‘war of the aisles’ between supermarket chains and brands as we see shelf space increase for own label products, but we are yet to have the ability to predict exactly how leaving the EU is going to impact the price of our baskets.

Brands are finding themselves under mounting pressure from retailers; the ‘Big Four’, in particular, are blaming Brexit for rising prices on the shelves and this escalation, along with a paradigm shift in consumer tastes and unflattering media coverage, has left many firms seeking ways that they can maintain customer loyalty.

It is hardly a surprise that own-label is on the rise as an industry, as we already know that the majority of consumer are driven by price and in-store offers. Once considered to be substandard when compared to branded products, and aimed at low-income customers, own-brand items are now the preferred choice; however, the type of products that have seen the sharpest increases in own-label varieties have been cereal bars (15.1%), frozen fish (3.4%), sweets (3%), cake (3%) and wine (1.9%). With supermarkets now heavily investing in new product development, a vast range of own-brand items can be found in-store, consistently creating further competition for brands.

Last year, a YouGov report publicised that consumers believe “there isn’t much difference between leading brands and supermarket brands”, and this can be put down to three core factors, quality, price and ethics.

To put this into perspective, even Waitrose, a store renowned for its affluent perception, have had to create own-label lines in order to compete for consumers that had been lost to the European discounted stores. This goes to show that even the ‘well-heeled’ customer base are not immune to being pound conscious.

As mentioned previously, we have noticed three distinct driving factors in the popularity of own-label. We would argue that the number one factor is quality, and a changed perception in own-label products has meant that there is no suspicion surrounding the quality of own-label produce A study by Nielson in 2014 revealed that more than 70% of consumers in the UK think that the quality of own label items has improved.

Lidl and Aldi have implemented clever marketing strategies, by embracing the mistrust around their food and its origins, raising their profile and putting the claims to bed in an extremely transparent way – a tactic that shocked the entire industry into action. Since this bold move, we have witnessed several retailers grow their product range to include both value and luxury product ranges, securing a broad appeal.

However, as the Brexit negotiations continue, we are seeing a question mark appear over the quality of food being sold in the supermarkets. For example, Brexit has created an opportunity to increase the import of American meat (currently banned under EU law due to the pesticides, additives, growth promoters and various processes involved), and doing so will encourage UK farmers to be allowed the same controversial techniques.

As the public becomes increasingly educated and aware about nutrition and quality, they will strive to seek out the products that meet their requirements, we predict that the rumoured imports and changes to British farming will receive an unprecedented public backlash.

The second factor is price; in the aftermath of the Brexit decision, many shoppers are seeking out deals and opting for the products that will save them money, namely own label items. Recent findings show that in a bid to cut back on food bills, 48% of shoppers would choose own label items. However, the irony is, that now that there is no stigma associated with these items, supermarkets can command higher prices for them; of course, there is another factor involved with the element of own label.

The final driving force to be discussed is ethics; today’s shopper is concerned with the welfare and morals of the items that they purchase and consume. This change has been acknowledged by both brands and retailers, who have either expanded their ranges as a result (ie, Gluten free, dairy free), or have assumed an ethical stance behind their lines to nurture the new attitude, and this stance usually comes hand in hand with increased costs.

An example of this is the Morrison’s Milk for Farmers campaign in 2015, a response by the supermarket giant to the milk price protests. The Milk for Farmers range gave consumers a chance to buy milk at a price that was inflated, but it also came with the guarantee that the extra cost was going back to UK farmers.

The moral trend is still expanding, with popular hard hitting documentaries such as Conspiracy and What the Health? being released, consumers are being encouraged to question what they know about the food they are eating and the impact that their choices are having with regards to welfare, the environment and their health.

What retailers and brands need to learn, is that paying lip service to the movement will not work in their favour; Tesco came under fire after it became public knowledge that their ‘farm’ ranges in-store, were nothing more than a marketing ploy, and many of the products came from overseas. It is well-documented manoeuvres such as these have led ’conscious’ consumers to be wary of established firms, disgraces such as the one above, and the horse meat scandal has led to public outrage, where loyal customers have felt mis-led and mis- sold too.

These instances have led to a rise in interest of food provenance; there has been a spotlight shone on the origin of our food. As our integrity with regards to food ethics grows stronger, so does the demand for ‘authentic’ produce, and this demand has seen an increase in home-grown food brands appear in the market, filling the gap that retailers have ignored for so long.

Brands and supermarkets must align themselves and their products with these values rather than relying on transparent marketing strategies. Customers will be attracted to firms that offer reasonable prices that are reinforced with ethical justification; in our research, we found that more than 50% of shopper’s value place of origin of items, just as important as the price.

At The Sterling Choice, we have long stressed the need for transparency in the food sector; brands need to understand that it’s the lack of transparency that is forcing customers to shop elsewhere. The price war is an outdated concept, the era of ‘deal-hunting’ is over, customers are now largely aware that these so-called ‘deals’ often entice them to overspend; a report by The Money Advice Service showed that the majority of shoppers find supermarket deals too complex and led to an average overspend of £1,200 annually.

Brands must acknowledge and act on these values if they want to continue to be successful, the rise of social media means that businesses are publicly at the mercy of their audience and any mishaps plastered over social media can cause irreparable damage. Brands now have the opportunity to innovate and transform their offering, and our Vision Shift Report highlights insights that could drive change and challenge the outdated ‘price war’ mind-set. Today’s consumer wants quality, ethical, affordable produce, whether hats own-label or branded.

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