The impact of COVID-19 means Australian shoppers will be looking more closely at price, promotions and value moving forward. So what can your brand do to mitigate this?
A new report by IRI – 'FMCG In The ‘COVID-Quarter’ & Preparing For Recession' – predicts that shoppers will be eliminating, postponing, decreasing, or substituting purchases moving forward.
“Some consumers will still seek premium products during a recession, but we have seen a reduced willingness to pay a price premium for better quality in 2020 compared to any of the last five years," IRI said.
The report adds that additional frugality will propel the embracement of private label.
"Over half of shoppers have already chosen store brand/private label items more often in the last month to save money, or because of brand availability issues," it said.
“The convergence of several factors—including increasingly value-conscious consumers, retailer differentiation and profit-optimization objectives, and enhanced producer operating capabilities—will all play a role in propelling the private brand market."
A majority of shoppers are seeking deals, regardless of brand affinity.
Innovation & brand awareness crucial
IRI notes that there are learnings from how brands responded during the last recession - in 2008-09. Those that rebounded strongly had a number of things in common.
“Most importantly, they used the recession as an opportunity to double down on advertising and innovation,” it said.
It pointed to Budweiser as a ‘recessionary winner’, with sales up 23% organic growth of 3% between 2008-09. IRI credited continued investment during the economic crisis as key to this growth.
IRI recommended focusing on four pillars for cultivating growth in a recessionary period:
- Sustain R&D/NPD efforts, and streamline range.
- Use pricing to maintain and strengthen brands – leverage ways of boosting value beyond price cuts.
- Invest in marketing to bolster ‘mental availability’ - advertise authentic attempts to be ‘part of the solution’ and to enhance permissibility of (premium) indulgences.
- Use data and research to make high quality decisions
Everyday treats and indulgences, such as ice cream, biscuits, alcohol, coffee and savoury snacks can exist as ‘antidotes to reality’ at a time of a crisis or recession.
"Regardless of the overall economic climate, premium and super-premium iterations of these products remain more permissible versus other higher ticket prices associated with, by way of example, consumer durables," IRI suggested.
"Marketing communications should dial up the permissible indulgence provided by these affordable and necessary luxuries."
Click here to view IRI’s CPG and Retail Insights to Manage the Impact of COVID-19
IRI is an Associate Member of the Drinks Association.