Rolling media coverage is focused on financial woes in Australia as the economy hits recession, yet confectionery companies and retailers can do much to make the most of the situation.
Word on the ground is that confectionery manufacturers and petrol and convenience outlets must pay attention to price at this time, especially when it comes to product price cutting, if they want to protect brand value once the market becomes more buoyant.
Also important is that brands don’t recede from consumer awareness but take time to research the new consumer, what opportunities are available in the shadows, and the importance of NPD, Australian made, product differentiation and sustainability.
The recently released AACS ‘State of the Industry Half Yearly Report 2020’, prepared for AACS by Convenience Measures Australia, shows that after a strong 2019 with growth of 2.1 per cent, the strongest year since 2016, confectionery has had a tough start to this year with MAT now at -0.9 per cent.
While this isn’t dramatic, the past quarter decline of 10.6 per cent is, with some key confectionery segments being significantly impacted.
The largest two segments, chocolate bars and sugar confectionery, remain in growth of 0.2 per cent and 7.3 per cent MAT respectively. However, chocolate bars have declined by 7.2 per cent over the latest quarter.
The segment most adversely affected is gum and medicated, with a 29.8 per cent decline over the past quarter while chocolate blocks grew at 5.8 per cent over the same period.
IRI Worldwide Lead Consultant Justin Nel says a recession could set a dangerous precedent in terms of price one-upmanship where manufacturers think the best way to get through it is to decrease pricing, which is directly opposite to IRI’s view.
“Use price to maintain brand,” he said. “Don’t get dragged down to a price war, because it will take you a long time to recover.”
The reason for this is that when the recession is over, it will take that much longer to rebuild not only a business but also consumer perception of a brand if significantly devalued.
Mr Nel says it’s advisable that companies spend on research, because the consumer has changed, which means that companies need to understand their priorities and behaviours, streamline their range, put their best foot forward, not underestimate the importance of NPD and capitalise on digital marketing.
He emphasises that brands that offer a small additional indulgence have opportunity because consumers are looking to treat themselves with some indulgences during trying times and that range, rationalisation and innovation are themes of the day.
IRI Lead Consultant Jan-Willem Verstraten says he suspects that in the past, promoting ‘Australian made’ on packaging has done little to trade up a product.
He believes, though, that at the close of this pandemic, ‘Australian made’ on packaging will be much more relevant for products because of the perception of health around the claim.
“The ingredients in the product could be cheaper to make and have the same effect on the consumer that the idea of ‘organic’ has,” Mr Verstraten said.
Nielsen emphasises that local origin has become an important accelerator in brand/product decision making during Covid-19 and will remain a major choice driver into the future. Much of this has been due to interrupted global supply chains, as well as the need for local transparency and trust of local ingredients and sourcing.