We know the digital sphere is having a profound impact on consumers but how can the food industry shape their businesses to capitalise? At the latest Millennial 20/20 conference and exhibition, held in London last week, just-food heard the digital issues taxing the minds at FMCG companies operating in the UK, including Kellogg and Arla Foods.
That the consumer sector is evolving rapidly – and not necessarily in a linear fashion – is widely accepted. The rise of the digital sphere is changing how consumers shop, what they’re buying and when – and food is not immune from this highly-fluid consumer landscape.
However, it is one thing accepting the market is changing and quite another to be able to harness that change and prosper. Last week, just-food attended the latest Millennial 20/20 event in London to hear how consumer goods companies are trying to tap into the digitally-savvy consumer. One afternoon panel caught our attention in particular, it featuring Kellogg and Arla Foods, as well as Diageo, the world’s largest distiller, plus pharmaceutical giant GSK.
Over an insightful 30 minutes, the panel discussed subjects from the prospects of the direct-to-consumer channel and the use of social-media listening to the rise of voice technology and how to capture more consumer data. Here are our top takeaways from the session.
E-commerce and “true” convenience
One of the benefits of e-commerce – in its broadest sense – is convenience. Consumers can make a purchase when they want and have it delivered to a range of destinations.
In the food sector, however, other considerations can come into play, with product substitutions, shoppers still wanting to see what they buy – particularly with regard to fresh food – and a range of delivery charges trumping the work some grocery retailers have put in to make the online shop as convenient as possible (think initiatives like early-morning/late-night delivery slots and click-and-collect stations at stores).
The rise of services in the UK like Amazon Prime Now, through which shoppers in select locations can have a range of food and non-food delivered to their door, is looking to more closely hit that consumer demand for convenience.
However, even with Amazon Prime Now, there are caveats. Delivery within one hour “in eligible postcodes” carries a fee and, while a two-hour delivery window is offered for free, it is subject to a GBP40 (US$56) minimum order.
At the Millennial 20/20 event in London last week, Richard Gibbons, the director for global e-commerce customer development at Kellogg, said “the most exciting opportunity for me from an e-commerce point of view is e-commerce convenience”.
However, he argued: “True convenience with a shopper – not the version we see now in the market, which is the kind of Amazon Prime Now, GBP40 minimum basket, delivered in one to two hours. That’s not e-commerce convenience. E-commerce convenience is small baskets within 30 minutes, paying GBP1, GBP2 delivery fee.”
Gibbons cited the example of a business in the US and suggested the absence of that type of model in the UK could present an opening for a food retailer that has only really dabbled in online grocery in a limited fashion.
“There’s a great business out in the US achieving that called GoPuff, delivering to 20 cities and scaling rapidly. I’m waiting for the model to appear in the UK. I’m surprised it’s not here already, given some of the major retailers have such a vast store presence and they’ve not leveraged that footprint to enable true e-commerce convenience. It’s kind of left the back-door open for a retailer like The Co-op; they could be launching into the market with something quite interesting. For me, that’s a huge trend that’s going to really shake things up in the e-commerce landscape.”
It is the cost of the last mile of delivery that has likely stymied any retailer interest in this model, especially when even a company the size of Amazon is levying fees. However, convenience is one of the macro trends shaping consumer behaviour in the UK no matter the sales channel and the FMCG sector will be monitoring the likes of GoPuff closely.
How viable is direct-to-consumer?
The continued – and rapid – growth of grocery e-commerce in the UK, combined with the tough trading conditions in serving traditional, bricks-and-mortar retailers, is leading a number of food manufacturers to investigate whether selling directly to consumers could be an option worth pursuing.
In theory, the model has its appeal, not least in the consumer insight a manufacturer could glean if it dealt directly with the shopper. For all the talk heard at industry events from manufacturers and retailers about working closely together to better understand the consumer, the reality often falls short of the ambition.
Unsurprisingly, it was a talking point on the panel, with Kellogg’s Gibbons, as well as peers at dairy group Arla Foods and Guinness-to-Smirnoff supplier Diageo, chewing over whether and how FMCG companies operating in the UK could build a viable direct-to-consumer business.
“We’ve built a direct-to-consumer platform, not really with the objective of that platform being the most profitable part of our business but the kind of platform that will be engaging to shoppers and enable us to understand the latest trends. The trouble is it is very, very expensive to run these operations,” Gibbons said.
“We had a business in the US – which is still live at the moment – called Bear Naked Custom, which is a customised granola platform. Fantastic in terms of the data we can mine through that platform but the reality is as a commercial organisation the actual operation of that was not scalable. It was very, very labour intensive. It’s very, very difficult to drive scale through these direct-to-consumer platforms to really truly be able to mine the data that you would like to. That makes heavily reliant on our retail partners.”
Arla Foods, the European dairy giant behind brands like Lurpak butter and Castello cheese, is looking closely at direct-to-consumer. Steve Millard, the head of e-commerce and digital at Arla’s UK business, outlined the co-op’s thinking.
“Part of the challenge we have as a company is we have a massive own-label portfolio and from a direct-to-consumer point of view, that simply doesn’t work because there are margins that come into play. We have P&Ls we need to balance,” Millard said. “The way we’re looking at approaching it is not to have a standalone direct-to-consumer platform because you don’t quite get the scale you need. You need to invest a vast amount of money into digital marketing and marketing to make it work.”
How ever FMCG companies test – and potentially launch – direct-to-consumer models, it is likely there will be a limit to the size of that part of the online channel.
As Jerry Daykin, head of digital media partnerships at Diageo, told the Millennial 20/20 event: “You have to think of the consumer end-point as well. Many brands would love to sell direct-to-consumer and have all that data. I can’t imagine a world in which everyone wants to buy everything from a different retailer. It’s not a great experience.”
The desire for data
As the panel discussed, one potential benefit of a direct-to-consumer model is improved access to data on consumers. Many a business grumbles about being overwhelmed by data throughout different parts of their organisation but the appetite for data on the effectiveness of digital marketing campaigns, on how and when consumers shop and on what they buy and why shows no sign of being sated.
“The biggest challenge for us in terms of data in the e-commerce environment is access,” Gibbons said. “Of course, we’re very, very close to our retailers but we don’t own that data, they do and, particularly with things like voice [technology], the need for that data is going to become more and more pressing for brands and more and more challenging to access.”
The challenge of getting access to data is a common theme at many digital marketing and e-commerce conferences. In London last week, Arla’s Millard rose another issue with data – how a lack of it (or being unsure of which data to use) means it is difficult to know how effective a digital marketing campaign has been.
“In our organisation, we’ve merged the digital marketing side with the sales element of the business. We’ve done that to create a 360 [degree] approach. One of the major barriers when it comes to building on our digital capabilities and driving that digital agenda is data acquisition from a digital media perspective and demonstrating effectiveness,” Millard explained. “There isn’t one unified version of the truth. How are we going to measure it? How are we going to measure and demonstrate the effectiveness of any voice interaction or initiative we create?”
Using “social listening”
The panel at the Millennial 20/20 event also discussed social listening. The rise of Facebook, Twitter, Instagram and the like gives FMCG businesses an ability to inform a greater number of consumers about their brands but it is a two-way street; digital strategists need to be able to use the platforms to find out what people about saying about their products and, if necessary, react.
Companies can use tools to monitor social-media platforms for comments and shares as a benchmark for consumer sentiment, helping to deal with complaints and in areas such as product development.
Anoo Mehmi, global digital content strategist at GSK, set out why she believed social listening can benefit her business.
“We believe now that social listening shouldn’t just inform creative – what are people saying about us and new product ideas – but it should inform the bridge over the gap between what customers expect of us and what we’re delivering. For us, that’s an important part of social listening – to try to deliver authentic content to match our customers’ expectations and then measure that increase in sentiment change. Studies now show that percentage increase in sentiment relates to revenue growth.”
Millard said Arla uses social listening to help it develop its marketing content but also raised another way the co-op uses the tools. “We have used social listening in the past to determine where there are problems with a particular batch. There are applications in blockchain that could do that for us within logistics and supply chain but social listening is a great tool which enables you as a business far more than just in your content generation,” he said.
Diageo’s Daykin, however, was circumspect. “It’s definitely a really big indicator with things go wrong with your brand; often you’ll spot it there long before it will show up in some more traditional market research. I’m always a little bit cautious that, when you’re looking at social listening, you understand who you’re listening to.
“In the UK especially, the vast majority of social listening is dominated by Twitter because it’s a public social network. Twitter is a big platform but is it truly representative of all our customers? With social-media listening, we like to tell ourselves this is people telling their true feelings about our brands but actually it’s people managing their external feelings to their friends to try and say popular and cool things a lot of the time.”
Voice shopping and food brands – does the technology work?
The rise of voice-activated devices in the home, notably in the US but to a lesser extent in markets including the UK too, has got digital strategists talking.
Some industry watchers have held up voice as something of a game-changing technology, with devices like Amazon Echo and Google Home removing yet more steps on that digital path to purchase that is the focus of marketeers in FMCG.
However, while there are some significant businesses in non-food that are starting to talk up the growth of voice and their strategies to harness the technology, what about food?
On the Millennial 20/20 panel at least, right now, the jury is out.
Diageo’s Daykin argued voice is “a terrible experience for consumers to shop with”.
“A lot would have to change before that actually becomes how you would choose to do your shopping lists. You’re probably more threatened by subscription services or fridges that know when they’re empty. At the same time, there are interesting opportunities. In a way, it might play into the hands of bigger brands that are already established and are higher up in the rankings and searches already – but I’m not sure we know yet, we’re experimenting and trying a lot of different things with voice and chatbots as well, where we can do so responsibly.”
Kellogg and Arla echoed Diageo’s mix of interest and caution.
“Voice is a big challenge potentially for FMCG brands,” Kellogg’s Gibbons said. How to think differently in that space, what that means in terms of executions, brand campaigns, interrupting the shopper, influencing decisions: it’s a whole new playing field for us to understand – and understand quickly because it’s growing very, very quickly. In the US, over 20% of homes already have a voice assistant so it’s going to be here before we know it. We need to know how to win and what the tactics are we need to deploy.”
Arla’s Millard described voice shopping as, at present, “horrifically clunky” but said the co-op was exploring the technology.
“If you think about the flaws, just thinking about dairy, within e-commerce if you search for milk, you’ll probably find in the region of 1,400 products. There is nowhere near 1,400 milk products and less than halfway down page one, you’ll see Dairy Milk chocolate and other products with milk in the title,” he explained.
“With voice, with the way the algorithm works, that’s going to be a major barrier for us. More to the point what it doesn’t really take into account is what the shopper’s habits are, what their food intolerances what may be and when their next shopping cycle is going to be.
“The way it’s primed to do it is to deliver the thing at the top of the list when you search for it off a retail platform. It doesn’t really work. It’s not particularly intuitive. From a food inspiration point-of-view, from delivering something truly meaningful to the consumer, how do we start to think ahead of the curve and integrate when it comes to things like recipes? Arla’s products will more often than not form part of a recipe. How do we make it a lot smarter that people can order an entire recipe or a group of recipes at a time and do their meal plan for a week?”
Even from a four-person panel at one event, it was clear the pace of evolution in the digital sphere, while presenting opportunities, is also throwing up a lot of questions. It is also important to remember the vast majority of sales are still made in more traditional retail settings. The savvy company needs to stay abreast of the changes in digital while still effectively serving its core markets.
However, that change is occurring rapidly, so businesses that are not testing and learning now could, if and when shopping online or on mobile or via voice becomes truly mainstream, be left behind.