Think BR: Are you ready to compete?

Any experienced shopaholic will be able to relate to the adrenaline rush that comes with digging out a bargain, and that sensation is filtering deeper into the world of FMCG.

Budget retail outlet 99p Stores is repositioning itself as a ‘one stop shop’ for consumer food purchases with the introduction of a frozen food section to its stores.

This may seem like a minimal threat to the major supermarket brands, but think back to the impact of new retail models like Amazon all those years ago; It’s worth shelving our apathy and considering the ambition of value stores to steal a share of the FMCG market.

Consumers have never been more frugal in the way they fill their shopping baskets with value products.

Around 55% of all FMCG products sold are on promotion, according to a SymphonyIRI Group report but the price of an average shopping basket is failing to replicate amid stifled volume sales of 5.1%.

This "rocketing" between premium where it counts, and value where it doesn’t, shows where the 99p store has a real part to play in the future success of retail.

For premium brands such as Olay in the beauty sector there’s an obvious disconnect between brand communication and a presence in bargain stores. Selective distribution is crucial to the personal care sector where brand image is the key to building the equity required to sustain customer loyalty.

But as the price war, and the push for value offerings, heats up in the supermarket aisles and new one-stop shops emerge so the challenge to mainstream premium brands within the FMCG sector grows.

Established players such as Ariel, Kellogg’s and Heinz are under threat from economy brands across all categories, and as a result they risk a dive in their value perception due to the competition from their cheaper counterparts.

In a world where differentiation in the established FMCG categories remains challenging and consumers consistently find it difficult to notice any meaningful functional product advantages, price is an absolute point of difference.

Whatever FMCG brands want to achieve in their marketing output, they need to recognise that people tend to judge quality more emotionally and less rationally, so price position has real significance.

It seems inevitable that more and more of the industry’s established mainstream premium brands will find themselves in ‘value recognised’ outlets such as Aldi or Lidl. Both of these outlets saw their market share grow 26.1% and 11.5% last quarter.

This and the blossoming ambitions of the 99p Stores are a sure-fire symbol of how the consumer is choosing to spend their money.

The brands that will ultimately triumph are those that embrace this as a genuine opportunity, especially since these discount outlets have done a great job of making their proposition feel ‘normal’.

The opportunity they offer is to increase the accessibility of premium brands as well as bringing the brand closer to these savvy shoppers.

The big question for brand owners is how to sell a premium product at 99p while keeping your trade terms intact, still making a profit and not devaluing the brand?

It is worth noting that most major brands already have proven strategies for this, honed in developing markets like India and China where prices are much, much lower than 99p.

Here brands have gained distribution and reached millions of new consumers by downsizing format, so rather than selling a 200ml bottle they sell a 50ml sachet instead.

In the end, brands need to think innovatively to compete in what is the discount landscape of tomorrow as mums and families continue to deal with tighter purse strings.

Ultimately, it could take as long as a generation to call time on this era of economy. In the meantime, FMCG brands will need to be nimble, adapt to a new opportunity and move to where their consumers are.

Liz Wilson, chief executive, CMW

This article was first published on brandrepublic.com