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FMCG groups adapt in Europe
LONDON: Unilever, Danone and Nestlé are all adapting their pricing strategies and product portfolios in a bid to reflect changing shopper needs across Europe.
Unilever, the FMCG giant, is now selling a pack of 40 teabags for only £1 in the United Kingdom, while simultaneously introducing a face cream commanding £120 in Harrods, the high-end London department store.
"While middle classes in the emerging world are aspiring to so-called Western standards of living ... Western Europe is starting to see an economy that's taking us to the developing market dynamics, which is quite concerning," Pier Luigi Sigismondi, Unilever's chief supply chain officer,
told the Financial Times
"Particularly in Europe, consumers are poorer than they used to be, and feel entitled to be - and they are going to be that way for a while," he continued. "The pressure on my shoulders is not insignificant."
L'Oréal, the cosmetics manufacturer, also recently launched a hair dye developed for less affluent Eastern European shoppers in Germany. It added a bowl and applicator brush, but the cost was still 30% lower than is typically the case.
"Women aren't stupid," Jean-Jacques Lebel, president of L'Oréal consumer products, said. "It's not good enough just to say, here's a cheap product. Here we say, you can apply it with a brush and, with this product and this application, you will get better coverage."
Danone, the dairy specialist, derives around one third of its sales from Western Europe, an area which Pierre-Andre Terisse, its CFO, argued has essentially "stopped growing".
"What's happening in Europe is obviously a call for us to have a look at our cost base and try to be a bit more challenging," Terisse said.
"This is something we have to manage and to handle proactively, by adjusting our portfolio in pricing terms, by adjusting it as well in terms of offer, and by adjusting our costs."
Nestlé, the Swiss food group, has employed one simple technique in response to such conditions. "We as a company have opened half an hour earlier every day," Paul Bulcke, its CEO, said.
More broadly, the firm has rolled out smaller packs of its Maggi "cook in a bag" roast meat dishes in southern European markets. It has also found loyalty to branded items is higher in the US than Europe, where own-label lines have proved popular.
"Dollar stores in the US are fast growing," Arnaud de Belloy, Nestlé's head of distribution, said. "But they are different from those in Europe because they have more products and are more obsessed by the $1 price point."
Data sourced from Financial Times; additional content by Warc staff, 15 August 2012
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