BERLIN: Brand owners in the fast moving consumer goods industry should make greater use of shopper marketing, data tracking tools and integrated planning to thrive in Europe, McKinsey has argued.
The consultancy outlined several obstacles facing FMCG firms in the region, firstly citing retail consolidation, as shown by the fact the top five operators in France and Germany now take 80% of their respective domestic markets.
Similarly, "value-driven" chains like Aldi, from Germany, and Mercadona, in Spain, are gaining market share, a shift further encouraging the growth of own-label, which now takes over 30% of sales in many nations.
In response, brand owners must consider developing a range of products solely for the discount channel, for example using smaller pack sizes to allow reduced prices, as well as bargaining more determinedly on any promotions.
More broadly, McKinsey stated it was vital to continuously track the return on investment from trade spending, adopting a uniform approach which can be replicated across accounts, banners and countries.
Elsewhere, concentrating field sales teams on highly profitable outlets, or those promising substantial growth, is key, alongside building a price architecture based on rigorous insights and analysis.
Shopper marketing and category management were additional recommended strategies, for example tailoring product assortments for specific stores, like selling smaller packs targeted at "impulse" buyers visiting convenience stores.
"Such initiatives create win-win situations between FMCG companies and retailers and thus establish a basis for longer-lasting partnerships that go beyond annual purchase-price negotiations," McKinsey said.
Taking an international view of pricing could also help manufacturers gauge the possibilities available in various different countries, according to the company.
Equally, brand owners should create dedicated teams to work with individual retailers, with a structure reflecting that of the chain in question, and, where appropriate, assuming a multi-market purview.
Turning to marketing, McKinsey warned above-the-line activities and below-the-line executions at the point of sale too often "act in isolation", rather than offering consistent messaging throughout the purchase funnel.
"To enable this greater effectiveness, the planning process should ensure that sales insights about retailer and shopper needs are taken into account along with the marketing organisation's perspectives," McKinsey said.
Data sourced from McKinsey; additional content by Warc staff