FMCG innovation in a post Covid-19 world
As health indicators are slowly returning to green across Europe and many markets worldwide, there is more and more chatter about the return to normal, or rather to the so-called “new normal”. But what does it mean exactly for FMCG companies and their innovation strategy for the remainder of 2020 and beyond?
For starters, let’s keep things in perspective: a 3-month disruption to consumption habits, consumer behaviour, supply chain processes, health safety measures and regulatory environment, no matter how deep and unprecedented, should not have fundamentally affected the core of the innovation process, which typically spans over multiple quarters if not years in many companies. If a business took a knee-jerk decision to halt all innovation development, they are going to be in trouble now as they will need to make up for the lost time.
So, ideally, we should assume that you did the right thing and merrily went on with your market segmentation, consumer insights analysis, product R&D etc. in preparation for a launch, while adjusting your daily operations to the crisis, so as to be ready for launch when the worst is behind us.
What about launches that were planned for the second quarter of 2020? Well, obviously a lot of those could not be executed as planned or at all, as retailers stuck to the bare minimum of ensuring sufficient stock on shelves and did not have the luxury to list new products - not that they would have stood much of a chance anyway: as consumer behaviour showed in March and April, we saw a mass return to basic staples like pasta, flour and the infamous toilet paper. Shoppers just played it safe with products they knew and had little appetite for the discovery of novelties manufacturers had to offer.
If a manufacturer had some flexibility in their production and logistics process, this could however turn into opportunity: use that launch as a test platform for new distribution channels like e-commerce, direct-to-consumer sales, partnerships with food delivery services, etc. Making that product an out-of-store exclusive is in itself a powerful commercial tactic.
But as we’re now starting to see the end of the tunnel and the situation in stores is returning to normal, that ship has sailed and it’s time to think of what’s next. Despite all the talk about things never going back to how they were, most fundamentals won’t change: mouths still need feeding, houses still need cleaning and personal hygiene is -hopefully- still a thing. Does this mean manufacturers should just continue as if nothing has happened? No, of course.
Looking at some trends that have emerged or grown over the past 3 months, I would expect the following to have a relatively large and permanent impact on consumer behaviour in the future:
Safety will rise as a major purchase driver. The Covid-19 has revived our collective self-preservation instincts and consumers will be looking for products that guarantee a safe use and consumption, across both food and non-food categories. Safety was already a key driver or at the very least an indispensable hygiene factor in some categories, it will from now be of utmost importance.
Locally-sourced and natural ingredients will matter a lot more. Consumers will pay closer attention to what’s in what they buy. Just like we’ve seen a return of shoppers to local stores and local produce, manufacturers should adjust their procurement channels, use ingredients whose understanding does not require a PhD in molecular chemistry, and be vocal about it. The natural, organic trend was already a force to be reckoned with before Covid-19, and the crisis has supercharged it.
Ecologically responsible products will gradually become the preferred choices. The Covid-19 has brought with it a lot of questioning about our consumption habits and their impact on the planet. Consumers are now actively looking for more sustainable products. Greenwashing will not work: shoppers have gotten pretty good at spotting unauthentic “eco” messages and the backlash would hurt a lot. What manufacturers need are innovations that are making a true difference with responsible packaging, reduced use of finite resources and an overall environmental footprint that’s as low as possible.
Grocery e-commerce will come out of the shadows. For years, the online share of FMCG sales has been stuck in the single digits in pretty much all of Europe. But facing store access restrictions, the prospect of empty shelves and safety concerns, many shoppers tried online grocery orders for the first time in the past quarter. If the experience was positive, this will stick for many of them. For all the hype surrounding e-commerce in the past decade but never massively delivering for FMCG so far, this might just be the turning point.
It is still early days in the gradual easing of crisis measures. But while manufacturers should not read too much yet into the consumption indicators of the coming weeks as things need to fall back on their feet, they should definitely look to incorporate the above into their long-term innovation plans. The opportunity to learn from this crisis and to adapt should not be passed.
