Παρασκευή, 28 Σεπτεμβρίου 2012

MINI-SIZE ME: CONSUMER GOODS SHRINK IN VOLUME TO ADAPT TO CRISIS

Mini-Size Me: Consumer Goods Shrink In Volume To Adapt To Crisis

Nestlé invents the "Popularly Positioned Products" - (Nestlé)
By Laurence Girard et Cécile Prudhomme
LE MONDE/Worldcrunch
PARIS - For months, consumption has been stagnating, and purchasing power is not improving. Will the French, like the Spanish, start buying their yogurts one by one instead of in packs as a way to face the global financial crisis?
Remarks by Jan Zijderveld, head of European operations for the Anglo-Dutch conglomerate Unilever, on the "return of poverty" to Europe had an explosive effect. He said in an interview that his company had begun to sell smaller packets of laundry soap in Spain, each packet good for only five loads of laundry.
Will this new sizing spread to France, and the rest of the West?
According to consumer sales specialists, the French market has not reached that stage yet, but "since the second half of the year, national brands have been losing ground," observes Yves Marin, from Kurt Salmon management consulting.
To keep their market share during the crisis, brands are experimenting at both ends of the spectrum. On the one hand, they continue to produce big packages with aggressively low pricing to keep their customers loyal, and on the other hand, they are developing new products with smaller sizes and low prices to attract new customers or bring back old ones who have abandoned the brand.
Businesses also need to take the offensive, said Delphine Mathez, an associate at consulting company Roland Berger. "For the past few years, innovation in major consumer products has sent prices higher," notes Mathez. "Now, companies are realizing that there is a gap. There are low-priced, unbranded products, and branded products that are much more expensive. In the middle, there is nothing. So the goal of brand management should be to get the middle classes back, who can't afford the brands any more."
The sales of major consumer products in the first half of the year, compiled by market research company SymphonyIRI, do not show any stampede toward smaller sizes, except for alcohol, aniseed drinks, and soft drinks, which were highly taxed at the beginning of the year. "Consumers have returned to more classic formats for those, whereas they had been buying two-liter bottles of cola, for example," says Jacques Dupré, consumer product specialist at SymphonyIRI.
Individual packets
France is nothing like the emerging countries in North Africa, Asia or South Africa, where many products are sold by the unit because of customers’ budget constraints, but also because their habits are different. "In Morocco, for example, packets are smaller and products are bought by the unit, especially because people do their errands every day. If they have a child, they will buy one yogurt, but they will buy one each day," says Mathez.
The situation today is also nothing like that of 2008, notes Marin. At that time, companies decreased the quantity of the product while maintaining the same price. "Today, the tendency is not to hide the loss, selling less of something for the same price. Now, the idea is to create products that make sense for a buyer on a budget." These prices are set using psychological thresholds, as in Auchan supermarket's campaign of 50 organic products for sale for less than one euro, or using smaller, less expensive sizes for consumers who limit themselves to specific purchases, or consumers who decide on their budgets at difficult times like the end of the month.
Several years ago, giant food conglomerate Nestlé started to think about changing its products and its supply to help consumers on a budget. The crisis of 2008 accelerated the pace of development, although the Swiss company says its response was not opportunistic. Now Nestlé started offering a range of "popularly positioned products" (PPP) to the most budget-conscious consumers in wealthy countries. The products were initially developed for emerging countries.
Low priced products 
In France, for example, Nestlé has been selling individual Maggi cooking sachets, containing seasonings for fish or meat, for the past two years. The low price, below the psychological threshold of one euro, is part of the reason for the success of the product, which was originally developed for Eastern European countries. The Swiss company also offers a range of less expensive powdered coffee under the Nes label, with Mocha and Latte varieties. Herta sausages and Buitoni pizza are also in this low-cost category. Overall, these "popularly positioned products" represent 10% of Nestlé's revenue in France, and sales are growing faster than its other brands.
In France, Unilever is playing with formats to try to lower the face value of its products. The Anglo-Dutch giant is selling individual Knorr soup packets for one euro, and dishwasher tablets by packets of 20.
French yogurt company Danone does not plan to make a "Unilever-style announcement," saying it is still too early to reveal its overall strategy for dealing with the expectations of consumers whose wallets are getting emptier, and who are paying more attention to prices. For the time being, each subsidiary is reacting on its own to local fluctuations in consumption. Spain is on the front line. Spanish customers' loss of purchasing power caused Danone to sound the alarm in June. The French company has to deal with consumers who have stopped buying yogurts and other milk desserts in favor of cheaper products. It is still seeking the best response.
Read the article in the original language.
Photo by - Nestlé
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