Considerations when facing FMCG challenges

More bang for their buck

Promotion sensitivity is seen to be growing in South Africa with a record of 38% growth since 2005, a 3% increase from the previous year. This has been evident in the company's promotion results, we have run successful consumer promotions in-store with giveaways and prizes but of late, consumers are making purchasing decisions based on price promotions (saving direct to their pocket) rather than prize promotions.

Within this market, bulk packs, two for one and head office deals are working the most effectively, as they show a direct saving in the consumers' pocket.

Though a quarter of survey respondents indicated that retailer loyalty programs have a major impact on shopping considerations, which also highlights the need for instant consumer gratification (price discounts), rather than redeemable rewards.

Distribution and availability

Product availability, or the lack of, is one concern for just under a third (31%) of Africans. De-listing of products is a clear frustration for shoppers. Looking at the continent, Africa has 594 million consumers and 2.6 million retail outlets. After price, 'I buy brands that are easily available' was the second decision-making driver. Strong distribution is key to success in innovations in Africa, more so than the rest of the world.

There are 120 stores per million of the South African population, but in the survey, 57% of South African respondents said they shopped always at the same store. The reason isn't defined, but the soaring fuel prices are affecting consumer choice; 37% of global respondents consider the cost of travelling to buy groceries a major obstacle.

In-house competition

All brands are facing growing competition from house brands. In recent years, there has been a steady increase, with South Africans preferring to buy house vs name brands (59%). This presents a challenge for name brands.

Space in store is limited, with preference to house brands. Teamed with the lower price on average to name brands, manufacturers need to communicate the value, selection and quality offering they have, to sustain consumer loyalty, when price prevails in the current market.

Going green

The report also revealed that a quarter of its global respondents say they purchase more 'green' products than they did a year ago and 20% are willing to pay higher prices for environmentally friendly/energy saving products.

Organisations are making large investments to facilitate innovation of new green product lines and to improvise existing ones to make them more environment-friendly and the market is responding to such changes by preferring green products to conventional products.

Various factors influence consumer's green product purchase decisions, studies have highlighted the importance of efficient distribution as a factor influencing green product purchase and an appetite for attractive credit schemes for purchasing green products with an understanding of the long-term benefits.

Consumers are becoming more fickle, as they realise the need to manage household budgets effectively, and brands need to convey their value message and level of quality to differentiate, as price becomes the driver in purchase decision-making.