Price inflation is most definitely here but this is not a recession and there is a very real difference in how you can market your way to success!
That was the message at the Marketing Institute Ireland Breakfast event, sponsored by MCCP and held at Verve, the live agency. Attendees heard from a stellar line-up of speakers on the day including Kay McCarthy, founder of MCCP, Liam McDonnell, CEO of Dentsu Ireland, and Dee Cunniam, Head of Strategy, Category & Shopper Strategy at Britvic Ireland.
With full employment, strong domestic demand, forecast growth of 4%+ and higher household savings, the Irish economy is entering a new phase of development in this inflationary period. Companies and brands will need to adapt their positioning for success if they are to meet the changing needs of their consumers.
Yes, inflation is making headline news and it is impacting significantly upon people, with almost one third of shoppers describing themselves as ‘struggling’ according to a recent Kantar survey. Unfortunately, there has always been a cohort of people who ‘struggle’ and that group was at about 24% in March 2022, so the increase in just six months is significant. Overall, the household shopping bill is now coming in at around €7,687 per annum, an increase of roughly €868 as a result of price inflation (source: Kantar). Margins may be under pressure as supply chain costs rise but the category is undergoing a significant value surge.
Robert Short of RTE recently wrote about the fluctuation in various wholesale prices and while there are sharp rises, we are also seeing some moderation and occasional declines. For example, on an annual basis, the price of building and construction materials is up 16.6% but compared to August, prices fell by 0.6%. Electricity prices fell sharply in September by 26.9%, although they are still up 44.9% compared to a year ago. And we see that the price of petrol continued to fall and the annual rate of increase has now moderated to 5.9%.
These price pressures are naturally changing how consumers approach their household budget and how they shop each week. The impacts are fairly startling but of course the change also represents an opportunity for brands to pivot and match these new consumer demand dynamics:
- Almost 2% of online grocery shoppers have abandoned their carts completely
- Overall online grocery shopping is down over 5%
- Physical shopping trips are up nearly 4%
- Own label value ranges are up 20%+
The grocery store battle for share of wallet is currently being won by Dunnes Stores who recorded the highest share in the most recent survey with 22.7%, an 8%+ improvement year-on-year. Retail marketing is always competitive and challenging and we expect to see increased activity and innovation in the sector as it responds to these new consumer dynamics.
Outside of the weekly shop we also see very significant changes in fuel, gas and electricity costs, all eroding the level of available income in every pocket across the country and for every socio-economic group. And second-hand car prices are costing 67% more when compared to pre-pandemic levels according to a DoneDeal survey published today.
Kay McCarthy, founder and CEO of MCCP reminded us all of the bigger picture – we are living longer and are happier. While Irish consumers and media are negatively impacted by events in the UK where there is a recession, our national economic outlook is better. And importantly, our current economic reality is a far cry from that of 2008. Times have changed! We are drinking €3.50 lattes, eating artisan breads and spending money on craft cocktails. Consumers are emotionally invested in their brands, and it is essential that brands remain functionally and emotionally relevant in the context of this new consumer reality. Currently Dunnes Stores is doing this best in the retail sector and we can see that value own label value ranges are doing that within all retail.
Keynote speaker Dee Cunniam, Head of Strategy, Category & Shopper Strategy at Britvic Ireland, discussed “The Power of Brand Strategy in Difficult Times”. Dee highlighted how a strong brand strategy is key to succeeding, especially during difficult and disruptive times. It is more important than ever that brands understand consumer behaviours and are mindful of where they invest time and resources so that they can remain in synch with their consumers.
Dee gave some examples of brands who pivoted during difficult times, with a nod to the McDonalds EuroSaver Menu launched in 2002, and the Dunnes Stores Shop & Save Coupons. The value added during times of uncertainty is critical to longer term success too, and Dee highlighted the Brivtic launch of MiWadi Double Concentrate in 2010 which today has a 27% share of category!
The Marketing Institute Ireland Breakfast series is sponsored by MCCP, providing members with in-person networking events to discuss current topics and discover new insights into the world around us.
For more information about Marketing Institute Ireland and the Breakfast series, please visit mii.ie
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