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Point of difference: Why supermarkets are using niche products to gain swing votes
15th Jun 2012
Photo credit: Genius
Place this week’s results from Tesco and Sainsbury’s side-by-side and one thing becomes clear: the space race is all but over. Shoppers have evolved since the days of a single weekly shop and even the issue of best value has become eschewed by the ‘two-nation’ syndrome.
As the UK’s third largest retailer, the 16 per cent growth in smaller store sales Sainsbury’s reported suggests that the business is on fighting form for a tidal change, and it’s something seen across the entire food sector in Europe. The latest figures from Fast Moving Consumer Goods (FMCG) market measurement firm SymphonyIRI Group’s European Pricing and Promotion Special Report found that with a 3 per cent average price increase for grocery products across the continent, shoppers are trading down and reducing their frequency of purchase.
“Consumers are holding their nerve in the face of rising prices and have responded by buying more carefully, with total Europe sales volumes for grocery up just 0.8 per cent even as price increases drove value sales up 3.7 per cent.”
The FMCG report stated, adding that, “Greece and the UK clearly buck this trend with declining volumes, highlighting the shoppers’ fight to keep control of grocery expenditure in the current economic environment.”
“The promotional arms race across Europe may be coming to a head,” concluded SymphonyIRI's Rod Street . “Now is the time for brands to be more strategic and less tactical in their use of pricing and promotions.”
Tired of the ‘one-size-fits-all’ approach to out of town hypermarkets and the endless price wars waged across advertising, shoppers are responding to more subtle tactics employed to harness swing votes; consumers that are not necessarily loyal to one supermarket brand are now shopping around between a handful depending on price, convenience, and, most recently, product range.
Because along with the influx of organic products, flourishing farmers’ markets and a demand for a more sustainable supply chain, the UK’s dietry requirements in the last ten years has become far more specialist, and nowhere is this more apparent than on the shelves of the supermarket aisle.
As a nation, we’ve never been more diverse in our eating habits. A study released this week by market intelligence group Key Note found sales of vegetarian food will climb more than 10 per cent to reach £882.4 million by 2016. This comes on the back of almost 8 per cent growth in the past five years to January 2011, as consumers increasingly opt for alternative and health-focused diets such as vegetarianism. This long-term evolution of shopping basket decisions has created a shift in how consumers perceive their favourite supermarket brand. The habitual weekly shop and favoured supermarkets are making way for new perceptions- for instance how a retailer is seen to cater to an increasingly diverse customer base. Instead of filling trolleys with the same labels from childhood, shoppers are more receptive to new brands that fit with an increasing awareness for food consumption.
A category in particular that has flourished with this change are the ‘Free-From’ ranges developed by Sainsbury’s, Tesco, Morrisons and the Co-operative, as supermarkets look to gain the loyalty of shoppers more focused on range, whether it be dairy, meat, or gluten-free, over discounts.
The gluten-free customer is one that has received plenty of retailers’ attention, and is a market now worth £100 million, according to figures from Coeliac UK. “More and more people are being diagnosed with coeliac disease and in today’s difficult times, it’s a market the industry can’t afford to ignore,” said Phil Vickery, food ambassador of Coeliac UK.
So it’s no surprise that supermarkets have been so receptive to brands such as Genius, who has been making gluten-free bread since 2009. Since that time it’s been adopted by the UK’s top six supermarkets and become a house-hold brand name. Speaking to Roz Cuschieri, chief executive of Genius, we asked her about the shift in attitude for niche products, and how their relationship with supermarkets has changed since launching three years ago.
“Genius transformed the gluten-free market when we introduced our original bread in 2009. Since then, the size of the market has grown by more than 250 per cent. We now have a 51 per cent share of the gluten-free bread market and are benefiting from more consumers adopting a gluten-free diet, regardless of whether they have an intolerance to gluten or not.”
What began as a niche product traditionally only available to make at home or from specialist health food stores is fast becoming a staple supermarket offering, and the category is experiencing record growth in the industry.
“Gluten-free products are one of the fastest growing segments of the bakery market, with Genius products now available in Asda, Waitrose, Tesco, Morrisons, Sainsbury’s and The Co-Operative. Due to demand, we have also rolled out Genius products in the USA, Canada and Spain and we are looking at additional international markets.
“Overall, the market has grown and our products have both improved, and the range diversified, which has meant more choice for consumers. There is also an increasing health and lifestyle-choice trend towards following a gluten-free diet.” Cuschieri told My Retail Media.
By acquiring a relevance to niche markets, supermarkets can access loyal customers in what is becoming an increasingly emotive and lifestyle-led choice. And the supermarkets that are catching on have plenty to gain: by diversifying their offer to include products other supermarkets neglect, grocers are able to secure the all-important swing votes that sit between the closely fought positions of Asda, Sainsbury’s and Morrisons. High-end retailers like Marks & Spencer that were early supporters of gluten free, vegan and vegetarian ranges, are likely to obtain loyal consumers simply because their product offering is available. By targeting the niche, they can obtain a whole family of shopping, instead of the disloyal customers that look for bargains and inevitably unsustainable offers at competitive rates.
As a nation, our tastes are more diverse than ever before. It’s time for supermarkets to cut the tactics and develop strategies that will embrace the new consumer habits ready to be formed.