Feeling the Pinch 4:
The outlook for 2011
A strategic report on the challenges for
the Irish Food and Drinks industry in
the coming year
Contents
Introduction
Pages 3-4
Executive summary
Pages 5-8
The economic outlook
Pages 9-11
The consumer outlook
Pages 12-22
The business outlook
Pages 23-28
Key challenges and opportunities
Pages 29-40
Technical appendix
Pages 41-42
© 2010 Bord Bia, The Futures Company
© 2010 The Futures Company
2
Introduction
Introduction
Introduction
The aim of this report is to provide
insight into the prevailing situation and
prospects for the Irish Food and Drinks
industry in the Republic of Ireland into
2011, identifying the key challenges and
opportunities being presented to the
industry.
Whilst the strong economic contraction
of the last two years has abated in
2010, the current situation remains
uncertain. Few indicators point to a
return to prosperity in the short-term
and many highlight the possibilities of
more challenging times to come.
Perhaps the only certainty that appears
to be emerging is that significant change
is unlikely to materialise into 2011;
moderate improvement is the best that
can be expected and moderate decline
perhaps the worst case outcome. The
business and consumer landscape of
today represents the „new normal‟ - a
reality that will last for some time to
come.
As Charles Darwin once observed „It is
not the strongest species that survive,
nor the most intelligent, but the one
© 2010 Bord Bia, The Futures Company
4
most responsive to change.‟ Accepting
the permanence of today‟s situation and
adapting to the conditions it presents
will be the key for both businesses and
consumers alike to survive (and possibly
thrive) in the near term future.
This report explores the characteristics
of the „new normal‟ and what it means
for businesses. The analysis builds on
the themes that have been tracked and
explored in the first three Feeling the
Pinch reports. As before, our focus is on
the Republic of Ireland (ROI).
In addition to the quantitative consumer
tracking study, a deeper dive into Irish
consumer mindset has been conducted
through a qualitative research stage.
This phase of the research has explored
the following: the extent to which
attitudes and behaviours have really
changed, how the recession has created
permanent shifts in the way in which
consumers engage the marketplace,
what we can expect should the situation
worsen or even improve, and finally, the
outlook towards which consumers are
planning.
To build a more rounded view, we have
also sought to understand the impact of
the last two years on Irish businesses,
large and small, and the outlook the
industry has for the coming year.
Questions explored here include; how
have businesses survived the recession?
What common challenges have business
faced and still face into the future? What
are the domestic market conditions
companies are planning for into the
future? and finally, where does the
industry need more support?
Both these viewpoints have been used
to identify five key characteristics of the
„new normal‟ that all businesses should
be considering in the year ahead.
For more information on this report
or help in applying the findings to
your business please contact:
Helen King
Senior Business Analyst
Tel: +353 1 668 5155
Email: Helen.King@bordbia.ie
Executive Summary
Executive Summary
Executive Summary
Many underlying challenges for the
Irish Economy: High levels of
household debt and government debt
are likely to constrain economic growth.
The true value of toxic loans in the
banking system is still uncertain and, as
the government focuses on addressing
these issues and introducing a severe
austerity package, it will limit its ability
to play a role in developing the
domestic economy.
Unemployment is a major issue having
sky-rocketed to 13.6%. It will inevitably
continue to hit consumer spending.
Consumers have become far less
pessimistic of how their own
situation will change into 2011: Irish
consumers have a much improved view
of their own personal financial situation.
This improving personal outlook seems
partly disconnected from their view of
the Irish economy as a whole. People‟s
views of their own situations seem more
favourable than the outlook they
foresee for the economy.
© 2010 Bord Bia, The Futures Company
6
Consumers are looking at the wider
world as an indicator of their
potential fortunes: It appears that the
Irish consumer is looking further afield
at the wider global picture for an
indication of improvement in the
economy.
However, those closest to the
consumer have become the main
barometer for their own prospects:
Consumers have had to rely on family
and friends for financial support and to
get through the tough times.
Consequently, the longer-term view of
consumers is likely to be strongly
affected by the employment prospects
of the people they know. Real recovery
from a consumer perspective may only
come when the situation of those
closest to them has vastly improved.
Despite common ground, not all
consumers are in the same situation
and have the same concerns: Not
everyone is affected in the same way or
to the same degree. Some consumers
are clearly facing financial hardship and
others remain broadly unaffected.
Analysis shows that three distinct types
of consumers exist. Each consumer type
presents different challenges and
opportunities to companies and brands.
A similar story exists for British
consumers despite a seemingly
more positive economic outlook:
Britain may present some opportunities
for businesses over the next one to two
years but not necessarily a place of
greater growth through rising consumer
spending.
Executive Summary
Executive Summary
It has not been doom and gloom for
all companies (albeit these are the
companies that are still here): Of the
businesses surveyed, whilst many have
suffered some decline or at best
remained stable, a good proportion
have highlighted that they have grown.
Revenue has not always matched these
patterns. Margin erosion is a common
story due to retailer pressures and the
need to offer deeper discounts on
promotions. Consequently, fewer
companies highlighted revenue growth.
Views of the economy seem largely
unrelated to the view the companies
hold for their own business
prospects over the next couple of
years: Around half of the companies
surveyed stated that they felt that their
sales and revenues would grow in the
coming years. A large proportion also
felt that sales and revenues would be
largely unchanged - views that seem to
counter to their broader view of the
economy but may reflect the confidence
that has come with surviving and their
ability to adapt to recent challenges.
© 2010 Bord Bia, The Futures Company
7
Companies have proactively sought
new sales opportunities ahead of
cost cutting: The top two actions have
been to launch new ranges aimed at a
more value driven consumer and to find
new routes to market to reach a new
customer base. These have taken
precedence over cutting production and
staff costs. However, many companies
still feel that cost reduction will be
needed in the next one to two years.
Companies have been forced to
promote brands tactically and have
lacked strategic focus: Many
companies highlighted the fact that the
way they promoted products and brand
shad changed. Interestingly, a greater
proportion had increased their spending
rather than reducing it in the last one to
two years. This is a pattern perhaps
materialising more out of market
demand than desire: over one third of
companies have had to increase their
spend on in-store promotions.
Many companies have become
increasing worried that the actions of
the last couple of years have led to an
increasingly promotional and price
driven consumer, ultimately leading to
the erosion of brand equity.
Weaning retailers and consumers off
constant promotion is potentially one of
the biggest challenges facing brand
owners in the next one to two years.
The retailer landscape remains
challenging: The top concern
highlighted by around two thirds of
companies was avoiding further
pressure on margins by the trade in the
years ahead. Furthermore, the greater
focus on value has allowed the retailers
to place less concern in sourcing from
local Irish producers.
Companies want to get back to
innovating, building brands and
finding new markets outside of the
domestic market: Many of the
companies we spoke to highlighted their
desire to get back to building value in
their brands and the markets in which
they operate - a desire that many felt
might be unachievable given their
resources.
Executive Summary
Executive Summary
A consumer and business landscape
that is unlikely to significantly
change in the year head:
Today‟s landscape can be defined as the
„new normal‟, the characteristics of
which are likely to shape consumer
attitudes and behaviours for the
foreseeable future.
Companies will need to adapt to
survive and even thrive in this
landscape:
Accepting the permanence of today and
adapting to the conditions it presents
will be the key for both businesses and
consumers to survive, and possibly
thrive, in the short to medium-term
future.
Five key characteristics of the new
normal were identified in the
research:
Five key characteristics were identified
in the analysis. These can be
summarised by the acronym S.C.A.N.T.
– Scepticism, Control, Acceptance, New
Aspirations and Treading Carefully.
It is important to note that these
© 2010 Bord Bia, The Futures Company
8
characteristics also define the landscape
in Britain. Similar challenges face
companies exporting to Britain as those
more focussed on the Irish domestic
market.
The word „scant‟ itself can also be seen
to represent as an overarching value for
the „new normal‟: it is not about
abundance, nor is it about doing
without. „Scant‟ implies the need to be
resourceful to ensure that there is just
enough to get by. A sentiment that
seems to hold equally true for
consumers and companies alike.
Implications
Get back to building
trust and recognise
that new mechanisms
may be needed.
Help your consumers
gain or maintain
control.
Make sure you are fit
for purpose, not just
trying to fit in.
Make sure you are
marketing to the right
need.
Help mitigate the risks
of buying or trying
your products.
The economic outlook for the Republic of
Ireland
The economic outlook
The worst may be over but challenges remain
The current situation:
Up until 2008 the Irish economy had
undergone a period of strong growth
with average GDP growth in the region
of 6% during the ten years to 2007. In
retrospect, it is clear that, whilst growth
during the 1990s was driven by
increases in productivity, growth in the
second half of this decade was far less
sustainable, being based on a
construction boom, overvalued housing
market and rising consumer debt.
“People had been living with a
false sense of security. They
believed that all that was spent
today could be earned tomorrow
thanks to rising wages and good
job security.”
Ireland entered recession in September
2008. The recession started relatively
early in Ireland and resulted in a 3%
decline in GDP whilst most other
economies continued to grow in 2008.
2009 saw a worsening situation as Irish
GDP fell by 7.6%. This was significantly
© 2010 Bord Bia, The Futures Company
10
more severe than the rest of the Euro
zone. In 2010, the economy returned to
growth, but this appears to be only a
temporary reprieve as GDP fell by 1.2%
in the second quarter of this year.
The underlying challenges
Ireland is an open economy that is very
much reliant on trade and the combined
value of imports and exports was just
under 150% of GDP in 2007. Its
economy is particularly strongly
interlinked with, and thus affected by
those of the UK and US – who represent
Ireland‟s two main export markets,
together accounting for 37% of exports
in 2008.
Fluctuations in the value of the euro
also have a major impact. Though the
financial crisis has resulted in much
uncertainty and disruption for the Irish
economy, some exporters were able to
benefit from the falling value of the
euro.
crisis and the true value of toxic loans is
still uncertain and, as the government
focuses on addressing these issues and
introducing a severe austerity package,
it will limit its ability to play a role in
developing the domestic economy.
Unemployment is a major issue having
sky-rocketed to 13.6%. It will inevitably
hit consumer spending which accounts
for about 60% of GDP. Spending was
down by 1.7% in quarter two of this
year compared to the same period in
2009.
“The scale of downturn has
shaken people‟s confidence –
especially when compared to the
height of the Celtic tiger boom.
People feel like the rug has been
pulled from under their feet.”
High levels of household and
government debt are likely to constrain
economic growth. With regard to the
latter, the full extent of the banking
Quotes from Professor Alan Barrett (ESRI) Oct 2010
The economic outlook
Hard to foresee more than moderate growth in near future
Prospects for 2011 and beyond
The economy looks set to remain
sluggish in 2010 and may marginally
decline by the end of the year.
Prospects for growth remain limited in
2011 and 2012 with growth rates
unlikely to exceed 2%. At best the
outlook is moderate growth; at worst
further decline or stagnation could occur
as many uncertainties exist.
A key reason for this conservative
outlook is the rapid rise in
unemployment together with falling
house prices which will subdue
consumer spending in 2010.
Unemployment is likely to have peaked,
though if economic growth is too weak,
it will not drive sufficient job creation to
change this situation significantly.
After falling by 4.5% in 2009 as the
recession intensified, consumer prices
are expected to grow by approximately
4.0% this year, which will likely make
consumer budgets feel even more
stretched as pressure on wages appears
to be downwards.
© 2010 Bord Bia, The Futures Company
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The pick-up in the euro zone, with
growth expected to be around 1.7% this
year, should provide some boost for
exports. This is particularly true if many
of the underlying factors which made
Ireland an attractive place to do
business during its boom years remain
in place.
“Business costs are falling – they
are still high but through falling
wages and other factors, Ireland
is regaining competitiveness and
this is helping exports.”
The greatest challenge will be for those
businesses whose survival relies on
servicing the domestic market only at a
time when general confidence seems
low.
“To sum up, there is no way of
dressing it up – there is a general
mood of despondency – the
nation has been hit.”
Quotes from Professor Alan Barrett (ESRI) Oct 2010
Positive Factors
Improving Eurozone
growth and better than
expected growth in the UK
Moderate growth or decline
appears to be the most likely
prospects for the Irish
economy
Negative Factors
High unemployment and
the return of price
inflation
The consumer outlook
The consumer outlook
Consumers see some improvements in the Irish economy,
albeit the situation is still seen as bad
Irish consumers feel that the state
of the Irish economy has improved
Consumers‟ views of the Irish economy
show improvement into 2010 – however,
one must recognise that their view of
the economy in 2009 was extremely
pessimistic. In September 2010, 38% of
Irish consumers agreed that the
economy is going very badly, showing
an improvement from 52% in November
2009 and 65% in January 2009 (see
chart 1).
Despite this improvement, it is
important to note that the current view
of the state of the Irish economy is still
bleak: nearly half of all the consumers
surveyed stated that they thought the
economy was going badly.
Furthermore, we should note that the
fieldwork for this survey was completed
prior to the announcement at the end of
September by the Financial Regulator
regarding Anglo-Irish Bank. The higher
than expected final cost to the Irish
taxpayer for bailing out the bank over a
10 year period of 29.3bn euros, and in a
very worst case scenario 34bn euros,
may have darkened the outlook of many
consumers since the fieldwork was
conducted.
© 2010 Bord Bia, The Futures Company
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However, whether or not this matters is
questionable as increasingly consumers‟
views of their own personal situations
seem disconnected from their views
about the broader economy.
CHART 1
How do you think things are going
for the Irish economy these days?
Consumers have become far less
pessimistic about how their own
situation will change into 2011:
Irish consumers‟ have a much improved
view of their own personal financial
situation. In November 2009, the
dominant attitude was that their own
personal financial situation over the next
12 months would get worse (67% of
consumers). Now, in September 2010,
the dominant view of consumers is that
their own personal financial situation
over the next 12 months will be about
the same as the previous 12 months
(45% of consumers). Equally, 12% of
consumers felt that they would be better
off in the next 12 months.
This improving personal outlook seems
somewhat disconnected from their view
about the state of the Irish economy as
a whole. People‟s views of their own
situations seem more favourable.
Very well
Fairly well
Badly
Very badly
100%
18
38
80%
52
65
60%
54
40%
49
44
29
20%
25
0%
Jul 08
4
4
Jan 09
Nov 09
10
Sep 10
The consumer outlook
Consumers reference points on what will drive improvement
have changed
Consumers are looking at the wider
world as an indicator of their
potential fortunes:
In the latest survey we asked
consumers which factors they felt would
have an impact on the economy in the
next 12 months both in terms of a
positive and negative impact.
Not surprisingly, chart 2 shows a
divided view on the impact of the new
policies of the government: 24% stated
they will have a positive effect (with 8%
stating they will have the greatest
positive effect), and 43% stating they
will have a negative effect (with 38%
stating they will have the greatest
negative effect). The greater strength of
pessimistic feeling perhaps reflects the
fact that trust in the Irish Government
is at a real low: 84% of Irish consumers
agree with the statement “I now have
less faith in the government to tackle
the major issues that face our country”.
Where more consensus appears to lie is
in the importance of an improving global
economy. 56% of Irish consumers felt
that changes in the global economy
would have a positive effect and 30%
felt that this would have the greatest
positive effect.
© 2010 Bord Bia, The Futures Company
14
CHART 2
Which of the following do you feel will have an impact on the economy in the
next 12 months? a) positive/negative b) greatest positive/negative
56
56
38
35
34
Positive
24
Greatest
positive
9
8
15
2
30
-38
-18
-10
-7
-10
24
-6
-10
8
9
-3
-6
-5
Greatest
negative
-18
Negative
-27
-43
The new
Lending
policies
from the
of the
banks
government
The
strength
of the GB
pound
Changes Changes in
in the
consumer
global
confidence
economy
and
spending
The
Investment
stability
by the
of the
business
Euro
sector
The consumer outlook
Those closest to us are often the ones we trust most and
act as a barometer for our own prospects
As suggested on the previous page, it
appears that the Irish consumer is
looking further afield at the wider global
picture for an indication of improvement.
This is supported by The Futures
Company‟s Global MONITOR 2010
survey in which 58% of Irish consumers
agree that since the global economic
crisis, they are more aware of how the
global economy can affect them.
Subsequently, wider rhetoric from the
government and banks regarding the
economy is seemingly becoming a less
trusted or secondary indicator of the
reality consumers feel they may
ultimately face in the years to come.
Equally notable is the fact that 56% of
Irish consumers felt that changes in the
consumer confidence and spending
would have a positive effect and 24%
felt that this would have the greatest
positive effect. This suggests that
consumers feel the behaviour of people
like them has also become a key
barometer for their own prospects.
Who consumers trust has become a
tighter knit circle:
The importance of people close to the
consumer is further highlighted by
© 2010 Bord Bia, The Futures Company
15
whom they have turned to for support
during in recent times. When asked
„During the recession which people and
institutions were helpful in helping you
manage your finances?‟, 33% said that
their families have been very helpful and
a further 22% said that they had been
fairly helpful. Friends came second with
12% and 23% respectively saying they
have been very or fairly helpful (see
chart 3). Reliance and trust have
become interlinked - the people we look
to for support and help us are often the
the ones we trust the most.
Third on this list are the major food
retailers whose actions through the
recession have been seen as helpful to
the consumer trying to manage their
finances. The major retailers are likely to
receive favourable levels of trust in the
years to come as a result.
Conversely, many brands may find
themselves in a weaker position.
According to The Future Company‟s
Global MONITOR survey, more Irish
consumers agree „price is more
important to me than brand names‟ with
61% agreeing in 2010 up from 56% in
2008.
CHART 3
During the recession which people
and institutions were helpful in
helping you manage your finances?
Family
33
Friends
12
Major food
retailers
My company
Groups I
belong to
Local
businesses
23
7
6
21
13
4 12
3 11
55
35
28
19
16
14
Local
35 8
authorities
Charities 2 8
22
Very helpful
Fairly helpful
10
Religious
26 8
groups
The government 2 5 7
0% 10% 20% 30% 40% 50% 60%
The consumer outlook
Fear of unemployment is likely to generate a cautious
consumer outlook for some time
The longer-term view of consumers
is likely to be strongly affected by
the employment prospects of the
people they know:
According to CSO statistics, Irish
unemployment rates have eased a little
from their high of 13.8% in August 2010
dropping back in both September and
October to now stand at 13.6% of the
labour force. The dramatic rise of
unemployment through the recession
has been alarming for many consumers
and it has not just been about these
absolute rates.
Chart 4 highlights the proportion of
people who know anyone else who has
been made redundant from their job in
the past 12 months. The halo effects of
unemployment are clearly evident: 82%
of consumers know someone made
redundant from their job in the past 12
months. There is improvement, albeit it
is important to note the level remains
extremely high.
Equally, it is important to note that
despite such improvements, almost half
of the 293,600 people who are
unemployed have not worked in 12
months or more. 43% of those who are
unemployed are now classified as long© 2010 Bord Bia, The Futures Company
16
term unemployed, compared with 21.7%
a year earlier, according to CSO figures.
Critically, unemployment takes time to
reduce once the economic cycle shows
an uplift. The prospect of high rates of
unemployment through 2010 and 2011
are a very likely reality. The fear and
challenges created by such
unemployment are likely to curtail
consumer confidence and stifle any
thought of a quick return to the buoyant
boom years of the early 2000s. Real
recovery from a consumer perspective
may only come when the situation of
those closest to them has vastly
improved.
CHART 4
Do you know anyone else who
has been made redundant from
their job in the past 12 months?
Yes
100%
1
1
Don't know
1
13
24
80%
2
17
47
60%
86
40%
75
“I didn‟t sleep last night as I was
thinking about how my job could
be done by a computer instead.”
Older Family, Female
No
82
52
20%
0%
Jul 08
Jan 09
Nov 09
Sep 10
The consumer outlook
Despite common ground, not all consumers are in the same
situation, nor do they have the same concerns
Three distinct types of consumers
appear to exist:
The spectrum of financial impact
The reality of all recessions is that they
are unequal - not everyone is affected in
the same way or to the same degree.
Some consumers are clearly facing
financial hardship and others remain
broadly unaffected.
Deeper analysis of our quantitative
survey reveals three distinct groups:
–
–
–
The „Plain Sailing‟ group has been
the least affected in real financial
terms. Lower debts and steady
income means the impacts are
largely psychological.
The „Choppy Waters‟ group are
getting by and cut-backs have been
inevitable. Bigger ticket items like
foreign holidays have gone but other
luxuries are still accessible with
careful money management.
The „All Hands on Deck‟ group are
fighting to keep their heads above
water. Only the most valued parts of
their spending remain protected –
often those to do with their children.
© 2010 Bord Bia, The Futures Company
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Low
Approximately 30%
of the population.
Largely unaffected in
terms of income. But
have become more
cautious due to the
uncertain landscape.
“Shopping now is not
hugely different to
how it used to be. I
just watch more and
the pennies take
care of themselves.”
Financial impact of the recession
Approximately 45%
of the population.
Have had to make
cuts to get by. Need
to constantly watch
spending and debt.
“I’m much more
aware of price now.
I probably spend 2
seconds more on
every product
comparing and
seeing which is the
best value.”
High
Approximately 25%
of the population.
Facing real hardship
and have made
fundamental
changes to their
lifestyle.
“There’s nothing
more I could cut back
on - if things got
worse – I’d end up
starving myself!”
The consumer outlook
The three consumer groups have minor demographics
differences
Each consumer type presents different
challenges and opportunities to
companies and brands.
Understanding, how your consumers fit
on this spectrum can be the key to
finding the right strategies for the years
ahead.
Simple demographics are not the
defining differences:
Whilst the „Plain Sailing‟ group are
biased towards the high income groups,
as well as those who own their own
home outright and whose kids have left
home, more standard demographics
around age and working status are not
factors which differentiate them strongly
from the other two groups.
For the „Choppy Waters‟ and „All Hands
on Deck‟ groups, there is little to tell
them apart in terms of income, working
status, home ownership and family
make-up. These characteristics do little
to reveal the situation in which they find
themselves regarding their finances and
their key priorities when engaging with
the marketplace.
© 2010 Bord Bia, The Futures Company
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Income
Property
Family
Age and
working status
Own home (25%)
59% no kids at
home
All ages and
working (FT: 44%)
Mortgage (49%)
or rent (24%)
48% with kids at
All ages and
home
working (FT: 47%)
Mortgage (52%)
or rent (21%)
60% with kids at
home
All ages and
working (FT: 44%)
The consumer outlook
The three consumer groups show surprising similarity in
terms of their shopping behaviours
Approaches to shopping are often
consistent across all groups:
When we look at behaviour, it seems all
consumers are adopting the same
strategies. There is a strong focus on
getting the best from the market in
terms of price and value.
All groups use comparison websites to
save money, with the „All Hands on
Deck‟ group most likely to take this
approach. The use of coupons is a key
strategy used by all. Notably, here the
„Plain Sailing‟ group are more likely than
others to use coupons with 70% saying
they use coupons regardless of financial
circumstances. Amongst the „All Hands
on Deck‟ group, this figure drops to
58%. The „Plain Sailing‟ group is clearly
benefiting from the broad promotional
activity in the market, when arguably
their finances suggest they may not
need this help. Conversely, couponing
may be an effective route to attract
them to new products, though other
mechanics should be considered to drive
repeat purchase and loyalty.
All groups compare food products before
deciding which is best with greater focus
on functional over emotional value.
© 2010 Bord Bia, The Futures Company
19
Personal financial
outlook for next 12ths
Shopping
around
Bargain
hunting
Seeking
quality
83% feel will be the
same or worse than
previous year
45% regularly use
comparison websites
to save money
64% often compare
food products before
deciding which best
86% feel will be the
same or worse than
previous year
57% regularly use
comparison websites
to save money
73% often compare
food products before
deciding which best
90% feel will be the
same or worse than
previous year
65% regularly use
comparison websites
to save money
70% often compare
food products before
deciding which best
The consumer outlook
The greatest difference between the three consumer groups
lies in their financial attitudes and aspirations
The defining difference between
the groups is the level of debt and
the extent to which it motivates
actions in the marketplace:
For the „All Hands on Deck‟ group, many
of their behaviours are born from a
need to survive. Cut-backs and deals
are on the only way they get by and for
this reason, their loyalty is likely to shift
to the cheapest acceptable offer.
Financial
situation
61% are financially
comfortable
20
Aspirations
46% never changed
their spending habits
17% feel pre-recession
dreams are probably
now out of reach
59% have just enough
31% feel debt
to make ends meet
level ruining their
quality of life
77% changed
spending definitively
67% feel pre-recession
dreams are probably
now out of reach
46% are struggling
financially
© 2010 Bord Bia, The Futures Company
Impact of
recession
3% feel debt level
ruining their
quality of life
For the „Choppy Waters‟ group, there is
still a sense of balance; lots of spending
patterns have had to be changed, but
this is about keeping control and
making trade-offs.
For the „Plain Sailing‟ group, it is more a
function of being a smart shopper –
individuals in this group have a natural
desire to be savvy, rather than being
driven by finances. Promotions that play
to this mindset may be appealing to this
group and not alienate the other two
groups.
Debt
76% feel debt
level ruining their
quality of life
88% changed
spending definitively
96% feel pre-recession
dreams are probably
now out of reach
The consumer outlook
A similar story exists for British consumers, despite a
seemingly more positive view of the economic outlook
British consumers feel the British
economy has improved:
Consumers‟ views of the British
economy also shows improvement into
2010, though this sense of improved
outlook had already begun to show
through in our Nov 2009 survey. In
September 2010, 15% of British
consumers stated the economy is going
very badly (versus 38% amongst Irish
consumers).
Whilst nearly half of all the UK
consumers surveyed stated that they
thought the economy was still going
badly in September 2010, we now see
an increase in the proportion of UK
consumers stating that the economy is
going well.
Consumers remain unchanged in
their view of their personal financial
situations for the coming year:
Whilst views of the economy in Britain
are more positive, we see a greater
disconnect between this improving view
and the consumer‟s view of their own
finances: many (39%) still feel that they
will be worse off in the coming year
(compared to 41% amongst Irish
consumers). Equally, despite an
improving economic outlook, the
© 2010 Bord Bia, The Futures Company
21
majority feel that their financial situation
will remain the same: 49% amongst
British consumers (compared to 45%
amongst the Irish).
The consumer outlook for one‟s own
personal situations is remarkably similar
in both countries despite significantly
different performances of their
economies in recent times.
Uncertainty and unemployment still
driving caution in Britain:
As in ROI, unemployment is likely to be
a key factor shaping the outlook of the
British consumer. According to ONS
data, unemployment is far lower in
Britain, standing at 7.7% in August
2010. However, the halo effects are still
significant with 48% saying they know
some else who has been made
redundant from their job in the past 12
months. Equally, the announcement
made since the survey was conducted
that around 500,000 jobs will go in the
public sector is only likely to have fueled
concerns around the future.
This suggests Britain may present some
opportunities for businesses over the
next one to two years but not
necessarily a place of greater growth
through rising consumer spending.
CHART 5
How do you think things are going
for the British economy these
days?
Very well
Fairly well
Badly
Very badly
100%
21
80%
15
36
55
60%
59
61
40%
54
40
20%
24
15
7
0%
Jul 08
Jan 09
Nov 09 Sep 10
The consumer outlook
Section summary
Irish consumers have a more
positive view of the economy: The
views of the Irish consumer on their
economy shows improvement into
2010, albeit that the consumer view of
the economy in 2009 was extremely
pessimistic.
Consumers have become far less
pessimistic of how their own
situation will change into 2011: Irish
consumers‟ have a much improved view
of their own personal financial situation.
In September 2010, the dominant view
of consumers was that their own
personal financial situation over the next
12 months will be about the same as the
previous 12 months, as opposed to
getting worse.
Consumers are looking at the wider
world as an indicator of their
potential fortunes: General rhetoric
from the government and banks
regarding the economy is seemingly
becoming a less trusted or secondary
indicator of the reality consumers feel
they may ultimately face in the years to
come.
© 2010 Bord Bia, The Futures Company
22
Those closest to us are often the
ones we trust the most and a
barometer for our own prospects: In
considering which people and
institutions were helpful to consumers
during the recession in helping manage
finances, families came top followed by
friends.
The major retailers have also faired well
and are likely to receive favourable
levels of trust in the years to come as a
result.
As our circle of trust gets smaller, all bar
the strongest brands may find
themselves in a weaker position today.
The longer-term view of consumers
is likely to be strongly affected by
the employment prospects of the
people they know: Critically,
unemployment takes time to reduce
once the economic cycle shows an uplift.
The prospect of high rates through 2010
and 2011 are a very likely reality.
The fear and challenges created by
unemployment are likely to curtail
consumer confidence and stifle any
thought of a quick return to the buoyant
boom years of the early 2000s. Real
recovery from a consumer perspective
may only come when the situation of
those closest to them has vastly
improved.
Despite common ground, not all
consumers are in the same situation
and have the same concerns: The
reality of all recessions is that they are
unequal. Not everyone is affected in the
same way or to the same degree. Some
consumers are clearly facing financial
hardship and others remain broadly
unaffected. Analysis shows that three
distinct types of consumers exist.
Each consumer type presents different
challenges and opportunities to
companies and brands.
A similar story exists for British
consumers despite a seemingly
more positive economic outlook:
British consumers are likely to be
pessimistic. Consequently, Britain may
present some opportunities for
businesses over the next one to two
years but not necessarily a place of
greater growth through rising consumer
spending.
The business outlook
The business outlook
Growing confidence amongst the companies that have
survived despite the state of the economy
To build a more rounded view of the
current situation for the Irish Food and
Drinks Industry, we have also sought to
understand the impacts of the last two
years on Irish businesses of all sizes and
the outlook the industry has for the
coming year. This view has been built
from a number of depth interviews with
medium to large manufacturers and a
wider quantitative survey with small,
medium and large manufacturers.
export markets.
Whilst this represents sizeable level of
feedback, it is important to highlight that
the 67 responses on the quantitative
study do not represent a sufficient
sample for extensive analysis. Nor has
the sample been weighted to reflect the
true business footprint of the Irish Food
and Drinks industry (appropriate
weighting variables are not available,
nor would it be feasible to apply
weighting to a sample of 67 companies).
Of the businesses surveyed, sales
patterns for the last few years present a
varied picture. Whilst many have
suffered declines or at best remained
stable, a good proportion have
highlighted that they have grown. Often
they have benefited from structural
shifts in the market, such as the demise
of competitors or the fact that their
products now represent a better value
alternative, e.g. an alternative to eating
out or cheaper cuts of meat.
However, within the sample, there is a
balance of large, medium and small
companies and with around half the
sample solely reliant on the ROI
domestic market for their revenues,
around one third being mostly reliant on
the ROI domestic market and less than a
fifth of companies relying more on
© 2010 Bord Bia, The Futures Company
24
In summary, given the nature of
research in this section of the report, it
is important to view these findings as
directional rather than truly
representative of the industry as a
whole.
It has not been „doom and gloom‟
for all companies (albeit these are
the companies that are still „here‟):
Revenue has not always matched these
patterns. Margin erosion is a common
story due to retailer pressures and the
need to offer deeper discounts on
promotions. Consequently, fewer
companies highlighted revenue growth.
Companies share the same view as
consumers in that their outlook for
the Irish economy is pessimistic:
Around half of the companies surveyed
felt that the Irish economy would
continue to contract in the next couple
of years, with a significant number
expecting a strong contraction.
Around one third felt that the economy
would stagnate with neither sustained
periods of growth nor decline. Some,
admittedly the minority, felt the
economy would show moderate growth.
Views of the economy seem largely
unrelated to the view the companies
hold for their own business
prospects over the next couple of
years:
Around half of the companies surveyed
stated that they felt that their sales and
revenues would grow in the coming
years. A large proportion also felt that
sales and revenues would be largely
unchanged. These views seem counter
to their broader view of the economy but
may reflect the confidence that has
come with surviving and the ability to
adapt to recent challenges.
The business outlook
All companies have had to adapt and the business
environment has allowed change to be implemented
Companies have looked at all
aspects of their businesses:
The need to reduce costs and maintain
revenues has led all companies to look
at everything they do as a business.
From the 13 actions highlighted in Table
1, every company completing the survey
has listed an average of four actions
undertaken in the last one to two years.
Major changes have been called for and
many companies we spoke to
highlighted that they expect to make
further changes in the future.
Companies have proactively sought
new sales opportunities ahead of
cost cutting:
The top two actions have been to launch
new ranges aimed at a more valuedriven consumer and to find new routes
to market to reach a new customer
base. These have taken precedence over
cutting production and staff costs.
“You can‟t survive by cost cutting
your way out of recession. You
need to sell your way out of
recession.”
© 2010 Bord Bia, The Futures Company
25
TABLE 1
Which of the following actions, if any, has your company taken in the
last 1-2 years to improve business performance?
Rank
Action
Incidence
1
Launch new brands and ranges
Above 50%
2
Find new routes to market in the Irish domestic market
Above 50%
3
Renegotiate terms with suppliers
Above 50%
4
Change the way products and brands are promoted
Above 40%
5=
Invest in more efficient forms of production
Above 40%
5=
Withdraw from unprofitable categories and products
Above 40%
7
Change suppliers
Above 40%
8=
Withdraw from unprofitable channels and retailers
Above 30%
8=
Reformulate products and find new packaging formats to
reduce cost
Above 30%
10
Focus on the development of export markets
Above 30%
11=
Reduce staff wages
Above 20%
11=
Make redundancies
Above 20%
13
Collaborate with other manufacturers to improve leverage
with suppliers
Under 10%
The business outlook
New ways of promoting brands have emerged but there are
concerns over the consequences of heavy promotion
Brand promotion has been tactical
and not strategic:
Many companies highlighted the fact
that the way they promoted products
and brands had changed. Interestingly,
a greater proportion had increased their
spending rather than reducing it in the
last one to two years - a pattern that
has perhaps materialised more out of
market demand than desire.
Over one third of companies have had to
increase their spend on in-store
promotions – our depth interviews
suggest this has been led by the
demands of retailers. A comparable
proportion of companies agreed with the
statement that „It is only possible to
gain or maintain listings by offering
increasing levels of promotion or better
margins‟.
Many companies have become
increasing worried that the actions of
the last couple of years have lead to an
increasingly promotional and price
driven consumer. Nearly all the
companies agreed with the statement
„Consumers have become more
responsive to promotions‟. The
competitive nature of the marketplace
and the continued desire of retailers to
© 2010 Bord Bia, The Futures Company
26
draw in custom through deals is creating
a Catch 22 situation: promotion is
needed to maintain listings and sales
but at the same time is eroding brand
equity.
Weaning retailers and consumers off
constant promotion is potentially one of
the biggest challenges facing brand
owners in the next one to two years.
Without achieving this goal many
companies may be sacrificing the
longer-term prosperity of their
companies in favour of short-term gains.
Some companies are embracing the
digital age:
Around a third of companies stated that
they had increased spending on digital
media recognising the power of this
media to earn wider exposure for the
brand (rather than paid for exposure
through more traditional channels).
Equally, just as many companies were
yet to leverage this channel as a means
to promote their brands.
The retailer landscape remains
challenging:
The vast majority of companies feel that
the trade has become more focused on
trade margins than on what their
consumers want, prioritising their gains
ahead of real consumer needs. Equally,
around half felt that the greater focus on
value had allowed the retailers to place
less concern in sourcing from local Irish
producers.
Furthermore, nearly all companies felt
that the trading conditions with the
major multiples will only become
tougher in the next few years. Chart 2
overleaf highlights the main challenges
that companies feel they will face in the
next one to two years; the top concern
highlighted by around two thirds of
companies was avoiding further
pressure on margins by the trade.
“We have to convince retailers
to build an inclusive strategy
with smaller suppliers. It‟s not
about beating us all up and
squeezing us dry. If you
squeeze the supply chain too
much, it will kill itself. The
retailers seem to think there
are many suppliers out there
that it will not be an issue.”
The business outlook
Many companies see significant challenges ahead
Companies want to get back to
innovating, building brands and
finding new markets outside of the
domestic market:
Developing new products and brands
that meet the needs of today‟s
consumer was the second biggest
challenge that companies felt they faced
in the next one to two years. Whilst cost
reduction came third, finding budget to
invest in current brands was close
behind in fourth place.
Many of the companies we spoke to
highlighted their desire to get back to
building value in their brands.
“In long term, you look at what
is sustainable - we expect to
innovate through own brand
where we have more control.”
Significantly, over half the companies
surveyed felt that one of their biggest
challenges was finding new export
markets . As came through strongly in
our depth interviews, there is
recognition that the Irish domestic
market will offer limited opportunities in
the years to come and that growth may
only be achievable by finding new
markets in which to sell.
© 2010 Bord Bia, The Futures Company
27
TABLE 2
Which of the following, if any, do you see as the biggest challenges
facing your company in the next 1-2 years?
Rank
Action
Incidence
1
Avoiding further pressure on margins by the trade
Above 60%
2
Developing new products and brands that meet the needs
of today‟s consumer
Above 50%
3
Continuing to reduce production and distribution costs
Above 50%
4=
Finding budget to invest in current brands
Above 50%
4=
Finding new export markets
Above 50%
5
Staying up to date with the changing needs of Irish
consumers
Above 40%
7
Reducing debt
Below 30%
8=
Reducing promotional spend
Below 30%
The business outlook
Section summary
It has not been „doom and gloom‟
for all companies (albeit these are
the ones that are still „here‟): Of the
businesses surveyed, a good proportion
have highlighted that they have grown.
Often, they have benefited from
structural shifts in the market.
Margin erosion is a common story,
together with the need to offer deeper
discounts and promotions through
retailer pressures . Consequently, few
companies highlighted revenue growth.
Companies share the same view as
consumers in that their outlook for
the Irish economy is pessimistic:
Around half of the companies surveyed
felt that the Irish economy would
continue to contract in the next one to
two years, with a significant number
expecting a strong contraction.
Views of the economy seem largely
unrelated to the view the companies
hold for their own business
prospects over the next couple of
years: Around half of the companies
surveyed stated that they felt that their
© 2010 Bord Bia, The Futures Company
28
sales and revenues would grow in the
coming years. Views that may reflect the
confidence that has come with surviving
and their ability to adapt to recent
challenges.
Companies have looked at all
aspects of their businesses: Major
changes have been needed and many
companies we spoke to highlighted that
they expect to need to make further
changes into the future.
Companies have proactively sought
new sales opportunities ahead of
cost cutting: The top two actions have
been to launch new ranges aimed at a
more value driven consumer and to find
new routes to market to reach a new
customer base. These have taken
precedence over cutting production and
staff costs.
Brand promotion has been tactical
and not strategic: Many companies
have increased their marketing spend
rather than reducing it in the last one to
two years. However, the continued
desire of retailers to draw in custom
through deals and promotions is
potentially eroding brand equity.
The retailer landscape remains
challenging: The top concern
highlighted by around two thirds of
companies was avoiding further pressure
on margins by the trade in the years
ahead.
Companies want to get back to
innovating, building brands and
finding new markets outside of the
domestic market: Many of the
companies we spoke to highlighted their
desire to get back to building value in
their brands and the markets in which
they operate - a desire that many felt
might be unachievable given their
resources.
Key challenges and opportunities
Key challenges and opportunities
Welcome to the „New Normal‟
A consumer and business landscape
that is unlikely to significantly
change in the year ahead:
key for both businesses and consumers
alike to survive, and possibly thrive, in
the short to medium-term future.
It is clear that the consumer outlook in
ROI is strongly affected by the wider
global economic situation (or more
specifically, the situation of the
economies to which it is connected such
as the UK, US and Eurozone), as well as
the situation and prospects of those
close to them. The outlook for both
these factors does not suggest rapid
improvement is likely in the next one to
two years, though neither is there is
strong indication of significant decline.
Consequently, today‟s landscape can be
defined as the „new normal‟ - the
characteristics of which are likely to
shape consumer attitudes and
behaviours for the foreseeable future.
Five key characteristics of the new
normal were identified in the
research:
Companies will need to adapt to
survive and even thrive in this
landscape:
As Charles Darwin once observed, „It is
not the strongest species that survive,
nor the most intelligent, but the ones
most responsive to change.‟ Accepting
the permanence of today and adapting
to the conditions it presents will be the
© 2010 Bord Bia, The Futures Company
30
Five key characteristics were indentified
in our analysis. These can be
summarised by the acronym S.C.A.N.T.
– Scepticism, Control, Acceptance, New
Aspirations and Treading Carefully. This
section of the report explores the
evidence for these characteristics and
the implications they have for brands
and businesses. It is important to note,
that these characteristics also define the
landscape in Britain. Similar challenges
face companies exporting to Britain as
those more focussed on the Irish
domestic market.
The word „scant‟ itself can also be seen
to represent as an overarching value for
the „new normal‟: it is not about
abundance, nor is it about doing
without. „Scant‟ implies the need to be
resourceful to ensure that there is just
enough to get by. This is a sentiment
that seems to hold equally true for
consumers and companies alike.
Implications
Get back to building
trust and recognise
that new mechanisms
may be needed.
Help your consumers
gain or maintain
control.
Make sure you are fit
for purpose, not just
trying to fit in.
Make sure you are
marketing to the right
need.
Help mitigate the risks
of buying or trying
your products.
Key challenges and opportunities
Scepticism: The need to (re-)build trust to lay the
foundations for stronger relationships in the future
It is a good time to invest in your
brands:
Evidence
Evidence already suggests that the value
of brands has diminished for the Irish
and British consumer as they place
greater emphasis on price rather than
brands. Consequently, current market
activity focussed on deep discounts and
promotions will lead to a continued
weakening position for brands - a cycle
that most companies will need to break.
Indeed, analysis by McKinsey of past
recessions shows that companies who
increased their brand building spend in a
recession were the only ones whose
profits rose substantially when the
economy recovered. The value of brand
building now will pay back.
Building greater loyalty and trust should
be a more pressing objective for those
companies wishing to thrive in the
future.
Fortunately, today‟s media world does
not follow the same rules as the past.
Media can be „owned‟ by brands in terms
of their websites or even „earned‟
through the buzz of the internet allowing
low key „paid‟ campaigns to gain
exposure on levels that only the big
brands could have dreamed of.
© 2010 Bord Bia, The Futures Company
31
“I increasingly expect brands to prove
what they say in their advertising is
true”
67%
agree
“Price is more important to me than
brand names”
61%
agree
Source: TFC Global MONITOR 2010
Up
+5%
Source: TFC Global MONITOR 2010 vs. 2008
“We‟ve started buying
almost all own branded
items now. The quality
is exactly the same.”
Empty Nester, Female
“I now get ice pops for my children from
Aldi rather than expensive branded ice
creams and the „ice burgers‟ from
Dunnes. I‟m spending 10 euros less.
What I was buying before now seems
like such a waste.”
Younger Family, Female
“I buy own brands now on most things but I never
buy own brand tinned beans or peas – it has to be
Heinz or Batchelors – we prefer the taste.”
Pre-family Female
Branded products face competition from own labelled products and need to
work hard to communicate to consumers their added value.
Key challenges and opportunities
Scepticism: The need to (re-)build trust to lay the
foundations for stronger relationships in the future
Implications
Court comparison and highlight
the scale of approval
Show that you have nothing to
hide and be prepared to go to
new lengths
Often to become trusted we need
someone who is already trusted to
introduce or even recommend us. This
principle is being leveraged in today‟s
world but on a different scale. Coles
supermarket in Australia have created a
panel of 2,500 mums to regularly review
the own brand ranges. Products that do
not meet expectation of quality and value
are often delisted on the advice of this
group. Coles is building on the adage that
„mum knows best‟, albeit magnifying this
by 2,500 times.
Domino‟s Pizza launched an ad / contest
promising to never manipulate the
appearance of their food in advertising
following harsh criticism. Their „Domino‟s
Pulling the Cheese‟ ad goes behind-thescenes at a traditional Domino‟s Pizza
shoot to demonstrate the heavy
manipulation model pizzas undergo. At
the end of the revelatory and selfdeprecating ad, the on-shoot pizza chef
pledges that Domino‟s will never again
alter their pizza for their ads.
Paid media (TV, press, and posters etc.)
is clearly a luxury that many struggle to
afford. Focus needs to be on owned (eg
your website) and earned (eg exposure
through sites like You Tube) media. Great
campaigns that capture the imagination
can magnify the impact of a campaign.
Doritos has taken advantage of this
popular phenomenon by sponsoring a
contest in which consumers create their
own 30 second commercials for the US
SuperBowl. Last year two unemployed
brothers from Batesville, Indiana made an
ad for 2000 dollars and helped create
more media hype for the brand than any
previous campaign.
How can you show consumers the
truth behind you products and the
real way they are made ?
How can you create innovative ways
to make the most of owned and
earned media?
How can you amplify the power of
consumer recommendation?
© 2010 Bord Bia, The Futures Company
32
Leverage the power of owned
and earned media
Key challenges and opportunities
Control: Consumers value the brands and companies
that help them gain or maintain control
Consumers‟ relationship with time
has fundamentally changed:
Before the recession, consumers almost
always wanted to save time and were
happy to pay to do so. Now consumers
are happy to give time to save money.
Shopping lists have become a key
strategy. Consumers are shopping less
on impulse and have started to take
more control of their shopping budget by
creating shopping lists and sticking to
them. Consumers are fighting to resist
temptation and are seeking ways to
maintain control and to stick to their
plan.
Self-sufficiency and resourcefulness is
also a way to maintain control, eg
making sure that what you have is used
up, nothing goes to waste and what you
buy offers flexibility in terms of meal
solutions.
The spectrum of mealtime solutions from
the ready made meal to scratch cooking
is vast. Brands and companies have
opportunities to help consumer
experiment with cooking, helping to
develop skills to the next level, and
reducing the cost and risk of trying new
techniques and recipes.
© 2010 Bord Bia, The Futures Company
33
Evidence
“Since the recession I feel a greater
need to be as self-sufficient as
possible“
79%
agree
Up
+10%
“It’s important for me to get a greater
sense of control in every aspect of my
life”
78%
agree
Up
+15%
“Now I have a shopping list and only
buy what I need to buy. Before I used
to just go and load the trolley.”
Older Family, Female
“Instead of buying a pizza, I buy the
plain cheese and tomato base and
add the toppings myself with
whatever I have in the fridge – it‟s
much cheaper.”
Unemployed, Pre-family Male
It is becoming less about convenience and more about consideration as
consumers have learnt that cost savings can be made if time is spent upfront
researching their options or by being more resourceful.
Key challenges and opportunities
Control: Consumers value the brands and companies
that help them gain or maintain control
Implications
Providing just enough for the
job for which it is needed
Giving consumers flexibility on
promotions
Daily advice to keep people on
track
Delia‟s Classic Christmas Cake Ingredients
Pack makes things easier for those that
like the idea about making their own
Christmas cake. They‟ve measured out all
of the dry ingredients for your Christmas
cake and combined them in one handy
pack. Delias cake kit costs just £10, which
is great value when you consider that
when buying everything that you need in
separate packs and packets would cost
around £23 and you would have lots of
leftovers in your cupboards.
Each week, Carrefour offers its customers
the chance to select their own PromoLibre
products among the many departments
with the PromoLibre label. Having chosen
their three favourite products, the lowest
priced is refunded or discounted.
Spoonfed Suppers provides a solution for
time-pressed consumers who still wish to
cook from scratch and have healthy
nutritional meals. By signing up to the email list, consumers receive details of a
shopping list at the weekend, then daily
updates detailing recipes for supper using
the ingredients they‟ve purchased.
The meals are quick and easy to make,
low fat and nutritionally balanced.
Launched recently, the sign-up is totally
free
How can you allow consumers
flexibility over the promotions they
want from your brands?
How can you help consumers meal
plan and keep meal times
interesting?
How can you help people take the
next step in terms of cooking skills,
reduce possible wastage and the risk
of it going wrong?
© 2010 Bord Bia, The Futures Company
34
Key challenges and opportunities
Acceptance: Recognising that the world has changed
and re-engineering your brands and company to fit
Consumers‟ are recognising the
permanence of their situations:
Evidence
With two years since the start of the
recession, consumers are accepting the
fact that life has really changed and is
unlikely to change again any time soon.
Many consumers see their pre-recession
dream as largely out of reach and are
re-evaluating what is important to them
in today‟s world.
Equally, there is very much a feeling
that consumerism, as it once was, will
never return. Even if their personal
financial situations improved, many
consumers feel that they would broadly
keep the same habits, taking advantage
of the extra money in their pockets to
reduce debts and put money aside.
This outlook is shaping consumers views
of the marketplace more deeply and
creating a sense of permanence to their
needs and wants. Companies will have
to think more intelligently to maximise
value in the marketplace and consider if
their brands and businesses are best
placed to survive. Like consumers, many
brands may have to re-evaluate the
values they need for the coming years
and make the appropriate changes to
their proposition.
© 2010 Bord Bia, The Futures Company
35
“This recession will change global consumer
culture for ever”
61%
agree
“Some of the dreams I had for myself before
the recession are now out of my reach”
59%
agree
“If the recession improves,
then I will still shop the
same but put money away
for a rainy day”
Older Family, Female
A growing acceptance by consumers that fundamental changes are needed to
make life work within the resources they have at their disposal
Key challenges and opportunities
Acceptance: Recognising that the world has changed
and re-engineering your brands and company to fit
Implications
Is your current market able to
sustain the sales you need?
It is important for companies to recognise
that their existing customer base needs to
deliver the right level of return. Many
Irish companies are recognising the need
to find new customers in the years ahead.
Within the Irish market there are different
consumers that offer different potential
and scope to move away from price and
promotion lead sales. Companies need to
make bold decisions about the consumers
they want to keep and the channels they
sell in. Working out how to appeal to the
best consumers and finding the right
channel to target them could be critical to
longer-term survival
Make sure you are fit for purpose, not just trying to fit in
Trying to fit in?
M&S have adopted an
approach of promotion-led
marketing, whilst keeping
their proposition broadly the
same. „Dine in for £10‟ has
been extremely successful in
its uptake but has not lead to
profitable sales growth.
Equally, it may be time to recognise that
domestic demand alone may not be
sufficient to sustain a brand. Broadening
horizons to export markets may be the
only feasible solution to grow in the shortterm.
Fit for purpose?
essential Waitrose has
proved to be a formidable
weapon in the supermarket‟s
armoury. Far from simply
being a means of stopping
customers going elsewhere, it has actually boosted Waitrose's market share, making it
the fastest-growing of the multiples in Britain. Even in September 2009, barely six
months after it was launched, there was evidence that essential Waitrose was working.
TNS Worldpanel, which measures till-roll data, reported that sales at Waitrose surged by
11.2% during the 12 weeks to September 6th . The next best performer, Morrisons, was
up by 9.3%. That trend has continued into 2010.
What new markets should you be
seeking to exploit?
Do your brand values still resonate with your target audience? Do you talk to
their needs more effectively than the competition?
© 2010 Bord Bia, The Futures Company
36
Key challenges and opportunities
New Aspirations: Make sure that you understand what
your consumers aspire to and selling to the right need
Consumers have re-defined their
aspirations:
Evidence
Many things that consumers were
starting to take for granted in boom
years have been forgone in recent times.
Consumers are learning to do without
and redefining their aspirations
according to their means. The holiday in
the sun is largely out of reach and a
short break is becoming more
aspirational.
Equally, ethics appears to be reemerging: the recession put on hold
many more expensive ethical choices.
Consumers are now recognising that this
issue will not go away and they can still
make a difference within their means.
Here choices have to be affordable and
relevant to their concerns today.
Companies and brands can do a lot to
re-ignite dreams and aspirations and
help make the seemingly unobtainable
feel more within reach. With 23% of
Irish consumers agreeing „I've recently
put off buying something I could afford
because I didn't want to seem
insensitive to my friends or neighbours
with financial troubles‟, there seems to
be untapped potential in the
marketplace.
© 2010 Bord Bia, The Futures Company
37
“Since the recession I have learnt how
many things I can do without”
69%
agree
Up
+7%
“It is important to buy Irish products
to support the economy, even if they
sometimes cost more“
62%
agree
Up
+8%
“By choosing to do business with
companies that are more socially
responsible, I can make a real
difference to the world”
55%
agree
Up
+10%
When asked what
they would do if they
had more money in
their pocket, Irish
consumers‟ top
answer was buy
better cuts of meat
“Supervalue breaks –
you collect points on
your loyalty card and
get a weekend for 2
people – 2 nights at a
b&b and dinner. Lidl do
it as well as
Supervalue.”
Pre-family Female
Key challenges and opportunities
New Aspirations: Make sure that you understand what
your consumers aspire to and selling to the right need
Implications
Sell to the right need
Make more of better social and
environmental choices
Virgin Atlantic launched a £6m global
campaign which evokes the lush and racy
title sequences of James Bond films. The
campaign takes the viewer on a
metaphorical flight with Virgin Atlantic,
guiding them through a surreal and
glamorous world of airline iconography
and dramatising how it feels to fly with
the airline. The tone of the advert
recognises that business air travel is an
increasing luxury in today‟s world and
travellers now want more from what is a
rare, rather than everyday, experience.
“We are what we do” is the tagline of
“Less is more” (menos es más), a new
drink by Coca Cola in Spain. Menos es
más can be mixed with water and from
one little bottle you get at least seven big
glasses of this refreshing instant drink.
The product website is called “we are
what we do” and wants to inspire
consumers to contribute with everyday
actions to do good for the planet. The
idea has taken the simple concept of a
juice cordial and given it added meaning
at a time when people want to save
money and the planet.
Are you marketing to the right need?
Do your consumers see your brand as
an essential or luxury in their lives?
How can you better leverage the
social and environmental credentials
of your products to add value?
© 2010 Bord Bia, The Futures Company
38
Explore high-end premium
niches
Pinky Vodka is produced by
Barry Fitzwilliam Maxxium,
Ireland. Since launching
globally in 2008, Pinky's
sexy and sophisticated
bottle has been instantly
recognizable. Distilled five
times from pure glacial
water and slightly sweet
winter wheat, Pinky is hand
blended with violets, rose
petals, and ten other
botanicals. The drink is
very much aimed at
women, with celebrities
Paris Hilton, Beyonce and
Eva Longoria all reported
to be fans. This shows that
a well targeted premium
niche can be successful
even in today‟s world.
What premium niches can you
exploit? How can you better fulfil the
aspirations of more premium
consumers?
Key challenges and opportunities
Treading Carefully: Reduce the barriers to trial and
purchase by removing risk
Consumers want to mitigate risks of
making poor choices in the
marketplace:
Caution has become a key watch word
for consumers in today‟s marketplace;
almost every decision warrants
consideration to ensure that the risks
are limited or at best removed
altogether.Consumers are both
researching and comparing products
before actually trying them.
Companies and brands need to
recognise that ever increasing
assurances will be needed to gain new
custom. Consumers increasingly want
„no risk‟ choices and guarantees that
products can be returned if they do not
like them (not just that they are faulty
or poor quality).
Whilst at first this may appear to be an
extra cost for brands and companies to
bear, it is also an opportunity.
Companies can show true confidence in
their products or provide deeper and
richer moments of trial that they control.
Removing the risks to create a positive
first encounter, without offering deep
discounts or promotions, may be a
better way to build stronger
relationships even in the short-term.
© 2010 Bord Bia, The Futures Company
39
Evidence
“Lately, I’ve become more likely to
consider the potential risks of each
decision I make”
75%
agree
“I find myself thinking twice before
making even the smallest day-to-day
purchases”
69%
agree
“I am increasingly likely to spend time
researching a product before making
a purchase”
68%
agree
Up
+11%
Source: TFC Global MONITOR 2010
“I'm happier to pay more for a product
if it has a money back guarantee”
45%
agree
Source: TFC Global MONITOR 2010
A considered and cautious attitude pervades consumers‟ approach to all
aspects of their lives and is at its most acute in their approach to purchasing
the everyday essentials
Key challenges and opportunities
Treading Carefully: Reduce the barriers to trial and
purchase by removing risk
Implications
Give a deeper and more real
experience of the product
Raise the experience of trial
Remove the fear of not liking
the product
Domestic technology company Miele has
opened a number of experiential
showrooms in Dublin and London. The
showroom allows consumers to actually
use Miele washing appliances. Such a bold
initiative shows consumers really want to
try everything before they buy it to
remove any risks.
The new Asda Chosen by You range is
being put to the ultimate test by
challenging people to lay on a dinner
party entirely made up of items from the
range. Asda offer to provide the food –
with the consumer providing the venue,
the dinner conversation and, most
importantly, the critique of the food.
Consumers wishing to host an Asda
Chosen by You dinner party must leave
comment on the website saying why their
guests would make the perfect dinner
companions.
So confident is Morrisons about its
premium brand The Best, that it was
prepared to put the range to a cash-onthe-table test. During the first nine-anda-half weeks of the brand‟s launch, the
chain threw down a challenge to shoppers
to try its posh grub.
Marketing director Angus Maciver said:
“We think the quality and taste of our The
Best range is as good, if not better, than
any other premium own-label range on
the market, and we‟re prepared to put our
money where our mouth is.” If you don‟t
like it, Morrisons promise to give you your
money back.
How can you provide consumers a
more „real‟ trial and usage
experience of your products?
Can you raise the sense of occasion
at which consumers try your
products?
How far can you go to reassure
consumers that they are making a
no risk purchase?
© 2010 Bord Bia, The Futures Company
40
Technical Appendix
Technical Appendix
A multi-methodology approach to unlock insight
ECONOMIC ANALYSIS
Qualitative depths
In order to build up an understanding of
the macro context in which we were
conducting our research, we carried out
analysis of the Irish economy using desk
research using a variety in internal and
external resources. We took the
opportunity to test our hypotheses with
Professor Alan Barrett at the Economic
and Social Research Institute.
We recruited eight respondents across a
range of lifestages and income brackets.
We had a greater representation by
women (six respondents) reflecting the
fact our focus was on understanding how
people are managing their household
budgets, and in particular how the
recent economic events have affected
food shopping. The respondents were
invited to fill in a scrapbook exercise
asking them to record some of the
shopping activities and aspirations. This
was then discussed and explored in
follow up face to face in home depth
interviews lasting 90 minutes.
CONSUMER RESEARCH
Our consumer research consisted of an
update of the Feeling The Pinch
quantitative (FTP) survey together with
a qualitative element.
FTP Quant survey
COMPANIES
The survey was carried out online with a
nationally representative sample of 500
Irish adults. The fieldwork was carried
out in the last week of August 2010.
Previous waves of the FTP survey have
been carried in July 2008, June 2009
and Nov 2009.
A similar survey has also been carried
out in the UK with a sample of 1,000
adults.
© 2010 Bord Bia, The Futures Company
42
With support from Bord Bia, we explored
the commercial perspective by talking to
companies operating in Ireland.
Quant survey
67 businesses completed an online
survey in late October. Though this is
not a sufficient sample for extensive
analysis, within the sample there was a
balance of large, medium and small
companies, as well as mix of trade
profiles (half solely reliant on the ROI
domestic market for their revenues,
around one third mostly reliant and less
than a fifth of companies relying more
on export markets).
Depth interviews
We carried 10 phone interviews with the
below organisations who kindly gave us
time to talk to them about their
experiences of the recent economic
climate, as well as their responses and
outlook for the short to medium term.
The interviews were carried out in
September and October 2010.
– Butlers Chocolates
– DCC Foods Ltd
– Kepak Convenience Foods
– Flahavans
– Cully & Sully
– The Irish Dairy Board
– The Fastnet Brands Company Ltd
– Carton Bros
– Glanbia Consumer Foods
– Cooley Distillery