Context

You’ve completed your Category Strategy. You know where you are heading. You have plotted your timed course to get there because you’ve created a quantified set of prioritised Growth Drivers and Activation Platforms and you have a multi-functional set of Strategic Imperatives, which are shaping your corporate and brand plans across the next three to five years. You have aligned the key Growth Drivers to the opportunities in your major customers and your joint business plans are in place.

Everything is clear and ordered ….and then the metaphorical weather bomb drops. The cost-of-living crisis has interrupted our plans:

• Consumer and shopper behaviours have changed, affecting the company’s short term plans
• Cost of goods have sky-rocketed, leaving previously well-understood brand P&Ls in tatters

Suddenly the route is no longer clear and you and your commercial teams are no longer looking into relatively calm and assured waters, but rather into a raging storm of uncertainty. What do you do in the face of mountainous waves?

What are your options?

It would be all too easy to abandon ship and forget the strategic destination already targeted. Customer strategies are increasingly becoming short-term. Shopper habits are changing, seemingly overnight. The apparent need for knee-jerk reactions seems inevitable and irresistible.

But if the last two and a half years of COVID disruption has taught us nothing else, it is that a well-crafted Category Strategy, founded upon consumer needs, remains relevant despite dramatic, unforeseen circumstances. The destination remains the same although the course to get there needs to flex. Will you need to change some priorities? Almost inevitably, yes. Will the base of your vision remain solid? Yes. Can you retain a position of most trusted advisor with your major customers? Again, yes.

Successful companies plot a different course towards the destination. They navigate their way by continually tacking into the wind to reach the destination. They revise their short-term priorities where they need to. They align their business internally behind these revised strategies and they re-align with key customers so that there is common agreement on any new direction required.

A Board Director of one of our clients (a global household name in their Food category) recently told us:

“Investing in the time to build a coherent strategy for the category, both off-line and online, gives confidence to us and retailers that we are serious about delivering transformation. Category Strategies can also help protect business at times of challenge. We know from experience, when faced with inflationary pressures, that taking the time to show both parties are working towards the same category goals can help retailers rebalance decisions, basing them as much on future opportunities as on simply achieving short-term targets“.

Mention the word ‘category’ and most people automatically think about a Sales or Customer Marketing functional responsibility. What is so refreshing in the quotation above is the fact that it’s from the organisation’s Marketing Director. Category Growth Strategies attempt to target consumer behaviours, so it’s vital that the Marketing function is on board. His words demonstrate two things:

• How having a Category Strategy and supporting multi-channel strategies develops confidence in both the organisation and then, out to its customers
• That short-term storms will always exist, but the stronger the initial buy-in from customers, the more considered and less-knee jerk will be any decisions fundamentally impacting the original objectives

What should we do to weather the storm and ensure our Category Strategy remains on course?

Category Strategies are built around Growth Drivers, which in turn are created out of a very clear understanding of the key five Ws. So, it makes sense to answer this question by looking at the impact of changes to the economic conditions by each of the five Ws. Some will need to be reviewed and modified. Others will not. For each Growth Driver we need to review our short-term priorities and planned activities.

The Why

The core consumer-led needs that help determine categories are likely to remain unchanged, even in turbulent times. Consumers still crave that stimulating first cup of the day coffee. Fresh smelling laundry still needs to be done. Refreshing soft drinks are still a great way to cool down on a hot summer’s day. Meals still need to be prepared and the washing up still needs to be done.

So, the underlying consumer needs remain constant. If your category strategy is built on your most thorough understanding of consumer needs, you start from a fundamentally strong place.

However, turbulent conditions will often provide category-specific additional reasons and opportunities to make your brands even more relevant. In these conditions, many suppliers look to create relevant brand differentiation, whilst still satisfying the core category needs.

• For example, as energy prices have rocketed, the major manufacturers have created pods which effectively wash at lower temperatures with a claimed 60% saving on washing machine energy bills. Similarly, dishwashing detergent manufacturers are looking to convince buyers that their products are so good that the need to pre-rinse is eliminated, creating convenience and reduced utility bills.

Course correction implications on your Growth Drivers

Needs are needs, but what can you do to tap into further, often latent, economic crisis-related needs on top of or within the core category needs? This may mean accelerating already planned I&R. It might mean creating new ‘whys’ to buy your brands that aren’t yet under consideration. It will require new shopper communication across the consumer shopper journey to inform and persuade shoppers to consider and purchase your brand.

The When

Once again, targeted core day parts are unlikely to significantly change. Morning coffee needs are still satisfied in the morning. In-home laundry may be timed to make use of cheaper overnight energy tariffs, but this has little impact on the basic products being used in machines. However, depending on the category, the secondary and tertiary day parts may come under additional pressure.

Course correction implications on your Growth Drivers

Consider activations and communications which protect existing levels of category and brand frequency. As people spend less on holidays and luxury items, they are seeking everyday rewards to replace those moments. Consider accelerating strategies that are designed to create new day part usage or treating moments.

The Who

This is the first of the five Ws where we may need to re-shape our focus. A well-defined Category Growth Driver is always targeted at specific typologies. Rarely does it have a single target typology. Changes in economic conditions does not mean that a Driver’s typologies are incorrect but rather that their priority might change.

Course correction implications on your Growth Drivers

Consider the prioritisation of activations and spend against the most important typologies: think about the group most impacted and the group most immune to economic contextual heavy waters. Create brand communication relevant to the core attitudinal considerations of each. For example, Unilever’s ‘Taste Not Waste’ campaign on Hellman’s Mayonnaise.

The Where

When a Growth Driver is created, the Where is centred on the place of consumption which in turn, strongly influences the channels where the product purchase is made. Post COVID and subsequent cost of living crises, shoppers have increasingly returned to in-store where they can make more tangible comparisons. Consumers are much more savvy at comparing and researching on line before making purchases (ROPO). Shoppers are increasingly trading away from OOH to In-Home in order to save money. For example, the rise of in-home meal bundles where a starter, main and dessert for two, often including a bottle of wine, can be sold at the price of a former OOH restaurant main course for one. Now is the time to maximise your understanding of ROI of different activations across all channels and re-prioritise accordingly.

Course correction implications on your Growth Drivers

Accelerate plans to re-focus portfolio development in those channels where your target consumers are increasingly shifting their shopping behaviours towards. Ensure your Retail Media and O2O strategies are clear and robust with a consistent brand message that connects across all channels.

The What

This is arguably the most interesting one – the products you have or need to develop that best satisfy the previous four Ws.
Price will become an increasingly important factor to consider but this does not necessarily mean that a Growth Driver should be dismissed. It is very rare for a Growth Driver to be totally focussed on a set of products priced at either end of a pricing spectrum. It can happen, but it’s not commonplace. Instead, price tiers from Good to Better to Best typically exist within the majority of Growth Drivers.

Course correction implications on your Growth Drivers

Review your portfolio to capitalise and accelerate on the most relevant SKUs needed to satisfy the missions serviced by the different channels your targets are shopping in. Do you have an OOH portfolio that requires better balancing with more In-home focused SKUs? Can you take advantage of prevailing conditions in now critical channels? Focus on capturing the consumers who are ‘trading-down’ from premium to everyday products, utilising packing and shopper communications which reinforce the core benefits and remind people of the value for money, not just the price. For example, Fairy Liquid packaging and SRP states that it lasts twice as long and thereby justifies its initially higher comparative price point. Simply reducing your price to compete with your category’s cheapest on display products runs the risk of damaging your long-term brand equity. Price engineering to hit a new price point within the desired core need that your Growth Driver targets is another way to tackle this challenge. The connection of your Category Strategy teams and your Revenue Growth Management teams has never been more important.

Summary

A well-crafted Category Strategy remains a destination-setting real point of competitive advantage. Stormy conditions mean that some priorities may change as you tack a new course into the wind, but the destination remains the same. Don’t abandon ship – hold your nerve and plot a new course to the destination. Growth Drivers will remain constant but you should consider re-prioritising them based on how effectively you can:

• Reprioritise your target typology consumers, if required
• Better differentiate your portfolio with more compelling brand differentiation within the core category needs
• Re-assess your priority channels. If a current focus channel is less relevant, how much can be made up and at what level of margin through others?
• Re-assess the portfolio required to sell in the newly prioritised channels

As another of our clients recently said about his experiences and ambitions at the functional and corporate levels:

“We aim to consistently deliver more sustainable and profitable plans for growth. We influence the whole category we choose to play in. We acquire more of the available growth, and we are valued internally and externally as experts and valued business partners! After all, if customers find someone who can help identify where growth will come from and who then lead the crafting of strategies to acquire it, they don’t let them go’’. (Global Category and Customer Marketing Director)

If you have come to this article from the teaser posted on LinkedIn, many thanks for your interest. Great Category Growth Strategies depend on great insights at both the category-specific level and at a more macro contextual level. We have a free download available of Quantic’s view on these contextual trends and how they might impact Food and Drink businesses. To access this, please click here.

We hope to engage further with you, so if you have any questions, builds or thoughts, please don’t hesitate to contact either myself or Steve Hildebrand on duncan@thequanticgroup.com or steve@thequanticgroup.com