In times of uncertainty, A-brands need to boost consumption, says Unilever Belgium top woman Silvia Wiesner. “Simply increasing the frequency of promotions is not the best idea right now.” She sees great online opportunities, but these require better data partnerships.
“We are experiencing exceptional times”
Unilever’s financial results are excellent, but the outlook is challenging, says the Austrian, who already has been working 17 years for the multinational. She is general manager of Unilever Belgium since the beginning of 2021 and also sits on the Benelux board.
“Last year we already saw a dramatic rise in costs, there was pressure on margins. We had expected that the rise in input costs would moderate in the second half of this year, but now we know that this will not happen, much to the contrary… The FAO (Food & Agricutlure Organisation) of the United Nations is talking about the highest global food prices since the introduction of their food price index. These are exceptional times.”
“What does that mean for us? The plans we had carefully worked out for months need to be adjusted. We need agility. First of all, we need to ensure that supply problems are as minimal as possible. So far, we have done a pretty good job in that respect. Secondly, we have a big task to boost consumption. We see that FMCG volumes are now falling significantly across Europe and also in Belgium: minus 8% in volume over the last few weeks. And three: how do we cover the cost increases we are seeing now?”
“Private label share has been declining for two years”
Consumers are now primarily concerned about the cost of living. Consumer confidence in March saw its steepest fall ever. What will be the impact on brands – and especially premium brands – when shoppers pay closer attention to their budgets?
“Some people will look for entry-level products or special offers. But I also know that quality expectations for lower priced products have increased. Look at private label developments: the price gap is smaller this year than in 2021. The share of private label in Belgium has been declining for two consecutive years now. There will be categories where this trend is now coming to a halt. We also know that A-brands play an important role in periods of uncertainty. You have grown up with them, you can rely on them in difficult times. Premiumisation has continued to rise. People wanted to pamper themselves at home when they could not do so outside. That will not go away.”
“Increasing the frequency of promotions is not the best idea”
Another interesting factor will be the promotions, Wiesner thinks. “Last year we saw the highest level ever for promotions in Belgium. Just like in 2009, also an economically difficult period in which we saw a rapid reaction in terms of promotions. But while in 2021 the frequency of promotions increased, their aggressiveness decreased. As a result, the impact on volumes also decreased. We got a lot of feedback from consumers about what works and what doesn’t work for them. For us, it is clear: simply increasing the frequency of promotions is not the best idea. You don’t create value that way. Just look at the dishwasher market. We need to do the right promotions: relevant for shoppers, simple in the mechanics.”
Will the discount channel grow then? “Based on the information I’ve seen, inflation in the past did not impact store choice that much. Looking at Europanel data, inflation does not have a direct effect on discounter share development. We will have to see what happens in this particular environment.”
“More demand for instant gratification”
Polarisation is the word that perhaps best describes the current situation. “You will see an increased demand for entry-level products, and at the same time an increasing demand for premium offerings. Different socio-demographic factors are at play here. The continued growth of premium, health and sustainability is accelerated by consumers with higher incomes and by younger generations. The growth of entry-level products is driven by consumers who cannot afford more because they see their disposable income shrinking.”
“We are experiencing super interesting times in terms of consumer behaviour. I think we will see more demand for instant gratification. All this uncertainty makes people less inclined to put off their desires: they want it here and now. That is interesting for impulse categories. We are seeing the emergence of a kind of ‘last minute’ lifestyle: has everyone already planned their holidays for the rest of the year? I doubt it… People are hopping on last-minute offers. On top of that, there is a desire for security. We have already seen some panic buying, and also signs that shoppers are more likely to buy an extra pack, just to be on the safe side.”
“We need to revisit the plans”
Does Unilever now need to adjust its promotional campaigns, product launches and communication plans? “In terms of innovation, I don’t see any changes. As A-brands, we need to bring excitement to the categories, stimulate consumption – especially as volumes are falling. As an innovator, we don’t have to be afraid. But of course, this super-challenging situation requires agility from everyone. We need to resolve this together with our retail partners: we need to revisit the plans we made a few months ago. There will be adjustments, with proposals from us and proposals from the retailers. We are doing this as partners.”
Nevertheless, the atmosphere in the sector is troubled: we hear stories of trade disputes, retailers accuse manufacturers of taking advantage of the situation to raise prices excessively… But Silvia Wiesner, who can compare the situation with the German-speaking countries, sees a good basis for cooperation in Belgium.
“It also depends on how you show up. As a representative of the third largest FMCG supplier in Belgium, I don’t want to come across as arrogant. I want to be a reliable partner that pursues common goals. What is crucial now is that there is trust, and that also relates to transparency. As long as your partners feel they can trust you, you can face the challenges together. Of course you have more difficult conversations now. We have absorbed a lot of the costs that were rising week after week as much as possible ourselves over the past few months. But you reach a point where that is no longer possible.”
“The end of the offline organisation”
Meanwhile, the food retail landscape is changing dramatically, new business models are claiming their place: pure players, meal delivery companies, quick commerce, meal boxes… These are also new potential partners for Unilever. Is the dominant position of the traditional supermarket under threat?
“I prefer to look at the opportunities rather than the threats. There is room for just about every retail channel or format. It is important to get a clear picture of which consumer and which needs you want to serve. It’s not about offline or online anymore, we live in an omnichannel world. I’m talking about the end of the offline organisation. I don’t want a sales or marketing organisation that thinks in terms of an offline and online world, it all comes together. I also expect our retail partners to integrate their approaches much more.”
Important now is to set the right priorities: “Where do we start? Where are the biggest opportunities? Where can I experiment at low cost? Where can I gain consumer insights? In Belgium, I don’t see direct-to-consumer as a priority for us. Ice Cream Now is a big priority, though: we’re working with ordering platforms like Deliveroo, Uber Eats and Just Eat Takeway to offer the perfect dessert to people who order a meal online. In doing so, we are responding to a clear consumer and customer need and shortening the funnel.”
“Better partnerships needed around data sharing”
No one needs to be afraid of e-commerce, Wiesner emphasises. “If you’re already doing a good job offline, you should be ready to do a good job online too, because you put the consumer at the heart of everything you do. Grocery.com is a clear focus for us because of the size of the opportunity.”
But the online experience does present a challenge: “Online, shoppers are more inclined to give up their shopping basket. That doesn’t happen in the physical store. So you have to do it really well: get the basics right, the experience has to be easy. Online shopping is about convenience. Smartphone shopping is often also impulsive. That offers a lot of unique opportunities.”
“There is a demand for experience, for example in personal care: how can you include those emotional elements online, the storytelling… Consumers are certainly also open to personalising the offer. How do we make that work? Better partnerships around data sharing are needed. I don’t want to waste my time negotiating about the price tag of data: if we can agree that shared data is essential to better serve our consumers and shoppers, then it is clear that we have a common interest.”
