Knowledge Bank Blog, Category Strategy

Key rules for growing categories

We help lots of companies with growth strategies, across many categories.  I am struck by how often the key questions the companies are asking, are similar.  How can we grow a Category that has shown little or no growth recently?  In the context of deflation driven by Discounters?  With high levels of promotion in recent years having reset the consumer’s perception of what is a fair price?

The detail of the answers varies considerably but is always a combination of increasing usage and earning a price premium.  And intelligent merchandising as a fundamental support.

The first way to increase usage is to take the Category into occasions that it is not associated with.  Breakfast Biscuits is a well-known example, with Belvita leading the way to a whole new bay in most supermarkets.  Cooked Meats is another.  It used to be about something for a sandwich, but now it seeks growth from “ingredient for weeknight meals” and “on the go snacking”.  Yoghurt is a third.  Look at Arla expanding drinking yoghurt with Skyr and Arla Protein.  If the occasion is new for a category or brand, the volume sold is almost certainly incremental.

The second way to increase usage is to establish a new regime at an existing occasion.  Moist Toilet Tissue is an example.  For the uninitiated, Moist is used alongside Dry (paper) so now the consumer needs two products, not one.  In Shaving we can see a similar thing – pre shave, shave, post shave.  It is harder in food with many consumers looking to control calorie intake, but it can be done.  The naan with a curry, the wine in a meal deal, cake with coffee, especially out of home.  Again, if there’s a new step in the regime, much of the volume will be incremental.

If you can’t find new occasions or regimes, then earning a premium by being better is the alternative.  Companies like P&G and Unilever show the way.  “2 in 1” becomes “3 in 1” becomes “4 in 1” as the bar is raised and product performance improved.  These companies have consistently shown that with the right consumer insight, strong communication and the “body language” of premium pack design, consumers will pay more for better.  In food, the reason to believe is often provenance or artisanship – think of Kettle, Innocent, Bighams.  In alcohol, it can be pure aspiration – Corona or Peroni.

Whether you seek increased usage, or to earn a price premium, intelligent merchandising is a critical support.  There are many examples of the right products not being displayed optimally and category growth suffering.  Intelligent merchandising is about maximising distribution of the Category across relevant outlets in Grocery, Convenience, Forecourts and Food Service.  But as importantly, it is about careful design of flow and layout.  A basic understanding of how human beings allocate attention and make choices, tells us that all positions in store and on shelf are not equal.  Ensuring that the products most likely to deliver category growth have the best chance of being noticed and chosen, is central to success for Retailers and the products and brands they sell.

So the actions and priorities vary by category.  But the route to growth is always increasing usage or earning a premium, and intelligent merchandising is a crucial support.  Get these areas right, and your category can be grown, even in a challenging environment.

Jeremy Garlick is a Partner of Insight Traction, consulting with FMCG companies.  He was formerly Head of Insight at Sainsbury’s, Waitrose and Premier Foods.