Knowledge Bank Blog, Behaviour Change, Pricing & Promotions

Riding the Inflation Wave

Where would you go to find the biggest waves in the world?

Off the shores of Hawaii? Off the coast of South Africa? Off the beaches of Australia?

None of these.

Instead you’d go to a small, picturesque town on Portugal’s ragged west coast. The town is called Praia de Nate.

There you will find a wave known as ‘Nazare’. Nazare is big. Really big. It’s a freak of nature created by the largest underwater canyon in Europe.

It was here on 29th October 2020 that German surfer Sebastian Steudtner rode into the Guinness World Records.

He rode the biggest wave ever surfed. It was 86 feet.

Words don’t do it justice. Look at the picture at the top of the blog.

Steudtner said afterwards “I remember thinking ‘oh that’s fast’. The wave was chattering, crazy. It felt big, but at the time, I wasn’t really sure how big. That’s how it is out there. You just keep going.”

Why are we talking about this? The latest figure for food price inflation is 16.8%. It has risen for 17 consecutive months. It’s a wave that continues to get bigger.

Shoppers are looking around. Having to re-evaluate their purchase decisions. Retailers are looking around. Then stepping up the price battle. Manufacturers are looking both ways. On to their fourth or fifth price increase with retailers. Desperately trying to retain shoppers.

However, the wave is both an opportunity and a threat.

It’s an opportunity for those who react. Catch it at its peak and you can take a long ride.

But it’s a threat for those who don’t react. Sit on your board with your back to it and you will get hit.

So, how can you give yourself the best chance of riding the wave?

Be (more…) ESSENTIAL. Different categories will be in different places on the essential to non-essential curve. But when you think about it, there are very few truly essential categories. Toilet paper. Toothpaste. Milk. Detergent. Maybe wine, gin and chocolate. Some of you are nodding. You know who you are.

Outside these, most categories are not essential. There are a lot of discretionary categories. You don’t need to drink fruit juice. You don’t have to eat yoghurts. You don’t have to use skincare. There are a lot of substitutable categories. Want a snack? There are loads of options.

So, most categories and products are never going to be truly essential. But they can make themselves more essential. They can reinforce why shoppers should buy (& use) them. Why it’s as important as ever to buy (& use) them. Why it’s better to buy (& use) them instead of the other things they could buy instead. Frozen is a great example of a category that has been doing this.

The more essential you are the more likely you to ride the wave.

Be (more…) AFFORDABLE. Easy to say. Harder to do. Your pricing is your pricing, right? Yes, to a certain extent. But when we think affordability, we tend to default to base price and promotions. What about looking at pack sizing instead? Identifying how you can use pack size to make your products affordable to more people.

It could be the bigger pack that delivers lower cost per unit for shoppers who have the cash to buy in larger quantities (the pay day size…?). It could also be smaller pack sizes. Years ago when Unilever introduced single dose sachets (e.g. skincare, shampoo) in developing markets, it was a game changer. Suddenly a huge chunk of the population could afford to buy a product that they didn’t have the cash to buy before. Our industry is often afraid of smaller packs. The fear of existing shoppers buying less. Maybe look at it the other way. A whole new chunk of shoppers could start buying you.

The more affordable you are the more likely you are to ride the wave.

Be (more…) VERSATILE. Versatility opens up options. If you’re kitchen roll, being used for more tasks opens up occasions. If you’re a mixer, being paired with more spirits does the same. Versatility can be a real strength.

BUT it’s got to be “good” versatility. Good versatility means targeting and specifying the most relevant tasks if you are kitchen roll. Targeting and specifying the most relevant complementary spirits if you are a mixer. Shoppers still need to have a clear idea of when or how to use you.

“Bad” versatility is when you cast the net too wide. You see all the occasions up for grabs, so you go after all of them. We saw communication from a snacking brand recently. On one piece of POS it said, “power up your morning”, “blast through the afternoon”, “snacking on the go”, “elevate your evening together”. The only thing missing was the midnight snack. Try to be the jack of all trades and you will be master of none.

The more “good” versatility you can offer, the more likely you are to ride the wave.

These are just a few areas that can help you. We’ve talked about others – your value messaging – before. There are lots of tools you can deploy.

In surfing, timing is everything. It often is in the FMCG world too.

Are you going to ride the wave or are going to get hit by it?

Feel free to forward. Have a great weekend. Speak to you in fortnight.