This is the fourth article in a series introducing the new magazine Global Retail Brands. Throughout the week we will feature one article a day from the new publication – In this article analysts from Planet Retail examine the impact of the Euro crisis on shopper behavior
Written by: Niklas Reinecke, Associate Analyst and David Hamilton, Analytics Solution Director, For Planet Retail
The economic crisis in Western Europe has reached the shelves in supermarkets. As consumer wallets grow thinner, manufacturers are increasingly offering smaller package sizes and simpler products to help reduce consumers’ weekly spend. Planet Retail and Aimia took a closer look at consumer behaviour and strategies from suppliers and retailers in Western Europe to provide an outlook on how to achieve growth in the region in the future.
Unilever Brings Developing Market Strategies To Europe
After years of declining and stagnating revenues in Western Europe, consumer goods manufacturer Unilever has revised its growth strategy. “Poverty is returning to Europe”, Jan Zijderverld, Unilever’s top European manager, recently told Financial Times Deutschland. “If a Spaniard only spends EUR17 (USD21) per shopping visit, you cannot sell him washing powder for half of his budget,” he added.
As a result, Unilever has begun offering smaller, less expensive, packages, so as to limit the strain on shoppers’ increasingly limited budgets. Those strategies, according to Zijderveld, were originally applied in developing markets in Asia. “In Indonesia, we sell single units of shampoo for two to three cents and earn decent money. We know how it works, but we forgot how to do it in Europe prior to the crisis.” The change of strategy seems to have paid off for the company as it has reported that revenues in Europe increased in 2011 by 0.7% and 1.1% in H1 2012.
Leaner Times Ahead
The strategy change of Unilever, and also other FMCG manufacturers, seems to make sense. According to the ‘Employment and Social Situation Review’ from the European Commission, there has been a sharp rise in the numbers of households experiencing financial distress across the EU during early 2012. These households struggle to meet their everyday living requirements and are either running into debt or drawing on savings. Such extreme constraint might mean a single incident, such as a broken-down car, could have dire consequences. The pressure on the consumer budget might not come as such a surprise given the austerity measures implemented in Greece, Portugal, Spain and Italy, as well as their persistently high unemployment rates. As a result, manufacturers and retailers need to revise their strategies to meet demand and achieve growth.