Nestle: E-commerce a permanent post-Covid consumer shift but 'patience' needed as supply chain, communications adapt
Welcome to the first episode in the Reset Now video leadership series with leading CMOs in a new partnership between Mi3, Nine and the Australian Association of National Advertisers. This week Martin Brown, director of e-business, strategy and marketing for Nestlé Oceania, says a lasting impact of the coronavirus will be a permanent shift to online shopping. While the 'new normal' brings many uncertainties, Brown is clear on two things: Cutting brand investment is not an option, if brands can afford it; and marketers need to plan for between two and 10 quarters of negative growth.
You need to know this:
- Nestlé is scenario planning for six months to 2.5 years of negative growth
- A “a huge swing to online” shopping during lockdown is likely to cement permanent behavioural change and accelerate Australia's e-commerce transition
- Amid restrictions, Nestlé taking a more agile approach, using weekly cycles to understand consumers' changing needs and mindsets
- Cut through and differentiation in comms is critical. Nestlé is adapting processes to react faster
- Nestlé is trying to add value with brand-led lockdown classes for kids and families
- Brown not planning to cut ad budgets, and backs ESOV principle
- FMCG brands must be visible and engaged as consumers feel the pinch and may be more attracted to private labels. Bundling products an increasing opportunity
- Crisis is an opportunity for marketers to show leadership, learn new skills, get closer to customers
- “A bunch of marketing case studies are going to be written around the way in which brands responded to this challenge” – Martin Brown
- Adaptability is key
“We definitely see an increase in penetration of online ... Once people have tested an alternative, if it really works for them, they are going to stick with it.”
Accelerating e-commerce shift
The full human and economic cost of Covid-19 cannot yet be determined. On the latter, Nestle's scenario planning ranges from a technical recession, two quarters of negative economic growth, to a "worst case" 10 quarters, says Brown.
Amid the uncertainty, however, there are some relatively safe bets - and Brown is backing an accelerated digital transition.
He believes the “huge swing” towards online shopping necessitated by lockdowns is a habit that will remain long after restrictions ease. Australia, behind much of the world in e-commerce, will now start to catch up.
“We definitely see an increase in penetration of online,” says Brown. “Once people have tested an alternative, if it really works for them, they are going to stick with it.”
That represents a major opportunity for FMCG brands that can deliver. While early lockdown panic buying stretched many supply chains to breaking point, “online availability is absolutely essential” going forward, says Brown.
As Australia’s digital shift gathers pace, search strategies will become “absolutely essential” for brands. Brown also sees strong opportunity for marketers that can “find the right way to bundle brands together for specific occasions and needs”. (In the UK, for example, recipe box sales have soared five fold during lockdown.)
“The greater insight you can bring to that, the more likely you are to serve out something of value and interest in an online environment,” says Brown.
“What people are going to remember, long after the crisis has finished, is how you acted. That's true of companies and that's true of brands and that's true of leaders.”
The fluidity of the current situation demands greater agility from marketers and brands.
“More than ever before, it is absolutely critical that you've got a consumer insights team that can help you on a weekly cycle,” says Brown.
“Get an understanding about how this crisis is playing out on households and individuals in terms of emotionally, how is it affecting how they feel? What are their needs that we can respond to?”
Translating insight to messaging, however, is not always straightforward for big brand structures. Nestlé has faced “a really big challenge” to deliver “relevant and topical” communications at speed, admits Brown.
“So we’ve had to deploy completely different production techniques, and engage ourselves more in the conversation as opposed to broadcasting long pre-prepared messages.”
Brown thinks going through that process “is actually going to deliver better marketing communications, and increase levels of relevance.”
But to stand out “with a level of distinctiveness as we are doing it on the fly” remains a key challenge for brands trying to adapt to the 'new normal'.
“If you look at the lessons of the global financial crisis, those brands that were able to continue to invest not only did better during the crisis period, but did better and outperformed the market over the next decade.”
When the virus first hit, every brand rushed out with similar messaging: 'We are there for you'.
“That came from a very good place but obviously, the more of it that got out there, the less impact that had,” says Brown.
“Our focus right now is to be relevant, useful, kind, comforting, but ultimately, to be of value - and that really comes down to providing something useful and valuable for the change of circumstances and the needs that you have right now.”
Some brands, says Brown, have a “natural role to play at a time like this”. He cites Maggi and Milo by way of example.
For the former, Nestlé has been harnessing user-generated home cooking classes for families. With Milo, it's using sports stars such as Australia netball captain Caitlin Bassett to host exercise programmes for kids. “For those of us who have got young kids, they're crawling up the walls in lockdown. Keeping them engaged is hard,” says Brown. “So we’ll be running a series, which we think is quite valuable.”
“Increasing your investment rate with non distinctive advertising is not going to be a great investment for you. It comes down to what people see in your brand – and whether or not they notice it in the first place.”
While some brands have responded to the crisis by pulling spend, Nestlé will continue to invest. Brands that want to thrive – particularly as consumer spending is squeezed – must keep advertising, suggests Brown.
“If you look at the lessons of the global financial crisis, those brands that were able to continue to invest not only did better during the crisis period, but did better and outperformed the market in growth over the next decade,” he says.
Nestlé will follow that playbook.
“Obviously there has been some changes in our media plans, and the content strategy has changed. But it’s absolutely a determination to continue to invest,” says Brown.
“Brands play a really important role in people’s lives right now. There are a lot of people watching screens and they are looking for people to play a role in the content that they engage with. You take something away from someone and they miss it,” he suggests. “People enjoy great advertising. It's beholden on us to be relevant, useful, and engaging. Doing so right now, we can get a better ROI than ever before.”
But he reiterates the challenge for brands is to communicate in a way that is both relevant and distinctive.
“Do that well and right now you can engage with consumers that might otherwise not have discovered your brand. Or for those that are rediscovering your brand for the first time in a long time, you can start reinforcing that relationship and build something incredibly valuable over time,” says Brown.
“So if you can afford it, now is a really good time to be investing in advertising and building brands.”
Investment + good ads = growth
Brown subscribes to the excess share of voice, or ESOV principle, a theory that suggests brands that spend above their market share achieve higher growth than those that do not. He cites KitKat as a brand that has benefitted.
“We made a significant change in our investment strategy and lifted our investment levels concurrent with doing much more distinctive communication,” says Brown. “The content cut through and the branding on that seriously increased. Off the back of that, the brand has gone through an extended period of market share growth.”
But Brown underlines that there is no point throwing money at bland ads.
“Increasing your investment rate with non-distinctive advertising is not going to be a great investment for you. It comes down to what people see in your brand – and whether or not they notice it in the first place.”
“If you can afford it, now is a really good time to be investing in advertising and building brands.”
As brands that invest their way through the Covid-19 crisis are more likely to achieve lasting growth, so too will marketers that rise to the challenge, suggests Brown.
“What people are going to remember, long after the crisis has finished, is how you acted. That's true of companies and that's true of brands and that's true of leaders,” he says.
“Marketers have a great opportunity to be very influential leaders in their organisation and drive a greater sense of optimism and positivity as well as true consumer connection.
For future generations, there the coronavirus crisis will produce "a bunch of marketing case studies around the way in which brands responded to this challenge". But Brown thinks there is an opportunity for today's marketers to hone their craft and emerge stronger.
“I think that working through a crisis builds your skills and I think we will have better marketers and better run brands for it,” says Brown.
As in nature, the most adaptable operators will thrive.
“It is really important to recognise that you have to change your plan, that you have to be more agile in developing something that is more relevant to where you are,” says Brown.
“At the end of the day a lot of brands are going to be in a situation where consumers are going to be weighing up whether to stick with your brand or go to private label. The quality of your marketing and your ability to adapt to their needs in everything from the language you communicate to them, to the way in which your product bundle comes together and your price and promotion strategy work, these are all critical levers to get right,” says Brown.
“So you need to adapt really quickly.”
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