Ongoing uncertainty and tough economic conditions are affecting all aspects of the natural foods industry. From brands to retailers, consumers, investors, and manufacturers, everyone is feeling the effects of long-term disruptions and instability.
Recessions exacerbate existing problems and today’s retail climate is already saddled with significant challenges for all stakeholders.
Some of the realities facing brands during a recession include understaffed retailers, resulting in empty shelves, spotty promotional execution, planogram errors, and brands losing space and distribution; distributor issues due to increased input costs and velocity requirements; increasing production costs causing manufacturers to up minimum quantities in order to preserve healthy margins; more cautious investors, which decelerates funding; and more conservative spending habits among consumers amid inflation.
But while recessions present challenges, they also offer opportunities. Some of the world’s most successful companies were born out of recessions including Microsoft, Apple, Netflix, and Airbnb. The common denominator of these winners? They leveraged tough economic times to step back, reflect on their position, industry, and financial situations, and then made tough but bold decisions.
Here’s how today’s natural food brands should leverage the uncertain economic climate as an opportunity to scale. Download the full white paper here.
Support your top retailers with extra hands
Historically, inflation puts upward pressure on input costs for retailers and crunches margins. Generally, reducing labor hours is one of the first decisions retailers make to defend their bottom line.
As a result, stores begin to suffer from out-of-stocks, planogram errors, and promotional execution gaps. There simply aren’t enough hands to execute. Brands without retail backup should expect to fall victim to these execution gaps. Those who support their retailers will have a prime opportunity to fill competitors’ empty shelf space, expand their real estate, and gain much more visibility to consumers.
Because they need the help, retailers are providing brands that offer store support more opportunities. Buyers are more apt to cut in new products if they know the brand has retail support to manage the changeovers and resets. Store managers are more willing to give incremental placements if they know they have help stocking and managing them.
This is a golden opportunity for brand’s to increase distribution and visibility by supporting their key retailers. An aggressive retail strategy means acquiring a bigger slice of market share.
Invest in programs and tools to optimize pricing and promotion
Surveys show that more than 50 percent of consumers have already changed their eating habits as a result of inflation. Private label and commodities, which tend to do well during these times, are outperforming name brands.
Ironically, many brands have begun to reduce spending on promotions and pricing tools, which will result in a loss of loyalty as shoppers shift focus to deals and value. If there was a time to double down on investing in promotional and pricing tools, it is now. Brands that incent the shopper will find their products in baskets they haven’t been able to acquire prior — so long as the company can execute promos at scale. Retail support is a great way to ensure the money put toward promotions brings a proper return on investment.
For brands that wish to invest in pricing tools but aren’t in promotional calendars, it is still possible to deploy tactics to get consumers price cuts. One way to do that is by running an instant redeemable coupon (IRC) program, which inspires impulse purchases and encourages customers to try new products. Should brands have retail support and find themselves outside of promotional calendars, deploying an IRC program can help provide price relief for cost-conscious shoppers.
Brands are taking a sledgehammer to their budgets in a scramble to manage cash flow when they should be using scalpels — shaving in some areas but investing deeper in others. The unintended consequences of blanket reductions will be massive. Brands should position themselves appropriately and deploy the right tools to assist with price, which will ultimately lead to the acquisition of more new baskets than ever.
Interested in learning more? Join the webinar “A Mindset Shift: Recession as a Time to Advance at Retail, Not Retreat” on September 21, 2022 at 1 pm EST, hosted by Dirty Hands, the leading natural food merchandising company active in Whole Foods, Sprouts, and top INFRA, NCG and Natural Independent Retailers.
Download the full white paper from Dirty Hands here.