3 Ways FMCG brands are adapting to inflation-inspired changes in consumer behaviour
By Joseph Ekeng
Under an environment of steadily rising inflation, Nigerian consumers have found themselves in a situation of fast eroding purchasing power.
The rising commodity prices worsened by sustained forex crises and other macroeconomic challenges mean consumers are feeling the heat. Naturally, consumers are adapting by changing their consumption patterns: eating even more often at home, trading down to cheaper products, and shopping at retailers they perceive are doing better at managing prices.
This also means that brand loyalty is no longer considered sacrosanct as customers are breaking ranks with their favourite brands and replacing them with cheaper or more affordable alternatives. “Now consumers are starting to adopt more value-conscious shopping behaviours,” experts said.
According to the National Bureau of Statistics, Nigeria’s headline inflation rate rose for the second consecutive month to 21.91 per cent in February 2023, the highest in 17 years, from 21.82 per cent in January. Food inflation, which is also at the highest in 17 years, increased to 24.35 per cent in February from 24.32 per cent in the previous month.
For brands, this paints a gloomy picture because their survival rests on the sustained patronage of goods and services. And if consumers no longer find their product attractive, it means they face a bleak future.
Brands’ coping mechanism
Under these circumstances, smart marketers and brand owners have deployed cutting-edge innovation and marketing techniques, which allows them to demonstrate empathy with consumers and continue to engage with them irrespective of changing consumption patterns or income level.
New flavours to the Rescue
One of the ways that brands are coping with the pressure is by rolling out new flavours to sustain brand loyalty and in particular appeal to a new audience.
In April last year, Aspira Nigeria Limited launched four variants of Viva Dish Washing Liquid in different flavours (Original, Anti-Bacterial, Sea Breeze and Zesty Lemon).
Golden Penny Foods, a subsidiary of Flour Mills of Nigeria Plc, also recently launched a new noodle flavour called Golden Penny Jollof Hot Hot Noodles. Last November, Dufil Prima Foods unveiled Indomie Jollof Chicken, a new addition to the list of its flavours.
In the alcoholic and non-alcoholic drink segment, the past couple of years has seen a deluge of new flavours, with top players like Nigerian Breweries and Guinness Nigeria, leading the pack.
Since 2020, Nigerian Breweries have swelled its portfolio with flavoured drinks such as Star Radler’s ‘Red Fruit’ and Citrus flavour, while Guinness Nigeria introduced Tigernut and Ginger flavour within the same period.
NB Plc also launched new Maltina flavours including Maltina Pineapple and Maltina Vanilla.
During the launch, Emmanuel Oriakhi Marketing Director of NB Plc said “The innovation is a result of consumer feedback to diversify in malt as young consumers are looking for exciting flavour experiences and variety in their favourite malt drink, just as they seek excitement in their daily lives.”
Gbolahan Ologunro, a market analyst and portfolio manager at FBNQuest said: “By launching new flavours, from a consumer psychology perspective, there is that behavioural pattern you would expect from people to try out the new flavours.”.
Ayorinde Akinloye, a Lagos-based brand and market also described the trend as a necessary action for brand growth. “This is something that is here to stay where you will continue to see brands evolve taste just to test the market and drive volumes both for alcoholic and non-alcoholic drinks.”
New Product Development
In a persistently inflationary environment, new product development can be an effective tool for brands to retain customer loyalty and protect their margins. Top FMCG brands like Promasidor, CHI Limited and CWay have put this strategy to good use recently.
By launching Hollandia Slim, a new variant of the Hollandia brand, Chi Limited has gained a competitive advantage in its segment. The dairy product which comes in small packages has become very popular among low-income consumers because it is a cheaper substitute to the popular dairy brands.
Tropical General Investments Group, makers of Terra Seasoning Cubes, unveiled a new seasoning cube flavour, called Terra Jollof Cube, in February.
Also, CWAY Group has recently expanded its offerings with the launch of a new lemon drink and Darjeeling Ice Tea. These are all done to drive repeat patronage, despite the economic pressure.
Shrinkflation
During inflation, It is common for consumer goods to resort to creating smaller packages to make their brands affordable to the mass market. Also, brands protect their margin by increasing prices.
But when the inflationary squeeze seems to be getting out of control as it appears to be, many brands have resorted to a more severe solution- shrinkflation.
Downsizing a product while keeping its price the same is sometimes called “shrinkflation” – a combination of the words shrink and inflation. As Nigerian companies face ballooning costs of sales, some of them have run out of options that allow them to pass the extra cost down to consumers in the form of higher prices, therefore brands are opting for shrinkflation, probably as a last resort for survival.
Pretty much all the brands in Nigeria are guilty of this, irrespective of their categories. But this is more noticeable in the consumer segment where consumers are ultrasensitive to price increases.
For example, in the food and beverages segment, while prices of some of the brands have remained the same, there has been a noticeable decline in quality and even sizes.
The soft drinks no longer taste the same as a couple of years back and some of the biscuits products have almost become razor-thin.
According to experts, shrinkflation appeals to manufacturers because they know customers will notice price increases but won’t keep track of net weights or small details, like the number of sheets on a roll of toilet paper. Companies can also employ tricks to draw attention away from downsizing, like marking smaller packages with bright new labels that draw shoppers’ eyes.
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