Kantar Millward Brown Argentina
Big brands in Argentina are undoubtedly facing a challenging present and a transformative future. And this is mainly so because consumers are no longer the same. Due to successive ups and downs of the domestic economy, they have developed certain habits which seem now to be here to stay. Moreover, they are using as many digital platforms as possible to get informed, make better decisions, save time or simply distract themselves from the concerns of everyday life.
Consequently, brands have had to quickly change their strategies. And what’s more, some have come to view change as a constant, and are highly attentive to consumers’ appetite for adaptation. Consumers’ assessments of the economy oscillate frequently, according to the survey of Economic Expectations General Index by Kantar TNS Gallup. And faced with this uncertainty, 35 percent of the population say they might reduce their levels of consumption to match their budgets, according to Kantar Worldpanel.
It is not a new phenomenon to see different brand tiers to meet the needs of the different consumers’ purchasing power. Nonetheless, in recent years this pattern has been altered by new brands dynamics. According to Argentina’s Kantar Millward Brown database, price-driven shopping has increased from 28 percent to 34 percent in the last year. It’s not surprising, therefore, that many brands are discussing the right price for their products to meet the needs of the target audience. Ultimately, the question is: how much your brand is worth to the consumer in this new scenario.
The new brand landscape
After years of recession and double-digit inflation, Argentine purchasing power has been affected. Consumers have not stopped consuming, but have developed a different modus operandi was developed to make their money go further. They have become strategists searching for convenient prices, discounts and promos at an acceptable quality. Kantar Worldpanel (KWP) data shows that 23 percent of fast-moving consumer goods are bought on promotion. Shoppers are making their purchases at different points of sale: wholesalers, e-commerce or even buying certain products from abroad, such as clothing, which costs 50 percent more in Argentina than the international average, according to the Production Ministry.
This is leading to a search for convenience, which explains the growth in “secondary brands” (also called B brands) during 2016, followed by the rise of supermarkets’ own brands and low-price brands in 2017. Both types have grown at the expense of A brands, which have not been able to match consumers’ needs with their value proposals, especially in the categories most affected by inflation, such as dairy products and non-alcoholic flavored beverages.
But this is not all. Supermarkets’ own brands or low-price brands break the mould and bet on forging an emotional bond beyond merely convenience. Look at Carrefour’s campaign, Precios Corajudos, which reinforces their commitment to not increasing prices of their own brands despite inflation. Día Discount has developed more premium products to meet the needs of consumers with higher purchasing power who are not buying more categories but have more money to spend. Kin, the low-priced pure water from Coca-Cola, is for the first time mentioning the quality of its product in its advertising.
This is having a double effect. On the one hand, it drives low-mid-price B brands to communicate their values, to defend themselves from supermarket’s own brands and low-price brands. For example, Manaos, with investment and perseverance, has positioned itself as the national favorite – the Argentine cola. In this way, it has been able to lead the category on household penetration for the second year in a row, KWP data shows. Or Drive, primarily a convenience brand, has reinforced its value proposal by focusing on relevant benefits it offers to consumers, such as cleaning and fragrance. It has leveraged not only on massive media investment but has also been active on social networks with a campaign about “saving tips”.
On the other hand, brands’ first reaction was to focus either on convenience or price in their TV advertising. Those opting for convenience gave consumers a sense of benefit, which somehow strengthened their emotional bond with the target. Those opting to go directly to price, not a very common practice for leading brands in Argentina, caused an ephemeral impact that had to be quickly supported by campaigns that worked on improving brand equity. Consumers expected more from them.
Still brand lovers, but more selective
In general, Argentine consumers love big brands, because they reflect their aspirations and their identity; they define their status and belonging. They like to be seen using them. In fact, Kantar Millward Brown research shows that 66 percent of consumers make their purchase decisions based on brand. In Argentina the value share of private label brands is seven times less in than in Europe. Consumers therefore expect these brands to offer them a relevant and significantly different value proposal to justify their selection. What does this imply for the brand? They have to fulfil their basic product promise, but also provide a really rewarding experience.
This explains the rise of craft beers and healthier foods, such as Terma in non-alcoholic beverages or Gallo snacks, which offer higher value proposals. Brands that are not just salient but which are also meaningfully different tend to grow their value more strongly, even in challenging economic times.
This shows that consumers do not behave in the same way regarding all categories and brands. In some cases, their choice is more rational; in others they are willing to pay more, and if necessary consume less, in order to maximize the pleasure of the experience when the proposal is worth it.
The big challenge
Mainstream brands have a dual task ahead as they look to build their power. In the short term, they must meet consumers’ immediate needs, reacting quickly to demands for convenience. And in the longer term, they will need to play a significantly different role in people’s lives if they wish to shield their Brand Love. In fact, brands with both strong meaningful difference and rising levels of salience are 20 percent more likely to grow in market share, according to BrandZ data globally.
There is a high number of brands that are increasingly targeting the convenience buyer. However, the capacity of a brand to offer a significantly different value proposal - beyond price - is plays a greater role in purchase predisposition.
This is especially important if we want to maintain the appeal of massive brands to young people, who are today drawn to smaller brands that offer a craft element, exclusivity and customization. It represents a sizable challenge for big brands, which are used to mass production, selling through traditional channels, and communicating via mass media.