CROSS CATEGORY TRENDS
Cultural shifts, major trends and disruptions impact brands
These influences are altering the brand, category landscape
CULTURAL SHIFTS AND DISRUPTIONS
Brands take strategic actions as concern rises
The ongoing concern about sustainability accelerated, with more brands elevating sustainability to a strategic issue, even appointing a chief sustainability officer and considering the 17 UN Sustainable Development Goals in their planning. Leading financial brands, like Goldman Sachs and BlackRock, made sustainability a core investment criterion. Activist investors devalued oil reserves that exceed the amount that could be exploited under Paris Energy Agreement standards, labeling them “stranded assets.” Regions of the world moved at varying speeds, depending on local regulations and consumer sentiment. Car brands, for example, faced a more restrictive regulatory environment in Europe compared with the US. But most car brands aggressively introduced more electric vehicle models this year, despite a gap between consumer good intentions and purchase behavior. In some categories, consumers resisted sacrificing convenience. Coca-Cola Company and PepsiCo are trying to resolve the tension with recycling solutions that minimize consumer effort. Concern about sustainability has advanced to the point where people may not reward a brand with a premium for doing the right thing, but they will penalize a brand for not doing the right thing, rejecting it for a competitor. Additional analysis of BrandZ™ data by the Oxford University Said Business School has confirmed the increasing importance of sustainability to business performance.
HEALTH AND WELLNESS
Product, services help consumers improve health
Concern about ingredients drove product reformulations in personal care, beverages, fast food, and other categories. Personal care brands marketed products with natural ingredients and introduced digital devices to improve skincare and oral care. Shisheido acquired the popular clean beauty brand Drunk Elephant. Fast food brands added healthier menu items. KFC offered Beyond Chicken and Burger King offered the Impossible Burger, non-meat options that added vegetarian choice and a perceived health benefit. Coca-Cola Company and PepsiCo continued to expand their product portfolios, adding not only beverages with healthier ingredients, but also beverages with specific health benefits. Nestlé in China introduced NesQino, a system that includes a mixing cup and sachets of powdered ingredients for creating personalized smoothies and other hot or cold healthful drinks. Health and wellness in part drove the strength of the athleisure trend, which crossed both the apparel and luxury categories. Some insurers tied premium rates to personal fitness and health habits recorded on apps. In a collaboration with Apple, the US healthcare insurer Aetna launched an app called Attain that collects data on iPhones or Apple Watches. Google has also been active in healthcare. Apple and Google collaborated to develop a Covid-19 tracking system.
THE COVID CAVEAT
Pandemic will change daily life, but exactly how?
The Covid-19 pandemic shut down physical retail and restaurants, closed factories, disrupted supply chains, and altered the way people live, think, and, ultimately, what they buy and how they buy it. The pandemic struck as consumer attitudes and brand actions regarding sustainability and health and wellness had reached an inflection point, with conspicuous consumption evolving to more conscious consumption. Whether or not this shift will continue or slow, or even reverse, is not yet clear. The shift will continue if people interpret coronavirus as nature’s warning that next time may be fire or flood. In that case, plummeting oil prices could make this the moment to push for renewables. Or, it is possible that stabilizing oil prices will be a high priority for protecting the global economy. And worried about putting food on the table and paying the rent, consumers may prioritize price and value over sustainability and health and wellness, at least for a while. What is clear, however, is that the brands that proved most resilient to the commercial impact of Covid-19 were those closely aligned with how people live their lives. Covid-19 accentuated the relevance of brands that could fulfill the new basic needs, accepting orders online and delivering them or making them available for easy pick-up. These included technology brands like Microsoft, Facebook, Google, and Apple, that enabled people to stay connected; retailers like Amazon, Alibaba, Costco, and Walmart that delivered food and other necessities; a lifestyle brand like Meituan, the Chinese super app that facilitates O2O living; and even athleisure apparel brands that dressed people for at-home comfort.
Businesses seek to expand despite global tensions
Brands contended with more than the usual amount of geopolitical disruption. Trade tensions between China and the US resulted in tariffs that cut across many industries. Extreme political division in the US and the Brexit debate in the UK created uncertainty. When Microsoft won a 10-year cloud computing contract from the US Defense Department both Amazon and Oracle filed lawsuits charging political interference. National security debates about adopting Huawei’s 5G infrastructure impacted the phone’s smartphone sales. While brands tried to manage these disruptions, any possibility of normality was swept away by the unprecedented global impact of the coronavirus pandemic.
Market changes push categories into transition
Business-as-usual ended in several categories that are transitioning to vaguely defined futures. Energy brands are evolving from fossil fuel to clean energy. Car brands are shifting from making vehicles to making vehicles as part of a larger business portfolio of mobility options. Many telecom providers are moving into content and entertainment streaming and rolling out 5G. All of these transitions require significant investment. All of them depend on consumer support to succeed. Until now, consumer support for clean energy alternatives has been limited. Price and concerns about vehicle power and charging availability have limited demand for electric cars. And consumers remain unclear about the benefits of 5G. Post Covid-19, the future of these transitions looks even more vague. BrandZ™ analysis provides some clarity. Within disruptive categories disruptive brands excel, especially when technology is the engine of disruption. Within the car category, which declined 7 percent in value, only Tesla increased in value, by 22 percent. Tesla scores 147 in the BrandZ™ Disruption Index, compared with an average score of 100. Retail, a category that spent a decade transitioning from physical store limitations to online-offline agility, increased in value 21 percent, more than any other category, driven by the online capability of key players. The most valuable retail brands, Amazon and Alibaba, score 142 and 127, respectively, in the Disruption Index.
Helping people look their best is complicated
Brands attempted to help individuals become their best selves. Luxury shoppers sometimes selected logos less to demonstrate “This is what I can afford,” and more to express, “This is who I am.” Self-expression became complicated, however. In personal care, many time-pressed women sought simplified products that enabled them to look attractive and natural. In contrast, other women preferred multi-step routines sometimes recommended by online influencers. Adding more complication, the same individual might choose to be natural or made-up, depending on the occasion.
Data helps brands meet the individual needs of the many
Brands attempted to provide products and services tailored to individual needs but produced at scale. Solving this challenge depends on data. Oral-B and Colgate offered Bluetooth-enabled toothbrushes to help users brush their teeth more thoroughly and provide brands with the intimate details of oral care habits. Clinique ID offered a system in which individuals select base moisturizers and then add the capsule of a concentrated formula that matches their personal skincare need. Nestlé introduced a system called NesQino for mixing sachets of powdered ingredients to create personalized smoothies and other healthful beverages. PepsiCo’s Drinkfinity and SodaStream devices enabled users to personalize soft drinks. McDonald’s installed kiosks in many of its restaurants to better understand who orders what meal and at what time of day. The data is intended to prompt add-on recommendations, inform menu and promotion planning, and drive loyalty.
Consumers seek ways to have stuff without owning it
The importance of ownership is changing. Younger people still want stuff, but many do not feel the need to own it. Attitudes about possessions and the drive toward a circular economy animated this trend. H&M and other popular apparel brands offered rental schemes, an approach that began in the luxury category. Although many people will prefer to own a car, others will choose to share or rent a car, use a car-hailing or car subscription service, or rely on other transport possibilities. Car brands will become active in all these businesses. In several German cities, for example, Volkswagen operates a shared-ride service using electric minivans to transport people traveling in the same direction. Meanwhile, Kantar research in China found a rise in car purchase consideration, at least among first-time buyers, because of hygiene concerns related to Covid-19.
Brands embrace humanity in all its diversity
The notion of inclusivity has expanded from connoting nationality or religion into a broader embrace of humanity in all its diversity, including age, physical ability or disability, and gender fluidity. Brands have encountered inherent tensions. Personal care brands that need to reach particular audiences with specially-formulated products—skin care products for women of color, for example—need to communicate to a particular group about its specific needs without categorizing the group and contradicting the inclusiveness message. In a Starbucks ad titled “Every name’s a story,” a teenager transitioning to male continues to be called by a female name until ordering at Starbucks, where the barista writes “James” on the cup. The Black Lives Matter call to end racism animated many brands, most notably Nike, which had stood with NFL quarterback Colin Kaepernick after he took a knee to protest racism in 2016. Altering its iconic brand message, Nike urged, “For once, Don’t Do It.” “Don’t sit back and be silent.” Don’t think you can’t be part of the change.” “Let’s all be part of the change.”
Data breaches erode trust in tech brands
People are less awed by new devices and more aware of the negative consequences that accompany some of the benefits tech has provided. They welcome the convenience and personalization that sharing personal data enables, but they reject unwelcomed or unexpected privacy intrusions and data breaches. Apps that monitor health are good; obsessive monitoring is bad. People want to take back control of their data and the technology that collects it. Cars have more tech than many people know how to use. Smart personal care products know intimate skin care needs and oral care habits. Individually these products add benefits, but collectively they may induce tech overload, at least temporarily. The hyped promise around 5G may leave consumers more disappointed than delighted, at least in the near term. European regulations more strictly control data collection and use. California promulgated European-like regulations and privacy protection may become more of an issue throughout the US. However, the indispensability of technology during the Covid-19 crisis provided technology with a redemptive moment.
French entrepreneur creates collaboration along the supply chain
The megaphone and transparency provided by social media continued to increase consumer influence on brands. A recent entrepreneurial development from France points to how the relationship between consumers and brands may continue to evolve. Chi è il Padrone? is a French brand that literally translates as “Who’s the boss?” Chi è il Padrone? creates a collaboration of interdependent consumers, farmers, and retailers. In the Chi è il Padrone? community, consumers detail their food needs on questionnaires. This data enables farmers to plan their production. Prices are negotiated. For the system to work, consumers seek not the lowest absolute price, but rather an equilibrium price that is fair for farmers and enables them to sustainably produce. This approach in part depends on the agricultural heritage of France, where many people have family connections with farmers. But the underlying principle of an economically sustainable food network has wider relevance. It is not a theoretical notion. The Chi è il Padrone? brand is available at France’s largest retailer, Carrefour.
Incremental change gives way to riskier brand initiatives
Beer and beverage brands that have tried to arrest declining consumption with incremental change are making bigger bets. After years of introducing new brand variants, major brewers are expanding beyond beer with spiked seltzers, wine, and cocktail mixes that address the same drinking needs and occasions as beer. Meanwhile, having expanded its portfolio of healthier beverages to offset the decline of carbonated soft drink consumption, Coca-Cola Company purchased Costa Coffee, a UK-based Starbucks rival, and experimented with a canned alcohol drink in Japan. Similarly, recognizing the inevitability of shifting away from combustion engines, car makers are raising the ante on electric. Having introduced one electric vehicle in their product range over the last several years, leading car brands planned to offer an electric engine for most of their models.
Brands raise productivity of customer relationships
To increase the productivity of customer relationships, brands are combining their offerings into ecosystems that move customers through an entire process end-to-end. Adobe began in graphics design and, through partnerships, has become a one-stop-shop for digital marketing products and services. Salesforce began in CRM but has become a platform that enables companies to integrate data companywide. Originally an online directory with property listings, Zillow has leveraged that enormous resource to become a real estate brokerage offering a complete range services for selling and purchasing homes.
BRAND AS SERVICE
Brands complement product offerings with new services
Brands are extending into services partly in response to changing consumer expectations and market needs. Anticipating reduced car sales with the shift to mobility alternatives, car brands are exploring ways to sell subscriptions for services like predictive maintenance. Car brands also have launched car sharing services, including a joint venture by Mercedes and BMW called Car2Go. In energy, Shell is looking to develop its service stations as retail locations and charging points. Costco offers travel services. To advance sustainability, H&M introduced its “Take Care” repair stations in some stores to educate customers about how proper care can extend the life of their garments. Apple has leveraged the appeal of its devices, particularly wearables like Apple Watch and Ear Pods, to gain additional revenue from existing customers accessing an expanding range of financial services and streaming content.
Brand experiences widen accessibility, deepen relationships
Brands are introducing experiences that expand accessibility to brands and deepen relationships with customers. Luxury has always been about experience. But the experiences are changing. Prada, Louis Vuitton, and Gucci have restaurants, linking luxury with food. Lexus is creating airport lounges and restaurants. Lululemon opened its first experiential store, in Chicago, which includes a yoga studio and a café. In China, the e-commerce giant JD opened its first experiential store called JD E-Space, where consumers can test products from a wide range of categories, including electronics, fitness, and beauty, and then scan codes for purchase and delivery. Among the beer brands offering distinctive experiences, Peroni attempts to be more holistic, with elaborate pop-up venues, often with food and music, where the beer is served in a Peroni glass.
New products, services link brands with their customers
For consumers, D2C is a way to save time and sometimes money. For brands, it is a way to eliminate intermediation, strengthen relationships with customers, and collect more personal data. Smart brands are realizing that D2D is an attitude and not just a distribution channel. Coca-Cola Company created a subscription service in the US called Coca-Cola Insiders Club. For a membership fee, subscribers received monthly samples of Coca-Cola’s latest products. The move follows Coca-Cola’s acquisition of the UK-based Costa Coffee, which provides direct access to consumers. Pepsi refined two systems for customizing drinks: SodaStream, a countertop device; and Drinkfinity, a reusable bottle and flavor pods. In personal care, P&G acquired Billie, the subscription-based women’s shaving products and body lotion brand, and Colgate acquired Hello, a subscription-based oral care brand devoted to natural ingredients. The major brewers are operating e-commerce services like Beerwulf and Beer Hawk, which gather data about beer drinker brand preferences and drinking habits.
Emerging formats draw audiences, attract advertisers
In a development that is most evolved in China, content and commerce are merging into new formats. Short-format video sites TikTok (Douyin in China) and Kaishou, and the news aggregator site Toutiao, all owned by ByteDance, illustrate a growing channel where brands create appealing content to attract large audiences that can be seamlessly monetized with advertising or e-commerce. Although these sites are not as big or ubiquitous as major ecosystems like Tencent’s WeChat or Alibaba, these brands have simplified people’s lives by integrating a social and commerce experience.
Explosion of content adds communication challenges for brands
The volume and type of content available is changing dramatically, with implications for brands. Brands as diverse as AT&T, Amazon Prime, Netflix, Hulu, and NBC Peacock provide content that people watch on a variety of platforms. Meanwhile, the short-format video brand Quibi, which distributes produced entertainment, debuted, while other short-form entertainment brands, such as TikTok, from China, and France’s Kobini and Brut, feature material uploaded by users. These brands, however, share in common their approach to distribution. They are mobile-first. This enormous amount of content choice, and the possibility of accessing anywhere and anytime, expands brand communication possibilities and challenges brands to break through with relevant content.
Market developments make differentiation ever more critical
The need to differentiate continued to challenge brands across categories. Because of the popularity of SUVs, all car brands produce SUVs in all sizes and price points, further eroding the distinction between car brands. Open banking, the sharing of customer data among banks, has enabled banks to provide customers with dashboards that aggregate personal data from across financial institutions, a benefit to consumers that potentially creates sameness of offering in the banking category, where differentiation historically has been a challenge. Consumers may be able to distinguish one insurance brand from another based on the characters that repeatedly appear in ads but being able to differentiate the brands beyond price may be more challenging. But differentiating in a meaningful way is still the key to brand growth.
Start-ups face the challenges of growing up
Growing pains are impacting smaller startups and fintechs. Established banks worried when fintechs like Revolute and Monzo first appeared in the UK. Now, a few years later, the big banks have improved their technology, and the fintechs are learning that it is not that easy being a bank. While fintechs are respected for their disruptive power, they have been less successful cultivating the trust required for developing the long-term full banking relationships that their youthful customers will soon be seeking. Similarly, beer brands worried when their young customer switched to craft beers. The major brewers acquired craft brands. Today, the craft brands are facing the same flattening of consumption that has troubled the global brands. Like the global brands, craft brands are moving beyond beer into new products like hard seltzer. Just a few years ago, car brands, worried about Uber and Lyft, announced that they would be shifting into mobility. Today, Uber and Lyft worry about profitability. Meanwhile, tech brands are facing the challenges of adulthood. People expect trillion-dollar brands to act like responsible grown-ups. Venture capitalists are now looking more for profitable growth than any growth.