June 1, 2005
By Tom Zind
That Will Shape Our World
We asked the experts to forecast the future and identify developments likely to impact our lives and the business of marketing candy.
Channel Surfing Crests
Wal-Mart’s phenomenal success as a virtual one-stop shop can leave the impression that the last thing consumers are doing these days is sprinkling their dollars around the retail universe. But look a little closer, and it becomes clear that consumers are, in fact, patronizing more types of retail outlets.
From dollar stores and convenience stores to mass merchants and even the Internet, different retail formats are enticing consumers. Differentiated based on product mix, convenience, price points and ambiance, the range of formats speak to the consumer’s willingness to go far afield, if necessary, in the quest for value. Indeed, one size will not fit all in the future.
“The increasingly value-conscious consumer is going to be willing to shop a range of alternative formats and break up her shopping into multiple stops if necessary and shop certain stores for certain categories of products,” says Jon Hauptman, vice president of Willard Bishop Consulting Ltd., a Barrington, Ill., retailing consulting firm.
As evidence of the trend, Hauptman notes the average shopper makes 14 fewer trips to the supermarket annually—70—than she did a decade ago. Convenience stores, drug stores and, most notably, dollar stores have picked up some of the slack. The upshot: retailers will need to study the nuances of their competition even more closely and manufacturers will need to tailor strategies to each channel.
Get Healthy…That’s An Order
The cause, nature and extent of the problem may be debatable, but it’s hard to take issue with the fact that American consumers are not specimens of optimal health. And the remedy, certainly, is no less contestable.
But as the staggering costs of disease and the unhealthy lifestyles that can cause or complicate it come into sharper focus, pressure is going to mount for disease prevention and management. Employers, insurers and government, faced with exploding insurance and health care costs, will turn up the heat on people to take more personal responsibility for their health and wellness.
The rise of diabetes, a serious disease that spawns others and requires management, is illustrative. Roughly 17 million Americans now live with the disease, and a million more are diagnosed annually. This, no doubt, is a challenge as well as an opportunity for the confectionery industry.
So look for more people to start taking personal health matters into their own hands. From being more selective about the foods they eat, to exercising more to self-medicating, the consumer will be forced to become more proactive.
“It’s going to be more important for people to manage their own health and wellness,” says Mary Meehan, a co-founder of Iconoculture, a consumer trend research company. “If you can understand all of the myriad health information yourself and have access to the foods and exercise choices you need to address that, you’ll feel more in control.”
ESP: Extreme Sensory Participation
A popular prediction several years ago was that advances in food science would allow people to get their nutrition from a pill rather than a plate of food. A bigger head-scratcher, perhaps, was the thought that people would actually opt for that.
While more nutrition is being packed into some foods, the consumer is nowhere near ready to abandon food. On the contrary, love of food is stronger than ever.
In fact, consumers’ palates are getting more restless, and the quest for foods and gastronomic experiences that tantalize the senses in new, unprecedented ways may be at hand.
“There’s a growing interest in exploring and indulging our senses, and that’s going to spur new, unusual and high-quality products,” says Meehan.
As we seek to better appreciate, stimulate and connect with all of our senses, we’ll value products that engage the senses, even multiple ones simultaneously. Dubbed “synesthesia,” by Iconoculture, the trend is already starting to play out in the confectionery space with premium chocolates and products that marry wildly disparate flavors, like cheese and chocolate.
Also, flavors that are either intense or subtle enough to allow connoisseur-like distinctions, a la wine, coffee and tea, are likely to capture our imagination. Opportunities abound for candy.
Choice Hits Circuit Overload
Celebrated as the juicy fruit and essence of our free-market system, consumer choice could actually start yielding diminishing returns. From mutual funds to toothpaste to candy, we’re faced with a dizzying array of choices that can leave the head spinning. At some point, the confusion may reach critical mass and produce a backlash.
A social theory professor, Swarthmore College’s Barry Schwartz, has studied the proliferation of consumer choice. In a recent Scientific American article titled “The Tyranny of Choice,” he says choice is not a slam-dunk for consumers or producers. “Although some choice is undoubtedly better than none, more is not always better than less.”
In his recent book, “The Paradox of Choice: Why More is Less,” he cites an example. An upscale supermarket staged a sampling of a new line of jams and jellies. Consumers who participated were given $1-off coupons. In one test, all 24 varieties could be sampled. In another, only six of the 24 were available. While 3 percent of those who could sample the complete line purchased a jar, 30 percent in the limited sample group made a purchase.
Is this the end of the line for line extensions and new products? Hardly. But “less is more” might become a mantra for more marketers.
In a marketplace filled with look-alike products, consumers will be looking for a tiebreaker. Quality, of course, will be important as always and something more products will readily attain. More important for marketers may be the ability to spin a compelling tale.
“Consumers are increasingly purchasing stories behind products, and not purchasing just based on the usual attributes,” says Hauptman of Willard Bishop Consulting. “Trader Joe’s, with its catalogs, is a good example, as is Nike and Disney. They’ve built an aura around their products.”
Hungry to find products and brands we can count on and want to be seen with, we’re becoming increasingly receptive to marketing that seeks to create a bond. The rapid growth of the numbers of people willing to engage in viral or “buzz” marketing on behalf of companies—often for free—is an example of how eagerly consumers will embrace “story” products.
Ray Jones, managing director with Dechert-Hampe and Co., a Northbrook, Ill., retail consultancy that’s worked with the National Confectioners Association, points to the confectionery industry’s successful employment of nostalgia marketing, such as Hershey’s limited edition packaging, as an example of the power stories have to sell products.
They may be minors, but the power that people under the age of 18 exert in the marketplace and on family purchasing decisions is major. While their sheer numbers may be shrinking as we become an older society, young people will still be the prize that marketers court as they seek to cement the loyalty of life-long customers.
“The potential for more child-centric products is great,” says Hauptman. “But those that bridge the gap between what parents want for their children and what children are looking for will be winners.”
The reason: parents may start getting more involved in the product choices their children make. As concerns mount over issues such as advertising and marketing aimed at kids, parents may see that it’s time to play a more active parenting role. That can already be seen in the extent to which kids’ lives are heavily programmed by doting parents.
That trend, combined with the rise of more savvy pre-teens who increasingly view traditional advertising with a wary eye, could change the dynamics of serving the kids’ market.
“Marketing to kids is really coming under more scrutiny,” notes Meehan of Iconoculture. “Marketers are going to have to overcome a growing amount of distrust, brought on in part by the sheer onslaught of advertising messages we’re all getting on so many fronts.”
Make it Fast, Make it Simple
Despite exhortations by health experts for people to slow down, chances are the pace of life is only going to get quicker. Products and services made and merchandised for people on the go will continue to be winners.
Nextpert News, which produces video segments on what’s new and next, says extreme multi-tasking is now considered normal. “People work longer hours, sleep less, spend less time cooking and eating (and when they eat they’re also doing something else),” the group notes in its Mega-Trends 2005 rundown.
Moreover, according to Iconoculture, “multi-tasking is epidemic, and younger people love it.”
As adept as people will become at juggling, they’re not masochists. Increasingly, they’ll demand products that are easy to use and understandable. Mona Doyle, president of The Consumer Network, a consumer trends watch group, says we’ll all want more food products that “don’t require a lot of work, yet still taste great. Purchasing products that are easy to use is at the top of the consumer’s list of wants.”
The Incredible Shrinking World
As technology brings us all closer together, the types of products consumed, the way products are made and how products are sourced will continue to change.
The potential exists for food to be strongly impacted by the steady march of globalization. The combination of people traveling more and manufacturers using more overseas production and sourcing increases the chance for more ready adoption of foreign customs and trends.
“Wal-Mart has staff working on just sourcing globally to find new things,” notes Dechert-Hampe’s Jones. “There’s the potential for more cheap, low-end novelty candies made overseas to end up in this market.”
Additionally, Jones says candy makers will likely be looking more to foreign countries to produce products using native raw materials like sugar. “The cost of producing products in this country is going to continue to escalate,” he predicts.
Dave Smith, vice president of Technology Futures, Inc., Austin, Texas, says the rise of the “value networks” concept in business rests heavily on globalization. Advances in communications technology are allowing manufacturers to build far-flung webs of suppliers that can maximize cost-savings and expertise.
“Manufacturers are going to be able to go where competencies are the best, and that’s a trend that will likely hit the confectionery industry,” he says.
Keeping consumers in a spending mood will keep retailers busy in the years ahead. Flashy products may not be enough. Equally important may be making the shopping experience more fun and interesting.
Look at Whole Foods. The natural foods retailer is making deep inroads into the business of food retailing by injecting more excitement and wonder into the mix. Mainstream retailers like Kroger and Safeway are responding.
“Food shopping can be boring and many operators will be trying to enhance the experience and make it a bit more of an adventure,” says Jones.
A companion trend that may take root is greater attention by retailers, particularly supermarkets, on the “center store.” While perimeter departments like produce and bakery have been spruced up, the center aisles where products like canned goods and candy reside have been neglected. Look for that to change as retailers and manufacturers recognize the value of closing the gap between lame merchandising and products with latent excitement.
“Bringing more excitement into retail —‘retailtainment’—is going to be used to entice more people to go down the center aisles,” he says.
Nowhere to Hide
If information is power, marketers are going to be supercharged in the future.
Widespread adoption of technologies like radio frequency identification (RFID) will give manufacturers and retailers the knowledge they need to maximize distribution efficiencies. That and other tracking technologies also hold the potential to shed more light on consumer purchasing behaviors as well.
The overarching trend is what Smith of Technology Futures calls “sensor networks.” The rise of digital technologies that detect multiple variables is enabling manufacturers and marketers to make quicker, more intelligent decisions.
“Devices in phones and PDAs that let people know your exact location will open the door to location-based marketing,” Smith says. “Increasingly, people will be able to program devices, allowing the user to choose the messages they want to be interrupted with.”
Advances in sensor technology also will aid manufacturers in designing processes that can be changed in real time. “In a food manufacturing environment you may have sensors for temperature, humidity, product flow and inventory levels,” he says. “All of these working in tandem will allow for more intelligent real-time decision-making.”