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Looking into food prep first, according to data (MAT August 2014) from GfK, within SDAs, Dessert/Yoghurt Makers, Hot Beverage Makers and Electric Fans are still in uptrend in both units and value. Deep Fryers, Irons, Juicers and Personal Scales rose in average price as they all lost units but gained in value.
With the highest growth rate (+24% in value and +27% in units), Hot Beverage Makers were driven significantly by Single Serve Espresso Machines which were +76% compared to the last MAT, while all other types of espresso machine suffered a decline.
As the second biggest category in SDA, according to GfK, Food Preparation has started to decline in value (–0.4%), but liquidisers are standing out on their own as still growing (+46%).
So what does this mean for the players in the market and do they agree with the stats?
IT’S TOUGH, BUT STRONG
DéLonghi’s Reece Ford says that the market is looking good at the moment, even though it remains a difficult and challenging one.
Ford feels that much of this can be attributed to the often high expectations that come with the NZ market’s “golden egg” reputation.
Ford explains that with more big name players in the market – Electrolux for example, Bosch too and even a revitalised Sunbeam – the competitive aspect increases. It is important, he stresses, to maintain the identity that has served the company and its associated brands so well in previous years.
“You need to be sure of what your brand is and what it stands for. I’m happy with where we are at – it’s a tough market out there. I always say, you need to look at your own DNA: what do you do and what do you stand for?”
National Sales & Marketing Manager for Sunbeam Cliff Carr is very encouraged with how the last few months have been for the company.
“It’s a staged journey for us, about marketing activation and making use of what we have today and then obviously changing that view in the medium and long term. There’s no reason why we wouldn’t be encouraged from what we’ve seen so far.”
One company in the personal care side of SDAs that is showing very strong signs of growth is Conair New Zealand. Jeremey Puttick, National Sales Manager for the company, says it is currently tracking at +24% up for the first nine months of this year compared to the same period last year. So what is this success down to?
Puttick explains: “This has been driven by consistent product innovation, and the fact that we have a foot in the SDA market as well as the fashion industry. Our retail partners understand the need to move with the times and follow fashion and innovation and they have seen very strong growth as well.”
SAME OLD MARKET, NO NEW PROBLEMS?
The impression given by the people spoken to for this feature is that there are no new issues around the market currently. One such commentator is Reece Ford at DéLonghi.
“I don’t see issues per se, because the game doesn’t change. It’s the same pressures, just different days. There is more pressure at the moment in smalls because everyone just sees it as the last bastion for Gross Profit but it’s up to us to know our game and to defend it.”
Another with the message that there are no new challenges is Key Service's Steven Meek, even though he is quick to point to some ongoing issues around online buying and the actions being taken to combat these issues.
“Internet trading and purchases made offshore continue to be an issue. A number of retailers in New Zealand are now implementing a multi-channel strategy which seems to be successfully encouraging consumers to continue to purchase in New Zealand.”
Cliff Carr also points to issues that are constantly surfacing in the market, such as the rise of own brands (aka “no-brands” for those who have made an investment in theirs!): “The age old issue of house brands and private label rears its head and that’s a very cyclical thing that we see.
“We have some retailers who are currently barrelling headlong down the house brand cycle and others at a totally different end, trying to get out of it. What causes both of those things is a strong focus on price and margin erosion and all those issues that industry faces across the board.”
But a proliferation of “knock off” brands and a focus on commodity products? Cliff Carr understands the thinking from both sides of the fence: “Everybody is looking for dollars through the till and it’s ‘low-hanging fruit’ in the eyes of some people but it’s very short-term. History would show that it’s not sustainable.” He adds however: “I do get that retailers want to get cash through the tills today.”
KEEPING UP APPEARANCES
Healthy living is as, if not more important, in the lives of Kiwi consumers then ever. As GfK’s figures note earlier in this piece, juicers and liquidisers are growing in popularity as a result of this and it’s clear that increasing interest in personal care and hygiene is a related global phenomenon.
For example, Aussie industry commentator IBISWorld says that this is certainly the case across the ditch, adding that just under 9% of GDP is being spent on health products in Australia.
And if you are healthy then you should also look healthy… Another interesting study, covered in UK newspaper The Guardian (http://bit.ly/1v91oli), conducted by retail analysts Mintel has revealed that 60% of 16-24 year-old British guys now regularly remove their body hair!
How to tap into this? Give the consumer a reason…
Steven Meeks and Key Service's response would seem to reflect these findings:
“Consumers are prepared to invest in quality product in the personal care category as long as they are given valid information as to why they should trade up, and what they are getting for the additional investment.”
HIGHER OR LOWER?
In our coverage of the market for SDAs last year, there was plenty of chatter about where the real strength of the category sits – in the higher or lower of the market? From gauging the opinions of suppliers around the market this year, the consensus is that much of the success in the category is to be found in the high end.
With the success the company has had over the last 12 months, it is no surprise to hear Conair’s Jeremy Puttick feeling positive about where the market currently sits:
“We have seen a very positive move away from the bottom end of the market and average sell prices have increased over the last 12 months as a result. It’s important to remember too that consumers will pay for what they want, particularly when it is a fashion related item.”
Sunbeam’s Cliff Carr feels that the market is quite polarised. This, he feels, is because we are in a period when SDAs aren’t showing stellar growth for the first time in a long while.
“Some of the categories that have seen massive growth in recent years are in serious decline and some of the things that are currently very popular at the moment are experiencing sensational returns – coffee pod machines for example are $4.5 million of growth on the previous year, up nearly 25% – that’s incredible!”
The bottom end may be where the volume is, but Reece Ford at DéLonghi warns that if a brand decides to enter product into the lower end then retaining its identity and DNA are imperative for continued success.
“What we consider an entry level product in New Zealand, a mature market, needs to be a product that contains the DNA to retain that customer. If we bring in a substandard product with our name on it, the person who buys it will associate that with the company so all products sold by us need to have the components that identify with our DNA reflecting on the company’s and customer’s brand expectations developed over the years”.
SMARTER CUSTOMERS, TESTING RELATIONSHIPS?
The relationship between suppliers and retailers is key to any success in any market. But with the proliferation of smart devices, this relationship is being tested. One sentiment that has been constantly repeated is the importance of ensuring that the message is consistent between what the suppliers and retailers are telling consumers.
Reece Ford: “We want consistency so what we’re doing is providing retailers with online videos of our products in use, links to our sites with information because consistency is what we want. If [consumers] get the same information from us as they do the retailers, that’s what we want.”
Sunbeam’s Cliff Carr emphasises the importance in having the same message coming from suppliers and retailers: “With that last three feet of a sale, if there is any inconsistency with that message they can check the validity of that message instantly on their smartphone. If there is any conflict we’re going to lose the sale so it’s paramount our partners know what we’re doing.”
Another who feels smart devices have impacted on the way consumers buy products is Key Services’ Steven Meek:
“From the research we have seen, up to 80% of consumers have researched online before entering a shop to make a purchase. A large number of these consumers also research using devices in-store while purchasing.”
How to make use of this? “The most impact we can have on this is by providing meaningful display material – touch & feel units etc – POS and in-store training,” says Steven Meek.
Really stressing the importance of training is Jeremy Puttick over at Conair. Without making knowledge available to aid retailers to help encourage a trade upwards, Puttick feels it is a failure on both ends of the relationship: “We believe in not only selling the product ‘in’ but also trying to ‘pull this through’ at the other end with training, POS and general support for the brands.
“Consumers may already know 95% of what they need to know to willingly purchase a product and they are looking for someone with the final 5% of knowledge and customer service to help them part with their money. Training and business partnerships have never been so important – unless you are happy trading at the bottom end of the market.”