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The growing importance of the convenience channel to drinks companies - Consumer Trends

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When drinks executives see references to 'disruptive influences' in retailing, they may well brace themselves for an uncomfortable haranguing about binge-drinking in pubs or town centres. It might come as a relief, then, that a new report from KPMG Boxwood on the retail sector in the UK refers to what other analysts might call market 'drivers'.

It seems odd to characterise consumer trends almost as irksome distractions for busy retailers who have businesses to run. But, management consultants, like brand marketers, want to set themselves apart from the crowd. The authors even refer to the innovative companies that are profiting from these trends as "disruptors".

Notwithstanding the curious terminology, the report's identification of the convenience channel as one of three principal disruptive influences in UK retailing - along with value and experience - will strike a chord with drinks companies.

There are, in fact, two convenience trends in play in the retail market, one related to the growth in convenience stores and the other speaking to a more generic interpretation of convenience. Undoubtedly, there has been huge growth in local supermarkets and convenience store retailing, as busy consumers look to shop more frequently and more locally for food and drink.

Usually unparalleled readers - and leaders - of consumer trends, the major supermarket chains were initially caught off guard by a growing consumer desire to shop locally. Shoppers didn't want yet more massive out-of-town hypermarkets. The "Space Race" among multiple grocers in the UK was over, and the battle to win back the high street and the neighbourhood shopping parade was underway.

Through the rapacious expansion of formats such as Sainsbury's Local and Tesco Express in the country, the supermarket operators have sought to assume primacy once more, but the local shopping environment has changed and continues to develop rapidly. The majors are innovating – both Sainsbury's and Tesco are trialling "microstores" with a footprint of only 1,000 sq ft – but the local shopping boom is also being fuelled by local specialists.

Independent delis seek to capitalise on growing consumer interest in gastronomy and the 'slow food' trend, where there are clearly opportunities for wines, spirits and specialty beers. The craft beer revolution to a considerable degree is borne out of similar consumer desires.

According to grocery research firm IGD, multiples saw the largest increase in convenience store numbers in the year to April 2015, up by 16.6%. That said, they still only represent less than one in ten of the convenience stores (8.6%) in the UK.

So, however many local stores the majors open, it appears they will not have it all their own way in this area of the market.

More promiscuous, more demanding, more discerning consumers? This all rings a loud bell. Go to any marketing conference, and you will find FMCG marketers talking about how fickle or demanding consumers are becoming and the m-word (Millennials) will almost certainly not be far away.

This is about premiumisation too. As the Boxwood report states: "Convenience is something consumers have always been willing to pay for - particularly affluent, time-poor consumers."

Consumers being prepared to pay more to buy the products they want, when and where they want them, should not strike fear into drinks brands, though the growing importance of smaller shops clearly has implications, not least regarding the number of SKUs that can be carried. Competition for retail facings in small stores is high, placing an onus on drinks companies to provide retailers with the right products.

Rather than stifling new product development and innovative marketing and merchandising, then, the growing variety in local retailing should fuel it.

Brands can provide support for smaller stores in other ways, such as Diageo's 'My Store Matters' website, while Molson Coors has created a video to help retailers maximise sales called "60 Second Shop".

At a recent category management conference in London, Molson Coors UK's category & insight director Matthew Deane said beer and cider had underperformed in the UK's growing c-store segment, remaining "broadly flat", adding that convenience retailing is "a fundamental category which needs to fuel future growth". This is borne out by market research firm IRI, which forecasts that, by 2020, sales of beers, wines and spirits through convenience stores will match those in out-of-town supermarkets.

Looking at the local shopping boom in terms of more discerning consumers seeking greater variety and choice, points towards the broader analysis of the convenience trend set out in the Boxwood report. Proximity, the report states, is just one facet of the convenience trend. Other critical aspects include home delivery, click & collect and ease of transaction, including the growth of contactless payment. Boxwood also stresses that convenience is about range and choice, pointing to a surprising dichotomy.

"Where possible," the report states, "consumers want a one-stop shop where they can fulfil as many of their needs as possible in one place." Underlining just how nuanced this trend is, Boxwood notes that "Amazon is perhaps the best and most obvious example of this strategy, having consistently extended its product range over more and more categories to include offerings as diverse as pet supplies, streaming videos, computer accessories and clothing". It's an undeniable fact, but can the dominance of Amazon and the local, independent deli opening and thriving at the end of the road really be part of the same consumer trend?

Semantics play a part here. Convenience is itself a somewhat intangible and subjective idea. It may at times be incredibly convenient to shop at a massive hypermarket. Contactless payment on the bus is a boon when you're in a hurry, but if you've left the house without your cards it will be infuriatingly inconvenient that the bus doesn't take cash.

To unravel this, one might do well to return to Boxwood's unusual notion of market disruption. The idea that retailers and brands have been discomfited by consumers moving away from behaviour that had become the norm and eschewed established modes of retailing is instructive.

The unease major supermarket operators felt when they realised consumers were doing more shopping locally, stemmed from the realisation that this was a trend they were not leading but something rather more spontaneous. Much has been written recently about how Millennial consumers in particular are more demanding and assertive than their forebears; more complex and less easily persuaded. To varying degrees, this can probably be said nowadays of consumers in all age brackets.

If the convenience trend can be distilled down to a single idea, it might indeed be consumer assertiveness, about more demanding shoppers disrupting the accepted order of things for retailers and for brands alike.


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