As the health emergency forced the world into lockdown, businesses adapted as fast as they could to cater for cooped-up customers and create alternative revenue streams.
One route taken, particularly evident in FMCG, has been the creation of a new generation of direct-to-consumer initiatives. It’s happened on both sides of the Atlantic.
In the US, PepsiCo launched PantryShop.com and Snacks.com earlier this month. The first retail ‘kits’ themed around everything from essentials including breakfast bars to workouts including protein shakes, and the second ‘snack packs’ of items such as Doritos and cookies.
In the UK, Heinz to Home made its debut during the lockdown, offering ‘bundles’ of the food giant’s lines. The selections include a bundle of baby food and an essentials collection of beans and soups.
“These are all instances of agile response in a time of massive disruption. Will they in turn disrupt retailers’ role in the distribution of food?”
It’s not just brands that have been opening up direct-to-consumer channels. UK wholesaler Bidfood, for instance, began delivering to home and created a click-and-collect service for shoppers.
These are all instances of agile response in a time of massive disruption. Will they, in turn, disrupt retailers’ role in the distribution of food?
Can any of them become a grocery equivalent of Dollar Shave Club, the razor subscription service that Unilever ended up paying $1bn for in 2016?
And might FMCG giants follow a similar path in food as Nike did in footwear with Amazon, cutting retail middlemen out of the equation and focusing instead on cultivating their own relationships with consumers?
That might look more worthy of consideration in the light of the online retail sales surge during the lockdown. The latest Office for National Statistics data revealed that the proportion of retail sales online reached an all-time high of 30.7% in April 2020.
The reality is, however, that the likelihood of FMCG brand owners opting to become retailers in their own right is low.
Many of the recent initiatives, such as Heinz to Home, were launched mainly to ensure access to brands when stockpiling by worried consumers was a problem. Heinz’s venture was also, like some launched by retailers and others, primarily aimed at key workers, who were offered free delivery by Heinz.
It’s unlikely, too, that FMCG groups would want to take on all the aspects of consumer relationships that retailers have traditionally handled and excelled at, such as service.
And in normal conditions customers would be less interested in shopping separately with a raft of brands when they have the convenience of getting all of them in local supermarkets, or through the established grocers’ ecommerce operations.
On top of all that, FMCG groups’ direct-to-consumer revenues are tiny – certainly at present – compared with the sums generated through retailers.
“The relationship between brand owners and retailers has often been collaborative – and that is where the latest wave of direct-to-consumer activity might start to get really interesting”
While a few brand titans such as Nike can throw their weight around with retailers, others have more of a see-saw relationship.
Remember Unilever’s stand-off with Tesco over Marmite a few years back? In the end, it was Unilever that blinked.
Or the fact that mattress-in-a-box online specialists sought a presence – sometimes desperately when online sales proved insufficient on their own – in established retailers’ shops?
Despite occasional high-profile clashes such as Unilever v Tesco, the relationship between brand owners and retailers has often been collaborative – and that is where the latest wave of direct-to-consumer activity might start to get really interesting.
Increased collaboration makes sense, according to James Hammersley, co-founder of ecommerce agency Good Growth, which launched Heinz to Home.
He told me that such ventures potentially open the door for retailers and brands to work more closely on product development and understanding consumers by comparing the respective insights and data that each can bring.
The next Dollar Shave Club may, like the original, again be the brainchild of an entrepreneur. But perhaps established brands and retailers, working together, could show that entrepreneurship isn’t only the preserve of start-ups.