Times of uncertainty

Posted by Filipa Silverio on Mar 13, 2020

In view of the current Covid 19 crisis, this week we look at insights from previous periods of uncertainty.

 

Primarily these are around times of economic uncertainty because we haven’t seen anything similar or on this scale – although I have referenced SARS in China and H1N1 in Mexico.

 

  1. During SARS outbreak in China and H1N1 in Mexico the main beneficiaries were cleaning and staple products plus personal care in China. Larger stores did best in China but it was proximity retailers in Mexico as shoppers didn‘t want to go far and to avoid busier places.
  2. Uncertainty leads to choice changes which are perpetuated as loyalty increases again afterwards. If uncertainty means a change in retailer, shoppers are 40% less likely to choose the same brand (BG20). Loyalty will also fall if shopping frequency increases (BG20).
  3. Supported by a paper from Lamey, Deleersnyder, Dekimpe, and Steenkamp looking at 20-30 year trends: PL increased by 7.7% in contractions and 2.3% in expansions; market behaviour perpetuated this with manufacturers operating pro-cyclically.
  4. Roberts/Buck also found that the same counter-cyclical activities were closely associated with growth in UK recessions in the 1970‘s & 80‘s. GfK confirmed this in downturns in Germany in the 2000s. This was also supported by Europanel/Steenkamp in a global study looking at brands vs Private Label – the keys being advertising, value for money, trust and innovation.
  5. Long term analysis in Germany also shows the resilience of big brands and that mid-tier brands should concentrate on their unique benefits such as region or consumer need. Academic studies again show that big brands stand up better to Private Label development.
  6. In summary for times of uncertainty and Covid 19: Can the industry also work together to help those in most need?