It looks like the universe is definitely expanding, which is good news for fmcg brand owners. As market channels proliferate, fmcg groups are racing to show off their brands outside the traditional realm of the household.
One of the latest phenomena is the branded retail outlet which stocks and promotes its own-label fmcg products on an exclusive basis. This week Van Den Bergh Foods launches into the tea-house market. Its long-awaited tea shop pilot – Ch’a – will debut in Brighton and sell “an expansive range of hot and cold teas and tea-based drinks”.
The initiative is aimed at building its Brooke Bond brand. Ch’a customers can relax with a cuppa in a social environment brewed by the new Brooke Bond tea-bird machine, which can make 100 cups of premium tea per hour.
Perhaps this is of little surprise, given the success of coffee shop chains, but it is a massive departure for brand owners. Their typical fmcg goods are relatively low value and have been successfully positioned, until now, as quality products on retailer’s shelves. Supermarkets supply the venue, fmcg companies supply the goods. This model has served almost since market forces began. Brand owners have done what they do best: build brands and generate consumer demand. They have understandably had little interest in building bricks and mortar retail outlets or running cafes, since these require wholly different skill-sets and resources.
However, the latest thinking is changing all that. Just as retailers have developed their own-label brands, why shouldn’t an established brand be put to use in non-traditional ways? In the US there has been a surge of “out of home” growth: brands following their loyal customers outside the home to capitalise on their position in the market. The theory seems to have convinced multinationals like Unilever (which owns Van Den Bergh Foods) and Nestle to experiment in the UK.
A spokeswoman for Van den Bergh Foods insists that the Ch’a launch is just a pilot: “It is a brand-building exercise, but at the same time the opportunities for ‘out of home’ growth are enormous.” She admits this is a departure, but denies any wholesale shift in direction for fmcg groups. “It is recognising that the market has changed – we are literally following the consumer,” she says. She also says that while teas (although no tea-bird machines) will be on sale at Ch’a, the impetus behind the idea is to extend the reach of the Brooke Bond brand.
Opportunities for design groups are immediate: “Design Bridge and Design Stream have been in partnership with us on the design of the tea-bird machine and Design House has been involved with the shop itself,” the spokeswoman says.
There are other brands which have capitalised on their luxury status by rolling out retail outlets. The Haagen-Dazs ice cream parlour would be expected to deliver a greater customer experience than a typical seaside ice cream shop – and, of course, Haagen-Dazs will charge for the experience. When the fmcg label is turned to retail there is an assumption that it affords premium returns to brand owners over rival shops.
Confectionery brands have fared well in the fmcg retail stakes. The luxury factor seems to apply here as well.
“If you look at confectionery the classic is Thorntons,” says Nestle trade communications manager for confectionery James Porteus. “Although we are not big in confectionery outlets, we used to own a cookie bake house chain called the Original Cookie Company years ago.”
Porteus adds that the chain was sold because it was not really practical for a brand owner to run such a venture. However, the chain is still in existence. “It was outside of our normal way of doing things. It did not fit in with our operation,” he adds.
But that was the philosophy of the old school. Nestle too has recently opened its first branded coffee shops. Cafe Nescafe is a concept which will be rolled out nationwide with Granada Road Services over the coming months. Like Ch’a it is a recognition of unfulfilled brand potential outside of the household.
However, some areas are still off limits. Fmcg groups are still wary of stepping on the toes of the retail giants. Home shopping on the Internet may have arrived, but so far the convenience of the medium has not persuaded the majority of individual fmcg houses to sell their brands directly to consumers. Not only would this move undermine their historic ties with retailers, but it still requires huge delivery and sales service functions which fmcg groups do not readily possess.
Heinz baked beans, the quintessential fmcg product, is one of the rare examples of a brand which does sell to consumers without a retail intermediary. But a Heinz spokesman says it has only launched on-line as a bulk-buying service for ex-pats overseas.
If the “out of home” innovations catch on, and Ch’a and Nescafe Cafe are the acid test, design groups could certainly stand to profit, particularly in the brand identity and retail sectors.