Tuesday 27 August 2019 ★ FINANCIAL TIMES 7

F T B I G R E A D. RETAIL

Criticised for being slow and unimaginative, consumer goods companies have seen revenue growth

dwindle. Now they are trying to reinvent market research using social media and other new technologies.

By Leila Abboud

For example, instead of commission-

ing an “in-home use test” that follows

400 people using its Cif kitchen cleaner

and a competitor product, Unilever can

now just mine product reviews on

Amazon to compare Cif’s product

performanceandthatofitspeers.

Another new tool at Unilever is called

Idea Swipe, which was inspired by the

dating app Tinder. It puts a new product

idea in front of consumers on their

smartphones—say,foranice-creamfla-

vour incorporating breakfast cereals —

and asks them to swipe right if they like

it and swipe left if they do not. The com-

panysaystheappdeliversbetterquality

data more quickly than older survey

techniquesandithastestedabout5,

ideas in more than 25 countries since it

waslaunchedayearago.

It is still too early to tell whether the

adoption of digital tools to predict con-

sumer trends and improve marketing

will really be enough to help spur faster

growth in the sector. Bain & Company

says organic sales growth at the top 30

global companies hit 2.9 per cent last

year — the best performance since 2013

— as the global economy expanded.

François Faelli, who heads Bain’s con-

sumer practice, says the big players

“have upped their innovation game”

andthatitisnowstartingtopayoff.

Others are more sceptical. Elio Leoni

Sceti, a veteran industry executive who

last year co-founded The Craftory

investment firm to back challenger

brands, thinks that big companies

remain too disconnected from consum-

ers. Their supply chains are slow and

they remain too focused on physical

retailchannelsinsteadofonline,hesays.

Nor do their brands have the authentic-

ity or sense of mission that power the

newcomers, like the Craftory’s recent

investment in TomboyX, which makes

body positive underwear for people of

allsizesandgenderidentities.

“Even if the big guys get good con-

sumer insights, they often don’t listen to

them,”saysMrSceti.

Big brands turn to big data

M

ost foodies and wellness

junkies have probably

sampled kombucha,

eaten jackfruit and

tried CBD oil in the past

few years as these once obscure prod-

ucts infiltrate the mainstream. But the

trulyhipwillsoonmoveontosippingon

pea milk, taking gaba supplements, and

smearingtheirfaceswithbakuchiol.

Those are predictions from Black

Swan, a London-based start-up that

hoovers up data from social media,

online forums, product review websites

as well as other sources and then

analyses it to divine what consumers

want. Its artificial intelligence software

purports to sift signal from noise to

figure out which early trends are

destinedformassadoption.

Black Swan has signed up 16 big

consumer goods companies as clients in

the past six months alone, includ-

ing PepsiCo, Danone and M cDonald’s,

putting it on track to double revenue

thisyeartoreach£30m.

It is growing quickly because it offers

something the leading consumer goods

companies, whose revenue growth has

slowed to a trickle in recent years, des-

perately need: an understanding of

what fickle shoppers will buy in the

future, as well as insights into how to

bestpitchproductstothem.

“It is like getting a crystal ball that we

all have wanted for the past 20 years,”

says Elaine Rodrigo, head of consumer

insightsandstrategyforFrenchyoghurt

makerDanone.

Black Swan is one of a range of tech

companies that are disrupting how

market research is done inside the very

industry that invented the discipline in

the 1920s. From its early days,

when Procter & Gamble sent staff out to

quiz American housewives about how

they cleaned their homes, cooked meals

or did laundry, the field has evolved to

help consumer goods companies decide

whatproductstomake,aswellashowto

priceandmarketthem.

For all their record of product innova-

tion, the industry is now trying to shake

off the impression that it has become

slow, bureaucratic and unimaginative.

Themakersofwell-knownfoods,drinks

andhouseholdbrandshavefacedgener-

allyslowergrowthsince2012,whichhas

made it clear that the big companies can

no longer dictate consumer tastes as

easilyastheydidinthepast.

Worse,theyareoftencaughtoffguard

by trends such as veganism or high-pro-

tein “Paleo” diets and then must scram-

ble to respond when new brands start to

take market share. Their complex sup-

ply chains, internal processes and

adherence to quality and health stand-

ards also means that launching new

products often takes a year or more,

while a challenger brand might only

takemonthstocometomarket.

Critics point to how the emergence

of HaloTop, an American no-sugar, low-

calorie ice-cream, surprised Unilever

and Nestlé, or how meat jerky has taken

offattheexpenseoftraditionalcrisps.

Now some in the industry are betting

that modernising market research can

rekindle growth. Leading consumer

goods companies want to upgrade

decades-old techniques, such as con-

sumer surveys, focus groups and retail

sales data, which are seen as too slow,

tooexpensiveandoftenincomplete.

Agile approach

Enter start-ups such as Black Swan.

They are using newer methods includ-

ing online polls that can be done in a few

days instead of taking the usual four-six

weeks. One such provider, Zappi, has

signed up dozens of consumer compa-

niestoitsself-serviceplatform.Itallows

marketers to set up their own studies

and quickly test ideas with panels of

people selected by age, income, or

location.

Other start-ups, such as London-

based Streetbees, allow companies to

conduct one-on-one video interviews

via smartphone that can be arranged at

a moment’s notice with consumers any-

wherefromMoscowtoOregon.

Then there are more data-rich, artifi-

cial intelligence tools that bring new

quantitative rigour to a once fuzzy field.

Examples include Signals Analytics,

founded by two veterans of Israeli mili-

tary intelligence, and Tastewise, a plat-

form that analyses menus, blogs and

onlinerecipestopredictfoodtrends.

The start-ups are challenging the

leading market research agencies that

have long worked for the big consumer

goods groups, namely WPP’s Kantar,

Ipsos and Nielsen. The old guard all saw

their revenues and profits fall last year,

said at an investment conference last

year. “Now, we have to totally adjust to

newdemandsfromclients.”

Tech bubble

After a decade when the industry has

been dominated by the cost-cutting

ethos pioneered by 3G, the search for

quicker and better consumer insight is

part of a new emphasis on investment.

“In the past, data and insights were

often seen as a cost centre and targeted

for cuts. But now it has become a strate-

gicasset,”saysMrWarner.

PepsiCo started working with start-

ups and tech providers last year as it

looked for better ways to understand its

customers. The huge snack and

soda group behind brands from Doritos

to Gatorade took nearly nine months to

figureoutwhatitreallyneededandreal-

isedthatnoonecompanyofferedasolu-

tionofftheshelf.

So instead, PepsiCo decided to work

with five start-ups to build a set of tools

knitted together in a proprietary plat-

formthatcouldbeusedbyanyoneatthe

company to spot trends earlier and

quickly test out their ideas for products,

packaging and advertising messages. It

dubbed the system ADA, after Ada

Lovelace, a Victorian-era scientist who

is credited with writing the world’s first

computerprogramme.

In addition to Black Swan for trend-

spotting, Pepsi is also working with

Zappi for quick polling and testing, and

VoxPopMe to collect interviews with

consumers. Two other London based

start-ups, Been There Done That and

Discover.ai focus more on product

positioningandmarketingmessages.

One of the first projects to use Pepsi’s

new market research tools was the

healthier snack brand called Off the

BeatenPath,whichusesvegetablessuch

as beans and peas to create crisps with

no artificial colours or preservatives.

When it wanted to launch a third prod-

uct for the line last year, ADA identified

seaweed as a trend ingredient that

would attract health-conscious con-

sumers. The new snack, rice and

seaweed crispy curls flavoured with

sweet chilli and lime, hit supermarket

shelves just under 10 months later,

which is relatively quick for a new

productlaunchatabigfoodcompany.

This year, PepsiCo used the tools to

create two flavours that aimed to mod-

ernise the Walkers crisp brand. Ingredi-

ent and flavour options were ranked

according to the volume and quality of

online conversations, as well as the

potential for scale. They were then

mapped against other sources of data to

refine the best flavours for launch. The

result:theBBQPulledPorkandWalkers

SpicySrirachaflavours.

“ADA allows us to get input from

consumers really rapidly, in a more

iterative way than in the past,” says

PepsiCo’s Mr Warner. “When you’re

developing a product, its packaging and

advertising, you can test all of it, get

reallyquickconsumerinput,orvalidate

an idea, which helps guide decisions

aroundwhatwedoanddon’tdo.”

While such product testing may

sound simple, it was not common

practice among big consumer goods

companies. Instead of being a central

part of the innovation process, market

research was often a separate depart-

ment that did not interact regularly

with sales people or brand managers.

Instead of delving deep into consumers’

minds, people there spent much of their

timewritingbriefstocommissionexter-

nal groups such as Kantar and Ipsos to

go out and research the ideas that came

fromthemarketingside.

“Up until relatively recently, market

research was all about mitigating risk of

the decisions that the business had

alreadymade,”saysStanSthanunathan,

who has led consumer insights at

Unileversince2013.“Todayourrolehas

changed to anticipating consumers’

desiresandcreatingtheirneeds.”

Swipe right

Foritspart,Unileverisnotsolelyrelying

on start-ups. About five years ago, the

company built a system to listen to

consumers via social media, telephone

helplines and rating sites and today it

has more than 30 teams of people doing

such work in various markets. They

monitor online chatter and feed back to

brands on what they are picking up, but

can also be commissioned by other

parts of the business to monitor con-

sumerperspectivesonaspecificissue.

Unilever has about 700 people work-

ing in market research. Although that

number has shrunk by a third in the

past four years, Mr Sthanunathan says

his staff were producing more analysis

than ever before because the new tools

weremorecosteffective.

The faster growth of more than a decade

ago remains out of reach

Year-on-year organic sales growth for consumer

packaged goods companies (%)

Top consumer packaged goods

companies grapple with low growth

Revenue

Compound annual growth rate (%)

Operating profit

2007 09 11 13 15 17

Source: Bain & Company

0

2

4

6

8

2007-12 2013-18 2007-12 2013-

0

1

2

3

4

5

6

in large part because of how technology

ischangingtheirbusinesses.

“In the insights industry, there is a

real gap between what has been tradi-

tionally available and what we need

today,” says Tim Warner, who heads

PepsiCo’s consumer and market

researchinEuropeandpartsofAfrica.

“There is a real burning platform feel-

ing now,” he says, referring to a famous

Nokia memo warning about disruption

from the iPhone. “People want faster,

more precise tools. The old methods

that were invented before the digital era

are not agile, precise, and predictive

enoughforourcurrentneeds.”

The stakes are high for consumer

goods giants because online shopping

and social media have lowered barriers

to entry and eroded the advantages that

used to come with scale. New upstart

brands and local players have flooded

into every category from beer and ice-

creamtocosmeticsandrazors,position-

ing themselves as either more authen-

tic, healthier or more environmentally

consciousthantraditionalbrands.

Asaresult,averagerevenuegrowthat

the top 30 global consumer goods com-

panies fell to just 0.4 per cent annually

in 2013-18, from 4.5 per cent for 2007-

2012, according to Bain & Company.

Average growth in annual operating

profitshashalvedoverthesameperiod.

In the US, large consumer goods com-

panieshavelost2.4percentagepointsof

market share to smaller companies and

private label products since 2013,

according to Boston Consulting Group.

Meanwhile, Unilever recently admitted

it was losing share across about half of

its business, with steeper losses seen in

packaged foods compared with house-

holdgoodsandbeautyproducts.

The changed reality prompted Jorge

Paulo Lemann, one of the billionaires

behind investment firm 3G Capital,

which owns Kraft Heinz and Burger

King, to liken himself to a “terrified

dinosaur”. “We bought brands and we

thought they would last for ever,” he

Consumer

brands are using

apps to develop

new products

such as pea

milk—FT montage

‘People want

faster, more

precise

tools. The

old methods

are not agile,

precise and

predictive

enough for

our needs’

‘Market

research

was all

about

mitigating

risk. Today

our role has

changed to

anticipating

consumers’

desires’

Tech boostBig brands are turning to

online platforms in the bid for faster,

more accurate consumer insights

Digital benefitsConsumer goods

makers still have big market research

teams but have been able to cut costs

Rise of the challengersUpstart brands

have entered every category from beer

and ice-cream to cosmetics and razors

AUGUST 27 2019 Section:Features Time: 26/8/2019 - 18: 02 User: nicola.davison Page Name: BIG PAGE, Part,Page,Edition: USA, 7, 1

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