Brands Rowing In Behind D2C Can Benefit From Premiumisation, Says Analyst

By Steve Wynne-Jones
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Brands Rowing In Behind D2C Can Benefit From Premiumisation, Says Analyst

The direct-to-consumer (D2C) channel offers food manufacturers the opportunity to develop personalised, premium products, a leading retail analyst has said.

Simon Harvey, food correspondent at GlobalData believes that D2C offers brands the opportunity to develop niche products that "can be customised to suit individual preferences but at the same time [be] modern and on-trend".

Nestlé Takes The Plunge

Earlier this year, Nestlé took a big step into the D2C world with the launch of the 'Choclatory' experience in the UK (pictured), where consumers could develop their own personalised KitKat bar, choosing from four types of chocolate and 14 ingredients.

The launch followed on from an initial rollout in Japan, where more than 300 varieties of KitKat have been launched in small quantities, aimed at the gifting market.

As Harvey notes, food firms thinking of embracing D2C should consider whether acquisitions or in-house ventures are the best way forward.


“The market is largely dominated by entrepreneurial start-ups that have recognised the potential of digital services and e-commerce to engage the Millennial and Generation Z consumer cohorts," he says.

"“That could make entering D2C organically attractive, but whether a major food manufacturer decides to launch into the channel through acquisitions or on its own, there are trends a company could harness – and personalisation and premiumisation should be central to product development."

Non-Food Investment

Some of the biggest forays into D2C in the consumer goods segment in recent years have been from personal care brands – earlier this year, Procter & Gamble acquired This Is L, a feminine care business built on a D2C infrastructure. Similarly, in May, Edgewell, which owns the Wilkinson Sword brand, acquired D2C shaving brand Harry's for $1.37 billion.

We're also more than three years on from Unilever's takeover of male grooming business Dollar Shave Club, arguably the biggest D2C investment of the decade by a major FMCG brand.


Skill Sets

As Harvey explains, within food, many manufacturers "lack the necessary skills in areas like delivery, back-end I.T. and digital marketing", to go full-on into the D2C market.

“The key is picking suitable products, a niche area, or one that can be customised to suit individual preferences but at the same time keeping it modern and on-trend. It is also about creating an online experience through D2C that is both engaging and fun."

Innovation is one of the key drivers of D2C success, however this can in many cases take too long "from the initial idea to the supermarket shelf, with the inherent risk of failure," adds Harvey.

"However, D2C offers some element of success because it is based on valuable consumer insights and actual shopping behaviour making it a service that's hard to ignore.”

© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.

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