Has the Demise of Black Consumer Brand Loyalty Arrived?
The old black consumer brand loyalty which many marketers of f.m.c.g. products relied upon is under threat.
Many of you reading this article will be over the age of 35 and able to remember the “good old days” of the 1980s, marketing under apartheid, when numerous myths and legends abounded concerning black consumers. There were some hilarious ones, such as, “black people can not see in three dimensions” and “black people are colour blind, so why waste money creating advertising in colour?” (I kid you not!)
But, despite these idiotic notions, there was one hard and fast tenet of marketing which we knew was unshakeable – black consumers were brand loyal and would always stick to the big brands they knew and loved. This was of great comfort to the manufacturers of top selling fast moving consumer goods, who could always rely on a huge black franchise.
So what brought about this unswerving loyalty? It was a combination of several circumstances unique to the lifestyles of black consumers, which the apartheid system either created or greatly contributed towards:
• The only stores which most black consumers purchased groceries from were township general dealers and stores in the nearest Central Business District. Many of these were independently owned and usually stocked only the top 2 or 3 brands in each product category.
• Black consumers were locked into this shopping pattern for two main reasons – there were no major supermarket chains then in the townships and it was virtually impossible to reach the supermarkets in suburban shopping malls with existing public transport. That meant little access to supermarket housebrands.
• With low disposable income, black consumers had to be careful how they spent their money and there was little room to experiment with new products. Major brands from large South African and multi-national manufacturers offered well-established quality and reliability which could be trusted without question.
Black consumer relationships with big brands started many years ago, via direct contact with consumers. Brands such as Omo were demonstrated to consumers in urban townships and rural villages from the 1950s. My husband has fond memories of seeing the Stork margarine promotions and filmshows brought on a 7 ton truck to his home town of Soweto!
However, two years ago, via our Township House Promotions programme, which sees 100 000 black consumers a year, and also from the 4 000 township traders which our cash van division services monthly, we began to pick up signs of change in the established pattern of black brand loyalty.
We increasingly began to hear consumers talk of buying housebrands from Pick’n’Pay, Score, Shoprite Checkers and Spar and we decided this was worth further investigation, as most of our clients are manufacturers of major f.m.c.g. brands.
This resulted in two research studies – ConsumerWatch and TradeWatch, which consisted of in-depth interviews with 200 LSM 5-7 households and 100 traders in major townships in Gauteng.
When asked whether they ever purchase housebrands, 70% of the households we interviewed said that they had switched to supermarket housebrands on selected items in the previous year!
This was an astounding finding and one with potentially huge ramifications for manufacturers of South Africa’s biggest brands.
Respondents told us that, with the rapid expansion of major supermarket groups, such as Pick’n’Pay, Shoprite Checkers, Spar and Score into many townships over the last few years and improved taxi routes from all townships to major shopping malls, they too had now been able to access money saving supermarket housebrands.
Whilst the improved availability of housebrands is without doubt a major factor in their increased purchase, it would appear, however, that, for 60% of those who had switched from major brands, the reason was predominantly financial.
The impact of the loss of one million jobs from the formal sector in the last 10 years and the increasing number of deaths of breadwinners from Aids is taking its toll on township consumers.
10% of households told us they had lost a breadwinner through retrenchment in the last year. 25% of the households we interviewed have no adult formally employed, whilst 47% have members who earn an income from informal work or a small business. This income can fluctuate considerably from one month to the next, causing havoc with financial planning.
There has also been a re-prioritising of spending amongst township families over the last few years:
• 46% of the households we interviewed send their children to previously whites only schools in the suburbs, with an increase in school fees and transport costs.
• The Aids pandemic has brought about a decrease in income caused by sick and dying breadwinners and an increase in the number of funeral policies and membership of several burial societies to cover funeral costs of family members.
• The purchase of cellphones, since the introduction of the pay-as-you-go concept, and the growth of the lottery have taken considerable amounts out of township families’ budgets. (25% of households have at least one family member with a cellphone and 75% of households have at least one family member who plays the lottery regularly.)
These new claims on family budgets have been funded by cutting back on all other types of spending and grocery spending has been heavily affected.
It is unlikely that this trend will change in the short term so what can big brand marketers do to maintain their sales amongst these consumers?
The most important thing to remember is that this trend is not a total rejection of big brands by black consumers. 77% of those we interviewed said that big brands were still important to them and were felt to offer quality and to last longer. 62% told us that they feel that housebrands are not as good as big brands but that, “we have little choice, we have to stretch our rand.” The pattern of which types of products are likely to be replaced by housebrands varies from one family to another, although cleaning materials seem to be most at risk.
F.m.c.g. marketers need to operate more strategically and selectively. The majority of consumers already feel that their favourite brands are the best and this needs to be managed by marketers.
Obviously, cheaper prices would be the main way to bring these consumers back into the fold, but simple price cutting is not always the best answer and can not be maintained permanently. These consumers are looking for added value and that can take many forms, including education on the benefits of the brand. Consistent, direct communication with consumers via promotions and sampling is essential.
Housebrands are also not always the cheaper option. There are some chains whose housebrands have increased in price and deteriorated in quality recently, offering little reason to move from big brands.
Traders in the townships tell us that consumers want smaller sizes, to be able to buy across a range of items with the limited cash they have. It is not always a popular option with manufacturers, as it reduces total volumes sold, but it may be a choice of a small size or none at all. Where spaza shops were previously the convenience stores of the townships, used for after hours purchases and “top-ups”, they have now become the outlets where the unemployed and those on very low incomes by all of their groceries. The reason is that, as they are literally living hand to mouth, they only buy one or two items per day. The cost of transport to go to a large supermarket outweighs the higher prices at spaza shops. They are also more likely to receive credit from neighbouring spazas. It is vital that these traders are included in distribution and marketing plans and incentivised to keep your products.
Another vital issue is when housebrands tend to be purchased and that is often from the third to the fourth week of the month, when the big brands have run out and money is tight. There is an opportunity for price and added value promotions to be run at these times, not only at month end.
There is no doubt that the old black consumer brand loyalty which many marketers of f.m.c.g. products relied upon is under threat and new shopping patterns are emerging. The old complacency which many marketers had regarding this market needs to be shaken up and new, exciting ways of marketing need to be developed.
Joint Managing Director
The Alternative Consultancy