27 Feb Nestlé to focus on direct channels
Nestlé, the world’s largest packaged food company, announced last week at an investor call that their next area of focus is establishing direct channels of communication with their consumers. Quite a big statement of intent from a business anchored in established distribution channels. Buoyed by 18% growth in their e-commerce sales (six times faster than its average growth), they have seen the future and it has a higher margin.
Take their iconic brand KitKat as an example. Last year they created a series of pop-up artisan Chocolatory shops with professional chocolatiers creating choc-lovers’ fantasy KitKats topped with ingredients such as freeze-dried raspberries and mini pretzels. It created a storm on social media as people showcased their creations.
You can also buy KitKat online in many countries direct from the brand’s website. Typically the purchase is fulfilled via the supermarkets but the purchase experience is embedded within the brand experience. One minute you are entering a competition or watching entertaining content, the next you are buying that multi-pack to satisfy your recently-heightened craving!
Whilst I am sure the supermarkets won’t be worried just yet, it does represent a shift in thinking from one of the world’s leading businesses: from maximising customer transactions via third parties to creating ownable customer experiences. When the latter drives transactions, delivers greater margins and improved customer loyalty, who can blame them.
This is a significant development in how Nestlé invests and presents it’s owned channels. Such a shift requires new competencies like building a retail experience division and transforming brand websites into e-commerce sites. Which is significant for a FMCG business. But I wouldn’t bet against them.
If you want to understand the true value of your ‘direct channels’, go to mavmetric.com for a free valuation.