Down-trading? Brands should win in trade-offs

For consumer businesses, an economic slowdown often brings with it the prospect of down-trading by their audiences. Be it in FMCG, durables, automobiles or even food and beverage services, we hear of discretionary items being struck off the shopping list. But, is it really true that consumers have been down-trading to save?

Over the last decade, our growing economy has created more discerning consumers, such as the consumers of modern trade. As a result, brands entered premium categories - in an effort to stay relevant.

When the slowdown struck, and in the wake of its aftershocks, the consumers sought out relevance in those very brands in which they had put their trust over the last 10 years. Those which are no more relevant to the consumer's frame of things have been relegated to the lower shelves.

But does that mean the relevant brands and extensions today reflect the much-discussed down-trading of the last three-four years? Far from it.

Down-trading has been defined as 'reducing the number of features (and their associated benefits) or the quality of a product to suit the selling price demanded by its customers'. It has also meant the consumer's behaviour of opting for such products, which would be priced lower with less features. What today's consumer industry shows is that rather than reduce features or prices, it is going in for affordable aspirations in segments that the consumer will not be down-trading in.

If we look at trade-offs, instead, it might explain how we are constantly moving up the ladder through calculated choices as consumers. A trade-off is supposed to be 'an exchange of one thing in return for another, especially relinquishment of one benefit or advantage for another, regarded as more desirable'.

Hence, we see the consumer of modern trade still buying her premium healthy oil, but restrict spends on other not-so relevant categories in a way that her total budget is not compromised. Even in edible oils, for example, the trend has moved on from one brand for the family to a choice of two or more oil brands - one a standard cooking medium and another for specialty cuisine (cold-pressed mustard, sesame or filtered groundnut oil) and a dairy fat (ghee). New-age shopping trends have shown the informed consumer choosing even more health-specific oils like rice bran, blends of olive etc. These set of consumers are continuously seeking benefits with value, and are the last ones to down-trade to cheaper options, even during a slowdown. Then again, a father will keep buying that Rs 5-10-chocolate bar for the child but probably will reduce the number of times he indulges in that expensive, imported dark chocolate, or settle for a locally-manufactured dark chocolate from a reputed MNC. That is a trade-off and certainly not a sign of down-trading.

Such trade-offs will lead to the growth of mint-fresh categories in the next decade. The consumer of today looks out for fresh and natural foods. Modern trade operators and brand-owners have started offering freshly-prepared or packaged foods and beverages with 100 per cent natural claims. The consumer makes a trade-off, even if these are higher-priced, by cutting back on a bottle of soft drink. The intention here is not to save money, but supplement health.

The sales trends with modern trade chains show the gradual increase in the shopper's ticket size, with no signs of down-trading. Brands need to win in the trade-offs. Otherwise, how could one explain the rise of categories such as dark chocolates and specialty cooking oils? Or, how is it that a seemingly high-tech gadget like a tab now has over 20 brands with comparable features but plugging every possible price-points? If it was the age of down-trading, we would have seen more and more sub-Rs 5,000 handsets being launched and generate volumes.

He is the president of the Future Group's Food Bazaar