Is it realistic for food brands to slash marketing in the cost of living crisis?

In mid-June, the government appointed a cost of living business tsar: David Buttress, former CEO of Just Eat. Immediately he urged businesses to “step up” and present him with ideas to save people cash.

Buttress has revealed a six-month, four-point plan to reduce costs, focused on the summer holidays, the back-to-school period, the expected increase in bills in the autumn, and around Christmas.

At the end of June, he told business leaders at a Confederation of British Industry event it was time for them to “join a national effort [and play a] full part in easing the burden for millions of people”.

Undoubtedly, that thousands of people have been plunged into fuel and food poverty for the first time in recent months is alarming. And it’s clear businesses must play a part in the recovery. However, I’m concerned about some of the ideas being mooted and how they might impact companies – and consumers – in the long term, if not managed correctly.

Marketing spend

For instance, some talk was about encouraging supermarkets and manufacturers to reduce marketing campaigns significantly to lower the price of goods to the end-user. It would appear that even government is at odds with this policy, as it recently decided to allow bogofs and promotions on HFSS goods to continue. Do policymakers not understand this activity comes with investment in spend with retailers, and in its own right requires marketing campaigns and so on?

The government has announced it will award a brand/logo to companies who do their bit to help with the cost of living crisis. However, as was mentioned at the CBI meeting, some leaders complained they have already been stretched as far as possible.

Indeed, while this is a good idea in theory, I’m not sure it will work in practice. The challenge is that either everyone or no one should do this. And what are the odds of the former happening?

If some retailers decide to take this approach and competitors don’t participate – and no one will force them to – then it will negatively impact their market share. The latter group might decide to promote fewer of their premium brands but raise the profile of secondary brands with a lower price point, which will capture a share of the purse as consumers drop their spending. And while using the upcoming government logo might be positive, it will not really help those in society who don’t buy brands.

Knock-on impact

With this example, there are so many other things to consider. Supermarkets make a significant amount of money selling shelf space and through product placement. How might their profit margins, and the potential knock-on increased cost to the consumer, be affected if brands are not spending anything on marketing or promotions? Also, things like two-for-one promotions can be life-savers.

So, again, I applaud the positive thinking, and whatever can be done to support those with the greatest need has to be considered, but I’m uncertain whether this – and similar ideas – are workable either in the short or long term.

Additionally, leaders are coping with internal pressures to mitigate costs. The overriding question is: how much of the inflationary cost drivers have already been passed on to the consumer? Managing the future from a cost perspective is a perilous task, with many unknowns. Even businesses with the best will in the world don’t want to reduce prices for the consumer only to find they can’t operate in a few months due to other cost impacts. And even without marketing, will customers move to other brands or businesses as they shift down?

Tough questions

A customer-centric approach is vital. But there are so many questions that cannot be answered to make firm plans for cost reductions. Are lead times naturally going to come back down, and product availability start to increase? When will inflation decrease and customer demand rise? If the events since the start of 2020 have taught us anything, it is to expect the unexpected.

Crucially, I worry about the ability to model the impact of changing product portfolios and marketing plans alongside rapidly evolving consumer behaviours. Of course, business leaders would love greater certainty and control, and for some normality to return. But as war rages in Ukraine and with Covid still not entirely at bay, we need to continue to invest in innovation today, so that tomorrow those hit hardest by the cost of living crisis will not suffer more.

Ultimately, the appointment of the cost of living business tsar, and the ideas about reducing costs, emphasises the need for leaders to have improved processes to manage their companies. You also wonder how much of a role central government will play – surely a cut in VAT on food would provide a benefit across the board?