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CLEAR STANDARDS FOR NEW ZEALAND THE DEMAND FOR ORGANIC PRODUCTS IS INCREASING GLOBALLY.”

Minister Damien O’Connor shares his vision for 2019. WE SAW plenty of action in 2018 and significant progress has been made to boost the value of what our producers and growers can expect to get for their great Kiwi products. The Ministry for Primary Industries’ situational outlook painted a rosy picture for our economic engine-room with primary sector revenue forecast to reach $43.8 billion for the year to June 2019. We are working in partnership with our primary producers. A $40 million-a-year Sustainable Food and Fibre Futures investment fund encourages innovative projects that will create more value from the food and fibre industries. We added an extra $9m to the budget for biosecurity to protect our key industries from pests and disease. We made substantial progress on the Regional Comprehensive Economic Partnership negotiations, a trade pact that would cover half the world’s population, and the benefits of Comprehensive and Progressive Trans-Pacific Partnership trade deal kicked in for agribusinesses on 30 December 2018. I’m particularly proud the Coalition Government has introduced a science definition for mānuka honey exports, legalised hemp seed as food, and passed legislation on Country of Origin Labelling for food – recognising that diversification and clear standards are key to the good health of our regional economies. PUBLISHED BY The Intermedia Group Ltd 505 Rosebank Road, Avondale Auckland, 1026, New Zealand ph: 021 361 136

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FMCG BUSINESS - LEADERS FORUM 2019

Following on from that, we recently agreed to establish a national standard for organic production. The demand for organic products Damien O’Connor, Minister of Agriculture, Biosecurity, Food Safety, Rural is increasing globally. Communities and Minister of State for One set of rules for our Trade and Export Growth organic products will be a real boost for the sector – which has long been crying out for it – and will bring us in line with 25 of the top organics markets. 2019 will be a good one. The Government is committed to sustainable and productive value growth for our primary sectors. The Primary Sector Council has been tasked with finding an overarching strategic direction for our food and fibre sectors – and that will be launched in the first quarter of 2019. My vision for New Zealand has always been as the producer of the finest food for the world’s most discerning customers. People will pay more for products when they absolutely trust they are produced sustainably and adhere to clear standards. MANAGING DIRECTOR-PUBLISHER Dale Spencer dspencer@intermedianz.co.nz

EDITOR Tamara Rubanowski trubanowski@intermedianz.co.nz ph: 027 2784761


[ FMCG Business Leaders Forum ]

WORKING TOGETHER

FGC Chief Executive Katherine Rich predicts 2019 will be a good year for the sector. I’M PICKING a very interesting year ahead for the FMCG sector. There’s no doubt from the suppliers’ point of view that profitability will be the main focus, but issues such as labelling, packaging and obesity will continue to loom large, as they have done for quite a few years. Obesity remains New Zealand’s most pressing non-communicable disease and work will continue there. The industry sees itself as a big part of the solution by developing more and healthier options over a wider range of products. Evidence of this can be seen across the sector. One example is what Coca-Cola has been doing. Between 2015 and 2017 it reformulated 22 products, and now all its core brands are available in low- or no-kilojoule varieties. Other companies are doing likewise. Research company IRI has plotted the change in consumer preference that accompanied such reformulation. It says that over the past 18 years, sales of beverages containing added sugar dropped from 64% to 45%, while sales of beverages with no sugar rocketed from 4% to 24%. In food, there are now more than 3800 products with a Health Star Rating label, and research shows more consumers are using them as a guide to healthier products within a category. Most products have added the labels after reformulation. Mix in education, and that will continue to be the most effective way of tackling obesity. I’m anticipating changes this year around supplier-retailer relationships. There have been issues in recent years, some well-documented and some not, but I believe FGC’s 2018 conference last November will prove to be something of a turning-point. For the first time in four years, Woolworths NZ were there alongside Foodstuffs, and so suppliers were able to get a straight-up and direct gauge of where both are at with regards to targets and aspirations. Significantly, both talked about the need to work closely, collaboratively and fairly with suppliers to sort out issues, and I believe most delegates would have come away with a sense of relief and optimism. If any of that is taken into 2019, then I believe it will be a good one for the sector!

Katherine Rich, Chief Executive, NZ Food & Grocery Council

I’M ANTICIPATING CHANGES THIS YEAR AROUND SUPPLIERRETAILER RELATIONSHIPS.” FMCG BUSINESS - LEADERS FORUM 2019

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NEW OPPORTUNITIES

2019 WILL be a fascinating year within FMCG. balancing the dichotomy of wanting healthy, Manufacturers are ramping up and adapting to yet indulgent snack solutions. We’re expecting take advantage of the opportunities ahead. to see an increase in solutions that cater for • Eco-conscious packaging and this demand. consumption: the rapid change in sentiment • Longevity & wellness: with life expectancy surrounding the use of single-use plastic bags rumored to average 120 years within our demonstrated behavioural change and Kiwis’ life-time, there’s a shift from ‘anti-ageing’ to willingness to reduce their impact on the ‘healthy-aging’. Healthy diets and gut health environment. Early product innovations such are now seen as the gateway to living a longer, as beeswax wraps, reusable bin liners and better quality life. Fat is now the new king, eco-cups capitalised on this trend. Globally a dairy, gluten and meat alternatives continue to number of brands, retailers, and packaging reach new heights. High fat/low carb ketogenic, companies have committed towards using gluten-free, paleo, and intermittent fasting diets 100% reusable, recyclable or compostable are now becoming mainstream. Innovation packaging across their global operations by in plant and marine-based foods, insects as Hilary Young, Marketing 2025. With plastic straws now in the spot ingredients and hemp-based products are both Manager NZ, Bluebird Foods light, the question remains, what will be exciting and bizarre. I’d predict to see much next? Blockchain technology could be pivotal as a big disruptor in more innovation in this space in packaged consumer goods over the this space providing greater transparency of sustainable business coming year. processes and the supply chain. • e-commerce: every year seems to be coined ‘the’ pivotal year for • It’s a snacking revolution: three square meals are a thing of e-commerce, but there’s a ground-swell underway; Amazon is nearing the past with eating centered around planned activities rather our shores, retailers are upping the ante and the ‘tipping point’ for than set times. Time-pressured health-conscious consumers are penetration is gaining momentum. I’d anticipate a year of trial-anddemanding more nutrient-dense snacks that they can feel good error ahead for both manufacturers and retailers in this space, with about eating without compromising on taste. Consumers are some only just finding their feet while trying to keep up with the race.

FOOD TRENDS

HERE ARE some of the food trends we are picking to continue in 2019:

Less processed foods Consumers are becoming more mindful of the ingredient lists of the products that they are consuming. Shorter ingredient lists, with products free from preservatives, artificial colours and flavours are becoming a more attractive choice for consumers.

Company collaboration Big companies have found success through collaborating with local specialised brands that are familiar and resonate with New Zealand consumers. Culturally, consumers like to see the production of their food as a craft. By working with smaller companies with links to the community, businesses are able to build a sense of connectedness with their consumers.

Growth of online artisanal food stores As people’s lives are getting busier, convenience is influencing consumer decisions around the food they choose to buy. Online food shopping has grown from strength to strength in the past year, 4

FMCG BUSINESS - LEADERS FORUM 2019

Catherine Beard, Executive Director ExportNZ

BIG COMPANIES HAVE FOUND SUCCESS THROUGH COLLABORATING WITH LOCAL SPECIALISED BRANDS.”

and its popularity is continuing to grow. Online food shopping has expanded from large chain supermarket shopping and ready-toeat meals, to smaller niche businesses such as juice cleanses, raw vegan desserts, and international treats not readily available in New Zealand stores.

Sustainability Consumers are paying far more attention to the way that food is grown, produced and marketed. The amount of single use plastic used to package food is becoming a concern for consumers. Companies who can find innovative ways to package and distribute their foods are likely to receive recognition from consumers.


[ FMCG Business Leaders Forum ]

THE RISING TIDE OF E-COMMERCE NEW ZEALANDERS spent approximately $10B purchasing products online in the latest year. While it’s been known that online is the next frontier, we’re starting to see this take shape in the FMCG sector. Shoppers are overcoming their barriers to shopping online - namely they trust that they’re purchasing genuine products; using secure Rob Clark, Managing payment methods; that Director, Nielsen their purchases will New Zealand arrive safely; on time and in good condition. We have seen an increase in shoppers’ likelihood to purchase packaged groceries, household cleaning products, paper products and wine and alcoholic beverages online compared to last year. As a result, when specifically looking at supermarkets, FMCG e-commerce is growing at a rate of +37% (in dollar terms vs last year) compared to total grocery sales at +3%. This represents approximately 59% of supermarket dollar growth compared to brick and mortar sales (41% share of dollar growth). With this rising tide of e-commerce from global players like Amazon, local e-commerce offerings from Woolworths and Foodstuffs and with over 10 meal kit offerings in-market, head-to-head competition in the FMCG sector will intensify. Fresh food manufacturers will need to continue overcoming shopper barriers to e-commerce. Impulse category manufacturers will need to find new ways to maintain relevance in an online basket. Centre-of-store categories will fight harder than before as they become increasingly commoditised. We predict that in 2019, manufacturers and retailers will compete more directly through focusing on supply chain efficiencies, range rationalisation and price, promotion and profitability analytics. Meanwhile, retailers will look for new ways to differentiate around the perimeter of the store through increased focus on health and wellness, premium products in the chilled and frozen aisles, and through fresh meal solutions. Products like sushi, chilled and fresh soup, pizza, hot chickens, and ready to cook meals are just some of the products retailers are using to differentiate in-store.

FMCG E-COMMERCE IS GROWING AT A RATE OF +37%.”

Scott Davidson, General Manager Merchandise at Countdown

RESPONDING TO DEMAND AND NEW TRENDS CUSTOMERS TODAY have an increased interest in social and environmental issues, which in turn impacts their purchasing. Our role as a supermarket retailer is to keep ahead of these sorts of trends, but also to respond to demand. Our range is very much designed around what our customers want and they’re often the driving force behind the changes in store. We will continue to see customers demanding less plastic packaging so expect to see some new inventions in this area. Customer awareness around wellness is also another trend, and is much more prevalent today than it has been. Just as there is demand for products with less salt and sugar, customers also now want more ‘good’ fats and protein. Nearly all our stores have a dedicated health and wellness section to make it easier for customers to find what they’re looking for. Along the same lines, demand for protein is another trend we’re seeing at Countdown in several different areas of the supermarket whether it’s meat, nuts, grains, fruit, dairy or sports products. This increase in wellness is also creating a growing trend for alternative plant-based options and meat alternatives, such as ‘Minced’, which we’ve just launched at Countdown, which is a meat alternative made from natural ingredients including soya and wheat protein, beetroot, mushrooms, tomato and coconut oil. We think the level of interest in vegan and vegetarian diets will continue to influence and create even more new product development in this category. We’re also predicting that a new development in 2019 will be food containing hemp seeds. Recently there has been a change in legislation regarding hemp products and there are several health benefits from the seeds including boosted heart health, reducing inflammation, a good source of protein, unsaturated fat, as well as minerals and vitamins. We expect to see more cookie, smoothie powder and other new food development using hemp in the near future. FMCG BUSINESS - LEADERS FORUM 2019

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CHANGE THAT LEADS AND TRANSFORMS AS WE look ahead to 2019, which is shaping up to be our most customer- and digitally-transformative year as a business, I reflect on how we arrived here and how we’ll continue to deliver an awesome shopping experience to New Zealanders, so they can get more of what matters to them. We, Foodstuffs North Island and together with our colleagues at Foodstuffs South Island, are collectively New Zealand’s largest retailer. In total we operate more than 500 retail stores, all individually owned and operated by our members in their local community. We have a responsibility to our members to be a leader in transforming retail experiences, championing our employees and taking care of New Zealand. The growth of e-commerce has shifted the paradigm – customers are demanding more from retailers and want to communicate with businesses directly, digitally and relevant to them. They want great quality products, a seamless personalised shopping experience and competitive prices; all of which we strive to deliver at our 328 stores across the North Island. We’re rolling out online offerings across our banners: New World’s I Shop is now available in 88 stores and an online offering for PAK’nSAVE will be rolled out in early 2019. These differentiated, and personalised offerings are key in winning shoppers and

delivering a phygital – complementary physical and digital touchpoints – experience. Our digital transformation is driven by our customers. Customers are in control and expect to engage with businesses directly. We need to stay connected, relevant and continue to deliver a valuable experience online and in-store. We were honoured to be named by Retailworld NZ as the large Retail Employer of the Year in 2018. This was our first time winning the award, which is determined by votes from team members and the general public. We know that it’s our 22,000+ workforce who make the difference to our customers. To build and lead the future of retail and the future of work, we need to be one of the most customer-driven, efficient and effective teams in the world. Our Cooperative structure enables each individual store owner to operate with the passion and commitment that only comes from locally owning a business. We’re committed to investing in our people to help them achieve their true potential, find fulfilling careers and play a positive role in their communities. That means fair and equitable pay for all roles, a diverse workforce, structured employee development plans, wellness development and overall engagement. A changing workforce and new ways of working is enabling us to evolve as a business and attract, but more importantly retain, top talent. By investing in the new “professions” – deli, bakery, butchery, seafood – and offering these employees opportunities to succeed at work and in their communities, they grow into engaged, supported employees and New Zealanders. It’s also up to us to choose how we leave this planet for future generations. More than ever consumers expect companies to be engaged in socially responsible activities. Customers want purposeled brands, social and environmental leadership, and authentic change that impacts people, communities and the planet. For example, two thirds of millennials believe big changes are needed in the way our food is produced, and as one of our biggest customer segments, we have to be leaders. The removal of single-use plastic bags at checkout and the offering of more reusable bag options across our brands, our signing to the New Zealand Plastic Packaging Declaration, our fleet of electric vehicles delivering shopping orders across the North Island, our Eat My Lunch partnership, and active contributions to environmental initiatives on a national and local level, are just some of the things we’re doing to be an exemplary corporate citizen; not just because our customers expect it from us, but because it’s the right thing to do. To be able to deliver on our purpose to make sure New Zealanders get more out of life, we’ll continue to innovate and implement change that leads and transforms.

CUSTOMERS ARE DEMANDING MORE FROM RETAILERS AND WANT TO COMMUNICATE WITH BUSINESSES DIRECTLY.”

Chris Quin, CEO Foodstuffs North Island

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[ FMCG Business Leaders Forum ]

GOING BACK TO BASICS TECHNOLOGY, CLUB cards, social media and customer data enables us to reach and individualise our shopping offers more than ever before, but in this mass consumerised market, I suggest there is immense power in going back to basics and making people feel valued every time they step into the store. Retail, and supermarkets specifically, are busy, diverse places and essential to the local communities they operate in. It’s easy to get caught up in the latest trends sweeping the food industry – conscious consumption, the food revolution, ease without compromise and digital disruption. Add in the global, political, financial, social and societal influences and it becomes a juggling act of complex considerations. And while all these things can influence what’s done in store, we must remember the basics… we are here to serve the individual – the person. Sometimes you need to step back to basics, despite the complexities and data availability. It goes beyond just delivering what the customer wants, beyond using the CRM to provide customised shopping deals to ensuring that the person, this individual customer, feels satisfied, fulfilled and valued every time they step into one of our stores. The last interaction that the shopper is likely to have is with another person. Be it at the checkout, or the security guard on the door as they leave. Is this interaction going to be pleasant and memorable? Because this is what sticks in their minds, puts a smile on their face and keeps them coming back. I mentioned trends – there are some we are seeing right now, which impacts how people want to shop. People are environmentally aware, want to make ethical, green choices – they want to do their part to save the planet, BUT if the budget is tight, putting their family and personal priorities first wins out. The bills need to be paid, the bank satisfied and the family fed. People want to buy the products that are good for their health, for the planet; conscious consumerism is stronger than ever before – but people are torn between the greater good and their own sphere of constraints. Our job is to offer them options. Regardless of their situation, the choices they need to make, or how we use data to entice this person into the store – I can guarantee there is one thing that is always going to make their shopping experience a better one – a friendly smile and some good old-fashioned kiwi hospitality.

Steve Anderson – CEO Foodstuffs South Island

New World and all other Foodstuffs retail and wholesale brands have gone 100% reusable.

FMCG BUSINESS - LEADERS FORUM 2019

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[ FMCG Business Leaders Forum ]

PREDICTIONS FOR 2019 LET’S GET the obvious ones out of the way. We’re going to see increasing emphasis on sustainability, and a special focus on plastics. Having taken the step to eliminate carrier bags from stores, it’s going to dawn on people that it’s nothing compared to all the plastics in packaging. A consumer reaction is inevitable. Other changes are locked in, too, if you know where to look. The growth opportunities in the food and beverage sector lie in Health/Wellness, Provenance, and products that are distinctive and hard or impossible to copy. Manuka honey is the perfect example because it offers all three. Unsurprisingly, Manuka honey exports have grown at an average 25% per annum for 15 years. And a greater focus on exports is something New Zealand needs as part of the future. NZ accounts for 0.1% of the world’s population and 0.3% of its GDP. Even Australia only accounts for 1.6% of world

EMERGING TRENDS BEYOND THE trends of environmental sustainability, premiumised consumerism and personal wellbeing, is the integration trend that is beginning to blur the lines between all three. In recent years the term sustainability has been most commonly related only to environmental initiatives and campaigns. With the rightful rise of social responsibility and wellbeing, environmental sustainability is now connecting back to its ultimate benefit - human sustainability and wellbeing. The rise of millennials who ‘want it all’ (premium, green AND better for me!) is a trend that is influencing other generations. From a marketing perspective, ‘green campaigns’ used to focus on how consumer choices and behaviour can help save our planet from emissions, deforestation, or single use plastic. These campaigns were often aligned with global issues being driven by protestors and pressure groups from other countries, which felt distant and irrelevant to the average Kiwi consumer. Today, you only have to check the forecast or walk up the street to see the effects of crazy weather and our growing waste problem – suddenly this foreign concept of global warming can be felt with the torrential rain or heat wave right here in NZ, making the consumer think twice about how their actions today might have a local impact tomorrow. 8

FMCG BUSINESS - LEADERS FORUM 2019

GDP. NZ has real competitive advantage in foodstuffs and beverages, but our tiny scale makes us very vulnerable. If NZ confidence surveys translate to economic activity, it’s exporters who will thrive. Domestically, the easiest things to predict are those that won’t change, or at least where the path of change is well established. So, increasingly, we’ll see people pay a premium for convenience. We already have meal kits delivered to the door and subscription services for everything from toothbrushes and razorblades to entertainment. It’s an enormous area of Jenny McMillan, Business opportunity and I’m confident we’ll see Development Director, Brother Design many new offerings in 2019. Design trends are always hard to predict, as kicking against norms is part of the process. But, looking abroad, we see a new embrace of colour: bright, bold and uninhibited. Every so often the cycle turns away from monochrome as a signal of safe good taste, so that could be one to watch.

Issues & Opportunities The consequence of a growth economy and consumer premiumisation is increased waste, which in itself is presenting further opportunities for products to be delivered in new and innovative ways, with less packaging, or packaging that is less impactful, or even better for the environment. For Malcolm Everts, Cottonsoft Ltd Marketing Manager FMCG the very nature of Chair – Soft Plastics Recycling Scheme being a fast moving ‘throw away’ society will change even faster as consumers, retailers, suppliers and government grapple with the task of local accountability.

New Developments It’s beginning with packaging, but products themselves will also have to be made increasingly sustainable. Whether it’s a plastic wrapped cucumber, or a cell-phone, both product and packaging solutions must be developed to consider end of life to ensure a circular option.

Predictions for 2019 Integration of everything! Consumers will want everything. The brands and products that give consumers benefits for themselves, their community and their environment will be the innovation and growth leaders in 2019.


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AN EXCITING YEAR AHEAD CEO of NZ Wine, Philip Gregan, shares his predictions for 2019.

Caro Jensen and Emily Camblin, Founders of Sip NZ / sipnzwine.com

5 WINE TRENDS TO LOOK OUT FOR Conscious Consumers

Consumers are increasingly interested in where their products are coming from and how they’re made. Wine is no different and with growing consumer interest organic, biodynamic and vegan friendly wines are “naturally” popular choices.

Bubbles Blossom Sparkling wines, especially Prosecco and Rosecco, will continue to grow in popularity here in New Zealand, turning the drink that has been historically reserved for celebrations into an everyday sip. Launches of small format bottles such as Moët Mini fuel that trend and offer a suitable new format to enjoy bubbles at different occasions.

Rosé is here to stay Once labelled a by-product, Rosé has come a long way with a huge selection of styles available in New Zealand to suit every taste and budget. Kiwis will continue to drink pink over the next year (especially on Rosé Day on 5 February!) and we’ll see more instagrammable wine-based cocktails and new packaging formats as Rosé unleashes its full potential as a lifestyle drink.

The rise of the wine-fluencer Peer to peer and Key-Opinion-Leader (KOL) reviews are becoming as important as wine critics’ thoughts on a product, especially for younger consumers and especially in emerging wine markets. New Zealand’s wine influencer scene is in its infancy, but we predict it is going to mature over the next year(s).

New concepts pop-up Events such as Pinot Palooza and the Urban Wine Walk are shaking up the wine event scene and are offering interesting new ways to taste wines and meet the maker. Exciting pop-up concepts will continue to emerge in 2019 and we are ready for it. Bye trestle tables and laminated tasting notes. You won’t be missed!

NEW ZEALAND wine is celebrating its 23rd consecutive year of export growth, as the industry continues its international success. The new year has kicked off with a bang as Sauvignon 2019 returned for the second time in New Zealand. The world’s leading wine producers, experts and key influencers all shone a spotlight on this diverse, expressive and sought-after variety. The event ran over three days from 28 - 30 January 2019 in Marlborough and Philip Gregan, CEO, NZ Wine explored the complexity of Sauvignon Blanc, emerging styles, vineyard practices, winemaking influences and its future. Throughout the summer months we also look forward to a boom in wine tourism. Of all international holiday visitors, 27% visit a NZ winery, and in 2017 we had 712,000 visitors to our wine regions. The international wine tourist is spending more, staying longer and visiting more regions than the average visitor. There are 279 wineries offering more than 400 wine tourism experiences in New Zealand, with services available ranging from cellar doors with tastings, wine tasting experiences with winemakers, vineyard tours, to restaurants and luxury accommodation. For many of us, Brexit and the uncertainty around what it could mean continues to be an issue. The risk of a “no deal” Brexit is increasing. Whether or not a deal is struck, the UK is New Zealand wine’s largest single market by volume and we are encouraging our members to ensure, at a minimum, that they talk with their UK distributors now to understand their perception of the risks. And finally, in 2018 the world’s love affair with New Zealand wine grew as wine lovers continued to explore our diverse range of wine varieties and styles. It will be interesting to see if Rosé continues to be such a phenomenal success story. Consumers are showing a great fondness for the style, prompting winemakers to produce greater volumes, as they are with Pinot Gris. We don’t see this momentum slowing any time soon! Watch this space as 2019 is shaping up to be another exciting year. FMCG BUSINESS - LEADERS FORUM 2019

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UNDERSTANDING CONSUMERS’ TASTES AND VALUES THE WINE industry continues to evolve and change, which means we must do the same or risk losing our consumers. There is an insatiable demand for change within our consumer base across the globe—don’t get me wrong, they still want history, heritage and authenticity within the wine sector. However, they are also looking for innovation and unique experiences that engage them beyond today’s news feed! This means that producers must not only deliver on the values that drive their business but also look outwards to our customers and consumers to understand their tastes and values. A vital part of staying connected with our stakeholders is leveraging digital technology and social media. Giesen is investing in digital capital, including the 2018 launch of our Giesen Group app enabling consumers and distributors to experience our vineyards through cutting-edge drone video footage and detailed wine information across our brands and tiers. We’ll continue to improve and update this resource over the next 12 months, guided primarily by user feedback. Our digital evolution extends to meeting millennials on their own ground. This consumer group is an increasingly important market segment meaning we need to develop relationships with them today, to ensure we are part of their lifestyles tomorrow. Part of this connection is developing a social media-based dialogue with consumers about our beverages and practices. For instance, we are seeing increased demand for organic wines and sustainable packaging, so we are sharing our story about growing, making and selling organic wines since 2009 in a way that engages an increasingly environmentally aware society. Our prized 100% organic Clayvin Vineyard will soon celebrate 35 years, an opportunity to connect with millennials and wine lovers with meaningful short-form storytelling and authentic imagery that invites consumers to be part of Giesen’s evolving heritage. Looking forward we predict an emphasis on shared experiences over material accumulation, an intense curiosity to discover unique products and a desire to integrate sensorial indulgence with health and wellbeing. For Giesen, anticipating these value shifts means offering occasion-based packaging like our eye-catching limited release Christmas sleeves, developing ‘discovery wines’ such as the unique Gemstone Riesling made with the use of granite tanks, offering lighter-alcohol drinks like Giesen Pure Light and new initiatives in health and wellbeing will be a focus. The bottom line is that 2019’s consumers expect that quality is a given, so they will buy based on how a beverage’s look and feel resonates with them—and if it delivers on quality they will ensure their social circles know about it!

WE ARE SEEING INCREASED DEMAND FOR ORGANIC WINES AND SUSTAINABLE PACKAGING.”

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Kyle Skene, General Manager, Giesen Group


[ The Shout Leaders Forum ]

CONSUMER DEMANDS ARE CHANGING THE WAY consumers shop for liquor is changing both globally and in New Zealand. Whether it be for researching or for purchasing, online options are proliferating. A recent survey by Nielsen has shown that 15% of Kiwis have purchased liquor online. Advances in technology, faster connectivity, alongside more convenient delivery options, will ultimately lead to a frictionless experience for shoppers. Bricks and mortar retailers won’t be able to rely as much on their advantage of convenience and proximity. Instead, retailers who dial up their in-store experience with craft taps, tasting and education events, and relationship building with local communities will continue to perform strongly. Lower and no A.B.V. cocktails and beverage options continue to grow in sales on the shopfloor. 2018 saw the successful launch of a number of zeroalcohol, low and mid-strength beers, with the light beer segment now growing by 6% in value over the last year. We predict a continued shift towards more sophisticated flavours, with cocktail experimentation on the rise, and on-premise trends

WE PREDICT A CONTINUED SHIFT TOWARDS MORE SOPHISTICATED FLAVOURS.”

flowing into off-premise locations. As product lines become increasingly blurred between beer, wine and spirits, we expect to see more development at the “extreme” edge particularly in craft beer (salt water, barrel-aged, fusion wines). Geoff Smith, Director of Millennial shoppers are Commercial Development, Nielsen New Zealand urging brands to be more socially responsible as they are increasingly educated and savvy about the choices they make. This is manifesting itself in multiple areas from packaging choices, to transparency in product ingredient listings, and the production process itself. For brands that can rise to this challenge, the rewards are worth it - a recent Nielsen study has shown that 73% of Millennials are willing to pay a price premium for brands that deliver on their sustainability promise. Products and companies that can tell a story with provenance and authenticity will continue to resonate in the New Zealand market. Premium and craft spirits that originate from local distilleries will continue to drive growth into the spirits category alongside global artisan products with a strong back-story - whether that be American Whiskies or Japanese Gin.

INNOVATION, CONVENIENCE AND PREMIUMISATION MILLENNIALS’ HEALTHIER lifestyles are part of a driving force towards changes across the entire supermarket, and alcohol is no exception. We’re seeing a greater demand for no or low-alcohol beverages, low carb and even vegan wine is continuing to increase. This generation has a greater focus on their personal health and we’d expect to see more Scott Davidson, General Manager innovation in this space going Merchandise at Countdown into 2019. Premiumisation is also a trend having an impact on the liquor category, with customers choosing to perhaps drink a little less, but wanting quality wine when they do. This also carries over into beer, with premium imported beer, craft beer, low carb and low alcohol beer continuing to rise in popularity. As we head into the warmer months of the year, we’d expect to see an increase demand for Rose, Pinot Gris and Prosecco, at the

detriment to Sauvignon Blanc unfortunately. While it’s still very popular, customers are broadening their taste. Chardonnay is making a resurgence however, and this year we’re seeing more elegant Chardonnays versus the oaky tastes of old. Chardonnay can be very varied, and we’re seeing some really zesty and fruity wines come in this year which we think will be welcomed by customers as we come into summer. One of the biggest changes that we’re seeing is the introduction of wine or craft beers in a can. Convenience and portion control continue to drive this new product development. The popularity of craft beer and cider is showing no signs of slowing down, and interestingly we’re seeing specialty beers becoming very popular for gifts such as Christmas, Mother’s Day and Father’s Day.

THE POPULARITY OF CRAFT BEER AND CIDER IS SHOWING NO SIGNS OF SLOWING DOWN.”

FMCG BUSINESS - LEADERS FORUM 2019

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WE’RE CURRENTLY EMBARKING ON A MAJOR, ONCE IN A GENERATION, IT TRANSFORMATION.”

Rory Glass, Lion Managing Director

FOCUS ON TRANSFORMATION AND SUSTAINABILITY TECHNOLOGY IS continuing to shake up the drinks industry, and it’s only set to continue in the year ahead. Choice is everywhere and technology is giving consumers the ability to review, buy and book restaurants and brands online, and get food and beverages delivered straight to their door. Creating novel brand experiences that facilitate discovery and bring people together face to face will be really important for brands and venues in the year ahead. Our Little Creatures Brewery, opening in Hobsonville Point in February, will be a great example of this. Acting as a real community hub, it will be a place for family and friends to congregate – complete with a giant dining hall, a variety of food and beverage providers, giant kids’ fort and a live microbrewery. For us, technology is also an opportunity behind the scenes and we’re currently embarking on a major, once in a generation, IT transformation that will equip Lion for the future of the digital world and allow us to provide a market leading, agile and responsive service for our customers. We’re also expecting to see the wellness trend go mainstream with consumers increasingly seeking out products and 12

FMCG BUSINESS - LEADERS FORUM 2019

experiences that are transparent and support a balanced lifestyle. This is an important area of growth for Lion and in the year ahead we’ll be building adjacencies, with the growth of our Drinks Collective non-alcoholic portfolio, and continuing our innovation in the lower alcohol space to bring greater choice and facilitate evolving consumer needs. We’ll also be focused on growing our positive impact through a number of sustainability initiatives across the year. We know that Kiwis are gaining a better understanding of their food and drink and as a result are evaluating their purchasing decisions with more scrutiny. They now want to know not only what’s in their product but how, where, when and who has produced it and what ethical and sustainable practices underpin it. Sustainability is crucial to the future of all businesses and we see it as great opportunity for us to drive innovation and continue to improve our processes. We’re doing some really exciting work with our brands in the coming year that will really help put a spotlight on our sustainability agenda and reinforce our commitment to supporting the community, treading lightly and growing our positive impact.


[ The Shout Leaders Forum ]

WHAT LIES AHEAD FOR 2019?

2018 WAS an interesting year for beer in New Zealand. We continued to see changes in how people consume beer, with a greater focus on value over volume. A desire from consumers to be aware of their overall wellness, as well as the changing nature of how different age groups drink alcohol in general. According to the NZ Health Survey by the Ministry of Health, about four in five adults (78.7%) consumed alcohol in the 2017/18 year. Down from 79.3% in the 2016/17 year and overall down from 83.6% in 2006/7 (-4.9%). However, total sales value has remained relatively consistent in this time. This reinforces the desire from consumers to focus on the higher value products. For beer this will often equate to the premium and craft categories. This trend is likely to continue in 2019. Along with craft, the low and no alcohol categories have seen continued growth at around 13% per annum since 2016. With the introduction of some big players in the 0% space, this category is set to see greater interest in 2019. When it comes to Craft, the Pale Ale is still king, with half of all craft beer sales in 2018 being Pale Ales or IPA’s from supermarkets and traditional liquor retailing. In 2019 this will continue or even advance with the increase in Hazy or New England Style IPA’s available and becoming more mainstream. Some other considerations for brewers in the coming year, and to the future of the industry, are around the sustainability of the product. Recent research out of the USA highlighted most beer consumers are willing to pay a premium for ‘sustainable beer’. It showed consumers who already pay for higher-end products are more aware of their buying behaviour and how their consumption patterns affect the environment. So as consumers demand more ethically produced products, brewers should look to what inroads they can make into creating energy and water efficiencies in their production. If 2018 was anything to go by, 2019 will be a positive year for beer. Greater varietal choice, more quality low alcohol options and the continuation of innovation from a passionate bunch of people who make up this sector.

Dylan Firth, Executive Director Brewers Association of New Zealand

LOW AND NO ALCOHOL CATEGORIES HAVE SEEN CONTINUED GROWTH AT AROUND 13% PER ANNUM.” FMCG BUSINESS - LEADERS FORUM 2019

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ARE COLLABS THE NEXT BIG THING IN BEVERAGES? AS WE head into the summer season it’s a good time to reflect on some of the year’s key trends in the beverage industry, including the rise of low or no alcohol beers and consumer friendly collaborations.

No alcohol While the floodgates haven’t opened, we are definitely facing a rising tide of low or no alcohol beer. A gamechanger has been the introduction of Heineken 0.0, which launched here in August.1 To date, sales have been strong, and we’re expecting many of our customers to trial this offer throughout summer matched to a variety of different occasions. We know AB InBev, which makes Stella Artois and Corona, has pledged to make one-fifth of its beer low or no alcohol by 2025, and it’s slowly been rolling out Budweiser Prohibition, its non-alcoholic recipe of the iconic American beer. Carlsberg too, has started screening ads in the UK for its San Miguel 0.0%. A perfect storm seems to be brewing as consumers search for genuine taste experiences without the hangover, and suppliers see potential gains from making a lower-harm and lower-excise product.2

Collaboration Speaking of flavours, while there’s nothing new about brewers trying to differentiate with unusual additives – I’m fond of a particular beer brewed with whole crayfish3. We’re increasingly seeing brewers collaborating with well-known non-beer brands, in a bid to give their brews added consumer appeal. In June 2018, Garage Project launched its Chocolate Beer, in partnership with Whittaker’s chocolate and us here at Foodstuffs. This limitededition brew also included ‘nitro’ to give it a velvety smoothness when poured. The media attention and social media buzz were certainly a marketer’s dream – which in turn led to fantastic sales for the product’s two very limited batches. This year, too, we saw an unlikely alliance between brewer 8 Wired and winemaker Sacred Hill, to create 8 Wired Lokomotiv Merlot Barrel Aged Imperial Stout. This is stout aged for a year in some of Sacred Hill’s Merlot barrels, and at 11% ABV it’s certainly not part of the trend towards no alcohol!

Packaging

FMCG BUSINESS - LEADERS FORUM 2019

Behemoth Brewing Company has recently taken things a step further with their Lid Ripper Hazy IPA, which comes in a can you pull the entire lid off, with a rounded edge you can then drink from like a cup. Also known as 360 cans, they help encourage the drinker to fully appreciate the aroma and flavour. The Lid Ripper Hazy IPA was also one of our best performing Gold Medal winning beers at the recent New World Beer and Cider Awards! And hold your subconscious bias for just a moment - but we’re slowly seeing the rise of canned wine. In fact, in the United States it’s now the fastest-growing wine category, with sales up 43% in the year to June. Commentators say Millennials are fans of the vibrant, portable cans – and don’t want to pay for a full bottle either5. Here, MoBev launched a range of 250mL cans under their Crafters Union brand in March and there will no doubt be more launching into the market this summer6,7.

WE ARE DEFINITELY FACING A RISING TIDE OF LOW OR NO ALCOHOL BEER.”

This year there’s also been intense public interest in recycling, sustainability and packaging, and that consumer concern partly explains the revival of aluminium cans. Glass, of course, needs a lot more protection from breakage, with plastic wraps and unrecyclable boxes4, while cans are a lot hardier. Eco-conscious Millennials, who perhaps also have a nostalgic fondness for things from the 80s and 90s, have adopted cans as part of the craft beer revolution, and breweries are following. We’re definitely noticing more cans. Consumers are also realising the quality cues that cans provide in beer and taking learnings from the US – wine too. 14

Morgan McCann, Foodstuffs North Island

Sources: 1http://business.scoop.co.nz/2018/08/30/0-0-alcohol-beer-option-response-to-market-demand/ 2https://www.telegraph.co.uk/business/2018/02/17/britains-unlikely-low-alcohol-beer-revolution/ 3https://www.stuff.co.nz/life-style/food-wine/drinks/87389888/alice-galletly-on-weird-beer-trendsholiday-brews 4http://www.stuff.co.nz/business/industries/9907512/Recycling-buyers-losing-patience 5http://www.packagingnews.com.au/beverage/convenience-drives-wine-in-a-can-trend 6https://www.stuff.co.nz/life-style/food-wine/reviews/104480828/john-saker-wine-in-a-tin-yes-we-can 7https://www.mermaidmary.co.nz/my-recomendation/2017/12/8/wine-in-a-canyup-thats-a-thing


[ The Shout Leaders Forum ]

INNOVATIONS IN PRODUCTS AND EXPERIENCES IT’S AN exciting time to be working in the brewing industry and if there’s one word I can think of to sum up my predictions for 2019 it’s innovation. Innovation not just in our products, but in the experiences we offer consumers and harnessing the excitement we’ve seen injected into our category in the last couple of years. The innovation happening in craft continues to impress, with some of the products we’re seeing really pushing the envelope in terms of style and flavour. This experimental brewing will continue, but I think we’ll see a settling of the craft category this year as people continue to enjoy their Peter Simons, Managing Director of DB Breweries Pale Ales and Pilsners, while trying something new every now and then. Low and no alcohol broke through in 2018. We were fascinated by the diverse reactions to the launch of Heineken 0.0 and when the product sold out just before Christmas it became very clear that this category is here to stay. What this means for 2019 is that we’ll see more interest in the low and no category and perhaps more options available to consumers in this space. I’m encouraged

by this because it means beer and cider is an option for more occasions, and people who might feel like a beer but don’t want the alcohol can find a drink that works. Innovation for us is also about sustainability and contributing to a better New Zealand. We’ll see the DB Export ‘Save the Entire World’ campaign culminate this year and with the premise of this campaign to involve consumers and encourage them to be part of our sustainability journey, I’m interested to see the results. In the same way that wine and food have been matched for years, in the hospitality space we’ll see more beer and food matching this year. We’ve been talking about it in the industry and I think this is increasingly trickling into mainstream. Fresh, crisp lagers with Asian food, IPAs and burgers, Porters with pudding – there’s no hard and fast rules but it means people are drinking beer as part of an experience and appreciating the flavours and styles of our product. I can only say cheers to that!

PEOPLE ARE DRINKING BEER AS PART OF AN EXPERIENCE AND APPRECIATING THE FLAVOURS AND STYLES.”

FMCG BUSINESS - LEADERS FORUM 2019

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FMCG Business Leaders Forum 2019  

FMCG Business Leaders Forum 2019