Leading brands are under pressure

Aimee Barker, assistant investment manager at Rathbones Picture: OLLIE JONES

NEW generations have grown up with the internet and social media as an integral part of their daily lives.

As a result, their behaviour and spending patterns are markedly different from those of people their age 20 years ago, which creates challenges and opportunities for companies seeking to engage with them. This may be especially true regarding perceptions of how companies treat our planet.

Companies selling branded goods are under threat in this brave new world of mobile internet, where information on product quality and supply chains can be easily conveyed through user reviews.

We believe these companies can continue to thrive, but only if they make significant efforts to be agile and innovative and demonstrate a genuine commitment to sustainable business practices.

The threat is especially acute for companies with long-established brands, which used to command consistent loyalty and predictable consumer demand. The emerging new generation of consumers is more aware of the world’s challenges and has a sense of collective responsibility as global citizens to deal with them.

As Richard Williams, head of Unilever’s investor relations, says: ‘With some 2.5 billion people using our products worldwide every day, we have a duty to be responsible.’

Unilever’s results show that its sustainable brands are growing faster and have better profit margins than the average for all its products.

There is much talk and some evidence that these new consumers are less loyal to brands than their parents and grandparents. This shift may be due to their exposure to alternative options through their time spent online and a greater willingness to try new brands in the hope of getting a better customer experience or a lower price.

There is also growing mistrust of institutions, government and the media, as measured by the Edelman Trust Barometer. The 2020 survey shows that most people do not trust the institutions the barometer tracks. This makes younger generations less willing to defer to the judgment and brands of their elders.

In Edelman’s latest survey, more than half of the respondents globally believe capitalism is doing more harm than good in its current form. As such, consumers are less likely to trust big business and prefer to support smaller companies or brands — or at least those that seem smaller and more authentic.

Consumers are increasingly willing to support, and often pay a premium for, brands with an explicit sustainable ethos and those which are seeking to help solve environmental or social problems.

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