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'Poverty is back in Europe': Brands adapt sales for record unemployment

Published time: August 28, 2012 12:05
Edited time: August 29, 2012 23:59

A man begs on the street in central Madrid July 19, 2012 (Reuters/Susana Vera)

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Record high unemployment in the EU has forced some of the larger consumer goods companies to shift marketing strategies. They target poverty-stricken Europeans’ demand for cheaper goods in the midst of an economic crisis.

Unilever – the third-largest consumer goods company in the world, which manufactures hundreds of brands like Aviance, Ben & Jerry’s, Dove and Lipton – will be doing just that. Jan Zijderveld, head of Unilever’s European division, said in an interview with Financial Times Deutschland that “poverty is returning to Europe.” He speculates that sales can be increased by providing smaller and cheaper branded products.

With changing economic conditions, shopping habits change as well: "If a consumer in Spain only spends €17 when they go shopping, then I'm not going to be able to sell them washing powder for half of their budget," Zijderveld said.

Unilever has already begun altering its branding to adapt to the challenge of low growth in the developed world. In Spain, it introduced Surf detergent in packages for only five washes; in Greece, it is marketing mashed potatoes in smaller packages for a lower price. It has also created lower-cost brands for products like tea and olive oil.

The company previously implemented low-cost branding strategies in developing countries such as Indonesia, where it sells individual packets of shampoo for a few cents each. But Zijderveld says that they have forgotten similar types of selling options in Europe because they were not used in the years prior to the economic crisis.

Univeler’s quarterly results last month bemoaned “sluggish growth” and “fragile consumer confidence” in developed countries. Zijderveld believes that lower-cost brands must be matched with Apple-like service in order to increase profits. "In an Apple store, everyone thinks: Wow, what an experience. … Why can't we sell food like Apple sells devices? Why are there no genius consultants for chicken?"

Record unemployment since adoption of Euro

Univeler’s move to adapt strategies for underdeveloped countries to EU markets is grounded in Europe’s grim new reality. Unemployment is on the rise in the EU as consumer purchasing power declines – the Eurozone’s unemployment rate hit a record high this summer.

The EU's ministry for statistics, Eurostat, reported that 17.8 million people were out of work in the Eurozone in June: The highest level since the Euro was adopted as the EU's currency in 1999.

And according to new French Labor Ministry figures released on Monday, more than three million people were unemployed in the country in July, the highest levels in more than 13 years. Spain's unemployment rate reached a record high of nearly 25 percent in the second quarter of 2012. Greece’s trails close behind, with a 23 percent unemployment rate reported in May.

This data “bodes ill for consumer spending and growth prospects," chief European economist at IHS Global Insight Howard Archer told CBC. A downward trend in consumer spending has been observed since the middle of 2011, VisaEurope reported.

Underlining this economic misery is an ongoing program of budget cuts and austerity, which EU nations are adopting in an attempt to pay down their debts. Eurozone citizens have witnessed cuts in salaries, healthcare systems, state financial support and public spending, which has led to an overall decrease in their discretionary income.

The cuts are proving deeply unpopular all over the EU, leading to mass protests, violence and strikes. The more unpopular austerity measures in Greece included a new property tax and the suspension of 30,000 civil servants on partial pay. In Spain, thousands of people regularly protest in the streets against austerity, with young people encamping in tent cities and general strikes being held against planned budget cuts.

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