With minimal economic improvement, rising commodity prices and continued consumer frugality, 2011 was another challenging year for the CPG industry. During our recent webinar, “Times & Trends: CPG 2011 Year in Review,” I discussed the key economic and consumer trends that impacted CPG performance across various channels, departments and categories in 2011. These include:
- Ongoing conservatism shifted shopper behavior: As illustrated in our December report, “The CPG Basket: Fostering Growth in a Time of Conservation,” pantry stocking missions are a way of the past. Consumers are now making smaller, more strategic shopping trips. Rather than blindly stocking up on anything and everything, consumers are carefully researching where and when they can obtain items at the best possible price.
- Shopping locally: As gas prices continue to climb, many consumers are looking to shop closer to home, contributing to a decline in supercenter traffic. In 2011, consumers made an average of only two supercenter trips each month, compared with an average 4.7 grocery store trips.
- In-home indulgences: Now that consumers across income levels are saving money by enjoying more meals at home, sales of various food and beverage categories have increased, including wine, chocolate, natural cheese and salty snacks.
- Some consumers are starting to open their wallets—cautiously: Wealthier consumers are buying higher-end CPG products, such as gourmet foods and salon-quality hair products, but they’re doing so with an eye towards value. High-end CPG products allow consumers to reintroduce some of the luxuries they previously enjoyed, while still spending less than they would at restaurants, bars or salons.
- Strong drug channel and private label performance: The drug channel remains strong, with dollar sales climbing more than 4 percent in 2011. Private label performance also remained positive, accounting for 22.9 percent of unit sales and 18.7 percent of dollar sales.
So what can CPG manufacturers and retailers learn from these findings?
Price remains the primary consideration for consumers, so CPG manufacturers should look for opportunities to lower costs through innovative sourcing, packaging, and product sizing strategies. This is also an ideal time to explore product development based upon existing and emerging consumer trends. Gourmet and other high-end products, in particular, present a strong growth opportunity.
Retailers should be cognizant of the growing private label popularity, and look to extend private label share, particularly across low-differentiation categories and those with significant price increases. It’s also important to constantly re-assess and adjust pricing to maintain an optimal price gap between private label and name brand offerings.
CPG retailers should also seek to enhance product assortment, especially in high-growth categories, and look for cross-promotional opportunities with high-growth categories and brands, as well as staple products. Both manufacturers and retailers should keep an eye out for technological advances and should seek out new and innovative means of informing and engaging consumers.
If you missed the webinar, you can view it here, or download the full “CPG 2011 Year in Review” report.
