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marketing, Retail Operations Management.

CPGs: Key Strategic Factors

Currently, U.S. consumers are nearly evenly split between those who are feeling more optimistic about the economy and their own financial prospects, and those who expect continued deterioration.

While consumers should be more willing to open their wallets if the economy’s gradual improvement continues, the key point for CPG makers/marketers at present is that even better off and more optimistic consumers continue to be frugal and conservative, in the sense of wanting to “live well for less,” according to a new report from SymphonyIRI’s Times & Trends, which analyzes 2012 CPG challenges and opportunities based on 2011 CPG trends/data.

Given this scenario, “CPG marketers need to actively respond with products and strategies that really emphasize their understanding of consumers’ most pressing needs and wants in order to drive purchase behavior and loyalty,” sums up SymphonyIRI Times & Trends editor Susan Viamari.

SymphonyIRI’s research points to the following factors/trends being most critical in CPG strategies in 2012:

Shoppers will continue to define value based largely on price. SymphonyIRI’s MarketPulse consumer survey shows more than half of shoppers still choosing the stores that they shop based on lowest prices, and three-quarters saying that price weighs heavily in purchasing/brand decisions. While input costs in many categories are moderating, cost pressures remain in some categories. CPG manufacturers and retailers have run out of ways to cut operational costs, and also “sense the shopper’s ability to pay more,” and will therefore continue to try to be more aggressive about passing costs along to consumers in the form of price increases.

Private-label will continue to account for unit sales in the 22% to 23% range and dollar sales in the 18% to 20% percent range. Retailers will increase assortments and retain the tiered PL pricing/quality offerings that have been proving successful for them.

CPG manufacturers will intensify their focus on innovation as their primary private-label-mitigation strategy. Example: Single-serve coffee offerings from leader Keurig (K-Cups) and others are responsible in no small part for the coffee/tea sector’s 14% share of 2012’s most successful beverage launches (versus a historical average of just 8% for the coffee/tea segment).

Drug-channel retailers will accelerate their focus on evolving store formats to expand food/beverage offerings.

Responding to shoppers’ increasing use of digital coupons, increasing tendency to research prices/offerings online and develop shopping lists prior to their shopping trips, and increasing use of mobile devices to research and receive offers during their shopping, CPG manufacturers and retailers will continue to seek to leverage digital/social media more effectively.

To effectively compete in 2012, SymphonyIRI advises CPG manufacturers and retailers to focus on three core action areas:

Identify opportunities and risks: Manufacturers should reevaluate sourcing and input sources, and be on the lookout for opportunities to lower manufacturing costs through innovative sourcing, packaging and product-sizing strategies. Retailers should closely track the evolving competitive set within their channels and by retailer, and adjust their product-mix and inventory-management strategies as necessary.

Evaluate pricing and promotional strategies: Manufacturers should continually reassess and adjust pricing to maintain an optimal price gap between private-label and national-brand offerings. Retailers should work with key manufacturers to develop cross-promotional opportunities for high-growth categories/brands and key, staple products.

Enhance product assortments: Manufacturers should explore product-development opportunities based both on existing and emerging product trends. Retailers should align assortment strategies with consumers’ changing trip-mission and product usage trends.

via MediaPost Publications CPGs: Key Strategic Factors For 2012 03/19/2012.


About Bob Innes

Who am I and what I do best! I am a skilled Sales and Marketing team player known for performing behind the scenes miracles that increase base distribution, improve customer relationship management, exceed annual sales volume,and profitability for Consumer Packaged Goods companies. And I've been doing it for over 15 years. My successful contributions include such clients as Kraft Foods, Mars, Bumble Bee Foods, Unilever, Johnson and Johnson and SC Johnson, and JM Smuckers.


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