From the unstable economy and stubborn unemployment rates to frugal consumers and high commodity prices, there has been endless discussion around the challenges facing CPG marketers during the last few years. All is not doom and gloom, though. The latest research from SymphonyIRI Group’s Times & Trends, “CPG 2011 Year in Review: The Search for Footing in an Evolving Marketplace,” uncovers several exciting trends taking place in everything from new product development and technology to store layouts and consumer shopping patterns.

“Evolving economic conditions have brought a polarity to the CPG marketplace,” says Susan Viamari, editor, Times & Trends, SymphonyIRI. “There is a sizable consumer segment that is feeling more optimistic about the road ahead, while a similar sized group is expecting a continued deterioration of economic and personal financial health. Among optimistic and pessimistic shoppers alike, all indications point to continued frugality and conservatism in 2012. CPG marketers need to actively respond to these trends with products and strategies that really emphasize their understanding of consumers’ most pressing needs and wants in order to drive purchase behavior and loyalty.”

SymphonyIRI predicts the following trends will be prominent in 2012:

  • Shoppers will continue to define value largely based on price. According to SymphonyIRI’s MarketPulse™ consumer survey, more than half of shoppers still choose their store based on lowest prices, and three-quarters note that price weighs heavily in brand decisions. However, SymphonyIRI anticipates that some shoppers will start to open their wallets more if positive economic reports continue.
  • Retailers in the drug channel will accelerate their format evolution process. Walgreens, for example, plans to convert at least 500 stores into “food oases,” where space devoted to food and beverages will grow as much as 35-40 percent. These stores are located largely in lower-income neighborhoods, where access to fresh foods is limited.
  • Manufacturers and retailers will pass manufacturing price increases on to shoppers, but reaction to potential commodity price deflation is yet unclear. When commodity costs began to rise in 2008, much of these were absorbed by cutting other costs and streamlining the supply chain. Running out of efficiencies and sensing the shopper’s ability to pay more, SymphonyIRI expects manufacturers and retailers to become more aggressive about passing costs along to consumers.
  • Private label will continue to account for unit sales in the 22-23 percent range and dollar sales in the 18-20 percent range. Retailers will increase assortments and retain the tiered product strategies that have worked so well in the past.
  • Manufacturers will expand their focus on innovation as the primary private label mitigation strategy. One example comes from the coffee category. Single-cup coffee, such as that offered by Keurig, is partly responsible for the fact that 14 percent of the most successful new beverage launches came from the coffee and tea sector in 2010, versus an historical average of just 8 percent, as reported in last year’s SymphonyIRI New Product Pacesetters report.

“It’s no secret that conservative consumers are embracing a variety of money-saving behaviors, such as making shopping lists before entering a store,” says John McIndoe, senior vice president, Marketing, SymphonyIRI. “Digital media will play an increasingly integral role in the pre-planning process and helping consumers find new ways to save in 2012. Like coupons, the Internet is being leveraged as a list-making tool. Though penetration is much lower versus coupons, we expect it to rapidly and steadily increase this year.”

To effectively compete in 2012, CPG manufacturers and retailers should consider the following action items:

  • Identify opportunities and risks: Manufacturers should re-evaluate sourcing and inputs resources 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 at the channel and retailer level to ensure appropriate product mix and inventory management strategies are maintained.
  • Evaluate pricing and promotional strategies: Manufacturers should continually re-assess and adjust pricing to maintain an optimal price gap between private label and name brand offerings. Retailers should work with key manufacturer partners to develop cross-promotional opportunities with high-growth categories/brands and/or with key staple products.
  • Explore opportunities to enhance product assortment: Manufacturers should consider exploring product development opportunities at both ends of the product spectrum, based on existing and emerging product trends. Retailers should align assortment strategies with changing trip mission and product usage trends.

About the Report

This month’s Times & Trends Report, “CPG 2011 Year in Review: The Search for Footing in an Evolving Marketplace,” is a free report available from SymphonyIRI, the world’s leading innovation partner that enables CPG, retail and healthcare companies to create and maximize new opportunities. The findings of this report were compiled based on information from SymphonyIRI InfoScan Reviews™, SymphonyIRI Consumer Network™, SymphonyIR AllScan Convenience Store Tracking™, SymphonyIRI Shopper Insights Advantage™, and SymphonyIRI ShopperSights™. To download the report, visit: http://www.symphonyiri.com/Insights/ArticleDetail/tabid/117/ItemID/1432/View/Details/Default.aspx.

About SymphonyIRI Group, Inc.

SymphonyIRI Group, formerly named Information Resources, Inc. (“IRI”), is the global leader in innovative solutions and services for driving revenue and profit growth in CPG, retail and healthcare companies. SymphonyIRI offers two families of solutions: Core IRI solutions for market measurement and Symphony Advantage solutions for enabling new growth opportunities in marketing, sales, shopper marketing and category management. SymphonyIRI solutions uniquely combine content, analytics and technology to deliver maximum impact. SymphonyIRI helps companies create, plan and execute forward-looking, shopper-centric strategies across every level of the organization. For more information, visit http://www.SymphonyIRI.com.