Report: CPG Industry Struggled in 2015; Growth Expected in 2016

By Lauren R. Hartman, Product Development Editor

Jan 27, 2016

Driving growth was a challenge for the consumer packaged goods (CPG) industry in 2015, according to a new report from Chicago-based market research firm IRI. Manufacturers and retailers had to deal with the ebbs and flows of the economy and its impact on consumer spending as well as the increased demands of digital-savvy shoppers.

IRI’s latest Times & Trends report called "Taking Stock of CPG Past and Future: Gear Up Now for a Year of Growth," evaluates the lessons learned last year and provides insight into several key trends it says should boost growth in 2016.

The trends for 2016 include keeping a pulse on ethnic diversity, harnessing insights on consumers' online shopping habits and focusing on quality versus quantity of marketing messages.

"At the beginning of each new year, we all reflect on our past a bit and vow to find ways to make improvements in the coming months," says Susan Viamari, vice president of Thought Leadership at IRI. IRI took a deep dive into the trends it believes will make a big impact, Viamari says.

The CPG industry looked for growth in the past several years due to the challenging economy and conservative shopper spending. Last year was no exception, the report finds. Volume sales continued to slide, and dollar sales growth was fed largely by inflationary pricing trends. When looking across channels, mass merchandisers and super centers posted sharper-than-average declines and the club channel showed some resilience. The grocery and drug channels held volume flat, outperforming the industry average of negative 1.7 percent.

The grocery channel continues to capture the lion’s share of total CPG spending at 43 percent, while club seized 11 percent, drug took 7 percent, mass/super picked up 4 percent and dollar netted 2 percent. Sales momentum continued to be slow across CPG aisles. Performance was weakest in the frozen food sector, where unit sales declined 1.5 percent, and strongest in beverages, where unit sales increased 2.9 percent. Growth was weak in non-food departments. The tobacco sector was boosted by electronic smoking products, which grew 23.9 percent for the year, and the health care department grew 2.1 percent thanks to the latest new products that help consumers tackle common ailments and conditions, such as colds, allergies and weight control.

Private-label's share of overall CPG spending changed very little during 2015, and stayed basically flat at the store level. 

Going forward, it says, consumers will continue to purchase conservatively, even though one-third of Americans feel their financial situation will improve this year. Fifty-seven percent of consumers will make their purchasing decisions before they enter the retail store, so marketers must continue their efforts to engage shoppers early in the planning process.

The report adds that one-third of shoppers will choose brands based on coupons they have at home, and 29 percent will base purchase decisions on shopper loyalty card discounts. Of course, they’ll leverage a number of Internet-based tools, such as smartphone apps and online advertising and promotions, to keep their grocery budgets in check in 2016. 

Finding pockets of growth in 2016 definitely presents its challenges, but it’s not impossible, the IRI research says. Its analysis uncovered the following top 10 trends that will offer growth opportunities for 2016 and beyond:

• Circle the Wagons: Omnichannel retail is turning the CPG industry on its ear. Harness in-depth insights about how consumers "travel" online to understand the new path to purchase and drive in-store growth.
• Melting Pot Gets Hotter: The growth and transformation of U.S. households are altering shopper attitudes and behaviors. Keep a finger on the pulse of increasing ethnic diversity and the explosion of non-traditional families.
• Doing More with Less (Media): Consumers are constantly barraged with marketing messages. Cut through the noise in the marketplace and focus on quality versus quantity.
• Lean & Mean Growing Machine: Manufacturer consolidation will continue as CPGs look for new revenue streams. Consider specialized acquisitions to fill white-space growth opportunities.
• Big Opportunity in Small Packages: The urbanization of America will drive growth of smaller footprint stores. Meet urban shopper needs with localized specialty outlets.
• On the Highway to Health: Consumers are embracing a wide variety of healthier-living strategies. Look across CPG aisles for new ways to deliver healthier options for shoppers and the environment.
• Get Real: Consumers want to know what they’re putting into and onto their bodies, what they’re feeding their pets and exactly what is making their houses cleaner. Answer consumers’ thirst for transparency and authenticity.
• Snack Attack: On-the-go lifestyles continue to have a profound impact on consumer eating behavior. Tap into grazing, the new sit-down meal.
• Go Smart or Go Home: The focus on big data is rapidly giving way to smart data that will drive smart growth. Marry big data with technology and analytic know-how to pave the way to growth.

Viamari adds that despite the challenging market conditions, marketers really do have reason for optimism in 2016. "Advancing technology has really given retailers and manufacturers a distinct advantage during these times of rapid and widespread change. By investing to understand how best to leverage new advances to really tap into the change, marketers throughout the CPG industry will identify exciting new ways to create real and lasting market advantages."

To download the report, visit www.iriworldwide.com/en-US/insights/Publications/Gear-Up-for-Growth-in-2016.

 

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