IRI lays out road map on how marketers can protect and grow share in CPG marketplace

CHICAGO — It’s no surprise that consumers are changing how they shop, where they shop and when they shop — they have more than 2,500 unique paths to purchase to potentially follow. Since there is no longer an “average shopper” in today’s world, IRI recently took a closer look at current shopping trends and provided a road map on how marketers can protect and grow share in the CPG marketplace in the new Times and Trends report, “Channel Migration: The Road to Growth Has Many Lanes.” 

 

“Following years of economic trials, the ‘golden ring’ of CPG shopping is value,” reported Susan Viamari, editor, Thought Leadership, IRI. “Today, more than 80% of shoppers visit three or more channels to carry out their CPG shopping journey. And, as more nodes crop up along the path to purchase, capturing shoppers’ attention and wallet will become increasingly complex. Retailers and manufacturers must provide value to each and every shopper through individualized targeting and flawless execution.”

 

Driving this change is millennials, Viamari shared with attendees of a webinar featuring the report. “Millennials have really been a hot topic for several years for a number of reasons. One, they struggled more than others during the course of the downturn so we’ve heard quite a bit about that,” Viamari said. “And at the same time this group really is going to be experiencing growing purchasing power. These guys are finally starting to show some level of optimism about their financial situation and beginning to open up their wallets to spend. … You can see by 2020, IRI is estimating millennials are going to account for just under 30% of overall CPG dollar volume, which translates into about $250 million annually.”

 

Another demographic change that’s going on in the United States is that the country is becoming increasingly diverse both ethnically and age wise. “When the country becomes increasingly diverse of course that means for CPG marketers that consumers are going to shop for, purchase and even consume CPG products in increasingly different ways,” Viamari said.



The drug channel, for instance, wins a disproportionate share of spending from Hispanic shoppers, who spend heavily on beauty and personal care products. Lower-earning households spend disproportionately in the dollar channel —nearly double the average rate. While higher-earning households still index on the low side, the channel is effectively defending its base across this wealthier segment, thanks to ongoing efforts to hone assortments, spruce stores and diversify formats.

 

Digital is another factor that’s changing how people shop. “Today, about a quarter of shoppers interact online in some way prior to shopping,” Viamari said. “Pretailing, or that early activity, is more prevalent in certain CPG sectors,” she said. For example, frozen food, personal care and over-the-counter medicines all experience high levels of “pretailing.” “Generally speaking about three-quarters of shoppers are telling us that they are going to rely more heavily on smart phones and tablets in the future as they’re shopping for CPG.”

 

Internet share of spending is fairly consistent across most consumer segments. Generation X, households earning $70,000 to $99,999 annually and those with children are notable exceptions. However, retailers are effectively defending the base.

 

During the past several years, trip mission patterns have changed considerably. The club channel is getting more of its dollars from pantry stock-up missions, and the drug channel is playing more of a fill-in role. These shifts underscore the channel-blurring phenomenon that is taking place, Viamari noted.

 

In addition, the grocery channel has lost share in core food and beverage departments, including refrigerated, general foods and beverages. Club is winning in beverages and general food, while also gaining nearly one-half share point in liquor. Mass/super lost ground in a number of departments, including home care and general merchandise, once again to the benefit of club. The dollar channel is holding steady across major departments, with slight up-ticks here and there, such as gains in beauty.

 

“It’s become more difficult to distinguish between retail formats solely based on assortment during the past couple of years,” Viamari said. “Dollar stores really seem to be cropping up everywhere and that’s really helped the dollar channel capture several points in penetration in just the past couple of years, they’re up 2.7 points,” she said. “And we’re seeing retailers of all sizes focusing more heavily on smaller formats, more urban stores. Right now the internet accounts for about 1.5% of overall CPG sales, but the impact of the internet channel on today’s path to purchase is huge and it’s growing very rapidly.”

 

A look at top-growth categories across channels demonstrates that consumers are turning to varied and sometimes even unexpected channels to fulfill their CPG needs:

 

 

“Consumer engagement and the CPG journey have forever changed,” added Viamari. “CPG marketers must adopt a strong multi-channel relevance, including a strong and seamless digital presence, or they will undoubtedly become obsolete. To ensure growth, marketers must execute well against four key strategies: protect and grow the base; maintain solid availability against existing and evolving channel preferences and behaviors; optimize marketing mix by media and retail channel; and develop channel-specific products and packages.”