Five mega trends affecting CPG
Aug. 5, 2015
by Ron Sterk
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CPG sales remain sluggish since the recession.
SANTA ANA PUEBLO, NM — Changes in consumer buying patterns related to demographics, health and wellness and other factors will accelerate in coming years, a panelist said at the International Sweetener Symposium on Aug. 4 in Santa Ana Pueblo.
“The rate of change today is likely the slowest we will see for the remainder of our careers,” said Cheryl Maduzia, vice president of strategic affairs, Acosta Sales and Marketing Co. She said five mega trends affecting the consumer packaged goods (CPG) industry today and going forward are demographic shifts, technology, channel blur, grocery store perimeter growth and health and wellness. The top four strategies to respond to the mega trends included adjustments in store brand/private label offerings, changes in store perimeter and center of store organization, health and wellness focus and localization, she said.
Acosta, based in Jacksonville, Fla., has more than 100 offices in the United States and Canada, conducts more than 150,000 store visits monthly and provides sales and marketing services to more than 1,600 clients.
CPG sales remain sluggish since the recession, with dollar sales up only 2 percent and number of shopping trips down 2 percent, Maduzia said. The largest gain in sales has been for budget-oriented dollar stores at 6 percent, while shopping trips have been flat to lower for all categories, which include mass market/super stores as well as drug, food, club and dollar stores.
Despite continued pressure on consumer spending power and rising costs that are squeezing manufacturers’ margins, significant changes were underfoot, Maduzia said. She focused on four generations, including 77 million millennials (18-34 year olds equal to 24 percent of the population), 51 million in generation X (35-50 year olds equal to 16 percent of the population), 75 million boomers (51-68 year olds equal to 24 percent of the population) and 38 million in the “silent” generation (69-83 year olds equal to 12 percent of the population). Millennials will move to peak spending by 2025, generation X shoppers are approaching peak spending period now and boomers are downsizing, she said, noting that consumer spending largely is driven by life stage. She said $65 billion in grocery spending will switch from boomers to millennials by 2020.
Demographically, singles living alone have shifted from 17.1 percent in the 1970s to 27.5 percent today, she said, while married couples with children have shifted from 40.3 percent to 19.6 percent of the population. Population growth will skew to younger and more multicultural, with 89 percent of population growth from multicultural, mainly Hispanic, in the next 10 years, she said. Younger shoppers’ brand choices are more influenced by digital.
Shifts to e-commerce and to other buyer channels may result in lost sales of 10 percent by traditional food retailers in the next 10 years.
She said shifts to e-commerce and to other buyer channels may result in lost sales of 10 percent by traditional food retailers in the next 10 years. The fastest growth during that time will be e-commerce, discounters and club stores, she said, as generations shop for groceries in different channels. She noted less than half of millennials typically shop in traditional grocery stores, compared to 57 percent of generation X, 60 percent of boomers and 64 percent of the “silent” generation.
“Millennial shoppers are looking for a new shopping experience,” Maduzia said. That group sees supermarkets as old school and unpleasant while they are seeking upbeat, informative, healthier and fresher options amid a “seamless in-store/digital experience.” Shifts in digital allow stores to personalize shopping experiences for consumers, she said.
Channel blur includes a shift to fewer retailer visits by shoppers, Maduzia said. The number of retailers in a shopper’s “portfolio” has decreased from 12.4 in any given month in 2007 to 9.7 in 2014, she said. Supermarkets continued to be the channel of choice for food, she said, but unit sales in the grocery channel have declined by 1.2 billion units.
The center of the store continued to provide 70 percent to 80 percent of total store profitability, she said, but it was shrinking for many retailers who now are “reinventing” the center with such things as new navigation paths and end aisle displays, store-within-a-store and meal occasion centers.
There is an opportunity for food stores to support shoppers’ health and wellness needs, and for food manufacturers to improve perceptions, Maduzia said. Historic health and wellness focus on low-fat, low-sodium, reduced sugar and lite versions are shifting to real food, fresh, natural, organic, clean label and “free-from” among other options. Stores need to provide information and education, services and digital options.
“Retailers are uniquely positioned to provide holistic health and wellness solutions,” she said. “Health and wellness is shifting from reactive to proactive.”