CHICAGO – Growth was elusive for consumer packaged goods companies in 2015. To gain ground, executives must adjust to a new path to purchase that many consumers are following, according to a new report from the market research firm Information Resources Inc. (IRI).
Consumers will remain entrenched in their conservative purchase behaviors in 2016, according to IRI. One-third of the consumers surveyed by the market research firm said they will make their purchase decisions before they enter the retail store.
|Susan Viamari, vice president of thought leadership for IRI|
“(The conservatism) is a carryover from the recession,” said Susan Viamari, vice president of thought leadership for IRI, in an interview with Food Business News, a sister publication to MEAT+POULTRY. “What we found is when the economy was tanking consumers took steps out of necessity to save money. Over the course of the recession and even afterwards we have not seen them step away from those behaviors. They realized the cutbacks were not as painful as they may have thought.
“They became much more informed and savvy shoppers. I don’t expect to see a shift back to their free spending ways.”
Dollar sales are growing, according to the report, driven largely by inflation and declining merchandising activity. Volume trends were weak across CPG channels and the weakness was driven by conservative shoppers.
With so many companies focused on attracting millennials to their brands, Viamari said CPG manufacturers are going to be challenged to insert their products into the entrenched behaviors many millennial consumers adopted during the recession.
“A lot of millennials came into adulthood with no job or were grossly underemployed,” she said. “Things were super tight for many and the need to budget had a major impact. These behaviors are going to be here to stay.”
Early retail winners during the recession were dollar- and club-store formats, but Viamari said grocery outlets have rallied in the wake of the recession.
“They [grocery outlets] took a hit as shoppers were going to mass merchants or dollar stores,” she said. “It forced them to step up their game, add more private label offerings, to offer more coupons and more specials. After a year or two we saw them hold on to share even with more competition. I would not say grocers were losers. The competition helped them to up their game.”
Going forward, CPG manufacturers must address the issue of growth in a volatile economy and at a time when food and beverage e-commerce options are much closer to becoming a mainstream reality. The IRI report recommends CPG companies “act now” to capture their share of the Internet market.
“There is going to be a lot going on there in the next several years,” Viamari said. “We need to understand that it goes back to pre-planning and that the path to purchase has changed. Companies need to be using the Internet, digital media and social media to influence decisions. Companies have to use online not just for actual purchases but to inform decisions. They need to make the argument for why a consumer should choose a brand or banner.”
The IRI report makes 10 recommendations CPG manufacturers may follow to prompt growth in 2016. One such recommendation is to do more with less media, according to the report.
“This is what we are getting at when we say we need to make digital media work smarter and not harder,” Viamari said. “Basically, we are really trying to hone instead of throw everything against the wall to see what sticks. The goal is to be targeted and hit your most promising shoppers.
“Consumers are inundated with gobs of messages. You need to invest to make your brand pop up when a consumer is looking at another brand on Amazon. Companies need to be much more strategic.”
The market research firm identified better data management as one way CPG marketers may improve growth. Specifically, IRI said companies should consider redeploying media resources to high-impact sites to increase awareness and shopper conversion; enhance targeting, brand development and assortment strategies to drive Hispanic sales at the retailer market level; and tailor and target media exposure against key target households.
“One-stop shopping has changed to more strategic shopping trips,” Viamari said. “Consumers are buying what they need rather than buying what they want. You don’t see consumers necessarily going up and down store aisles. They are strategic and don’t want to be tempted to buy what they don’t need. Marketers need to be more strategic in how they influence these shoppers.”