CHICAGO – Sept. 6, 2006 – With nearly one million individual consumer packaged goods (CPG) items available and the noticeable shifts in effective merchandising displays and promotions in the marketplace, it is difficult for consumers to make purchasing decisions. Retailers and manufacturers must begin to cut through this clutter by simplifying the shopping experience. The latest research from Information Resources, Inc. (IRI) has uncovered early indicators that point to a more consumer-centric approach to merchandising emerging. As a result, merchandising as it is known today is likely to undergo a major transformation.
To take a closer look at this emerging trend, the latest Times & Trends report, “CPG Merchandising Trends: Growing Demand for a Consumer-Centric Approach,” from IRI, the world’s leading provider of enterprise market information solutions and services for the consumer packaged goods (CPG), retail, and healthcare industries, explores trends in merchandising practices, including feature ads, displays, temporary price reductions and new innovative best practices as CPG retailers and manufacturers embark upon this transformation.
“As retailers reduce grocery display space, manufacturers need innovative merchandising tactics that stress the importance of consumer-centric merchandising to drive more profitable rewards,” explains IRI Global Chief Marketing Officer Andrew A. Salzman. “In order to compete for display and feature ad space during the next several years, CPG marketers must step up merchandising innovation to simplify the shopping experience, break through the clutter and better align with consumer segments and their shopping patterns. This IRI report is intended to help CPG manufacturers and retailers see new opportunities and risks that will arise with new merchandising trends, so that they can act on these insights with speed and confidence and win at the shelf.”
Merchandising Activity
In the past year, merchandising activity has declined in more than half of all CPG categories as CPG marketers begin to recognize that more is not always better with respect to merchandising. With the development of new store formats that focus on perimeter departments and upscale, uncluttered layouts, competition for shrinking grocery display space is intensifying for several categories.
Snacks/desserts and beverages, including carbonated beverages, ice cream, salty snacks and sports drinks, are among the most heavily merchandised categories. According to the report, these active categories share one or more of the following characteristics:
- Low category growth rates/intense competition
- Purchases are discretionary; consumers likely splurge when on deal
- Conducive to stock-up
- High levels of new product activity
CPG marketers are strategically leveraging merchandising to protect and grow share within stable and growing markets but are decreasing focus on declining categories. Eight of the top 10 categories that show an increase in merchandising efforts, such as frozen poultry, refrigerated entrees and bottled water, have flat or increasing sales. Nine of the top 10 categories showing declining merchandising activity are experiencing sales declines. In these declining markets, CPG marketers may have an opportunity to capture share as competitors decrease focus by increasing merchandising particularly with categories that have relatively low levels of merchandising but earn high lift.
Merchandising Effectiveness
Merchandising is an effective sales driver, as a majority of CPG categories earn an average volume lift of 50 percent or more, with over 25 percent reaching 100 percent or more lift when merchandising tactics are implemented. However, more than half of CPG categories are now experiencing a decline in average lift, especially in the drug channel, where 61 percent of CPG categories experienced a decline in lift during the latest 52 weeks ending June 18, 2006.
This year’s top 10 categories achieving the greatest merchandising lift have consistently earned these top spots in past years. Consumers’ response to the merchandising within these categories, including paper towels, toilet tissue, laundry detergent and shelf stable seafood, may reflect the fact that merchandising events for these categories are less frequent than in others. In addition, these high-lift categories tend to be relatively high priced, stock-up items and/or impulse items, such as chocolate candy.
A review of merchandising tactics used by categories achieving the highest merchandising lift reveals that there is not a magic mix for use of displays, feature ads and price reductions. The report emphasizes that a winning mix varies considerably across categories and brands. Each brand should identify an optimal merchandising mix through testing and historical analysis.
Best Practices
There is a dire need for simplification of the consumer shopping experience due to CPG product and merchandising proliferation. Campbell’s Soup and Gillette Fusion are examples of two brands that illustrate the success of consumer-centric merchandising. Campbell’s Soup has created a new gravity-feed shelving system that significantly simplifies the consumer shopping experience while driving both brand and category growth. Gillette leveraged a totally integrated merchandising blast to launch its new line of Fusion razors, blades and personal care products that broke through the clutter and enabled consumers to easily find these new products. The success of these strategies should prompt other CPG manufacturers and retailers to develop innovative, consumer-centric merchandising approaches.
About the Report
Findings presented in Times & Trends: “CPG Merchandising Trends: Growing Demand for a Consumer-Centric Approach” are based upon an extensive analysis of sales and merchandising data from IRI InfoScan® Reviews and IRI In-Store Solutions Group’s Perimeter View. IRI offers a range of additional services to help CPG manufacturers and retailers develop and implement effective merchandising strategies, including IRI Consumer-Centric Merchandising Suite™, IRI Shopper Insights™, and IRI Controlled Store Testing™. For an in-depth view of the report, click on http://us.infores.com/page/news/times_and_trends.
About Information Resources, Inc.
Information Resources, Inc. (IRI) is the world’s leading provider of enterprise market information solutions and services for the consumer packaged goods (CPG), retail, and healthcare industries, empowering its clients to grow their business profitably in a complex marketplace. Driving the transformation of the industries it serves, only IRI provides a unique combination of real-time market content, advanced analytics, enterprise performance management software, and professional services. The company’s portfolio of services, solutions, and technology enable leading retailers and their suppliers around the globe to see what they are missing, act faster with greater confidence and win at the shelf. Ninety five percent of the FORTUNE Global 500 in CPG and retail leverage IRI to power their business. For more information, visit www.infores.com.