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Consumer product goods (CPG) manufacturers continue to navigate the whims of undecided consumers, some of whom feel more optimistic about the economy while a similar-sized group expect continued deterioration of economic and personal financial health, according to Susan Viamari, editor of SymphonyIRI’s Times and Trends report. The Chicago-based market research firm released its “CPG 2011 Year in Review: The Search for Footing in an Evolving Marketplace” report that finds that consumers plan to continue their current path of frugality and conservatism this year.
SymphonyIRI predicts that shoppers will continue to define value largely based on price. According to SymphonyIRI’s MarketPulse consumer survey, more than half of shoppers still choose stores based on lowest prices, and three-quarters note that price weighs heavily on brand decisions. However, the research firm anticipates that some shoppers will begin to spend more if positive economic reports continue.
The company also foresees that private label will continue to account for unit sales in the 22 to 23 percent range and dollar sales in the 18 to 20 percent range. SymphonyIRI recommends that retailers increase assortments and retain the tiered product strategies that have worked well in the past. Innovation is recommended for brand-name manufacturers that are hoping to regain sales lost to private label.
When commodity costs began to rise in 2008, the higher costs were absorbed by cutting other costs and streamlining the supply, the market research firm says. Now, SymphonyIRI predicts sellers are running out of efficiencies and sensing the shopper’s ability to pay more, which will in turn cause more aggressive strategies to pass costs along to consumers, although the shoppers’ reactions to the increases remains unclear.
SymphonyIRI also foresees the continued evolution of formats in the drug channel, specifically citing Walgreens’ plans to convert at least 500 stores in mostly lower-income neighborhoods to food oases.
The market research firm recommends that CPG firms consider the following action items to effectively compete in 2012: identify opportunities and risks, evaluate pricing and promotional strategies as well as explore opportunities to enhance product assortment.