Innovation Creates Opportunities for CPG Growth

Innovation Creates Opportunities for CPG Growth


Tom Pirovano, Director Industry Insights, The Nielsen Company

SUMMARY: Purchasing decisions in 2010 will be affected by factors such as brand innovation, retailer assortment, proliferation of store brands, and healthy eating preferences. Walmart’s “Project Impact” strategy and other similar retailer initiatives will test consumer preferences for clean aisles and lower prices vs. broader product selection. In the first few months of 2010, sales of healthier eating alternatives should be a good indicator of consumer confidence. As 2009 brought an increase in coupon activity, CPG manufacturers will look for more efficient and effective ways to reach consumers vs. traditional trade spending. Time will tell if new product innovation will be enough to drive shoppers back to traditional brands.

Throughout the recession, retailers and manufacturers have stepped up efforts to bring about innovation that seize the moment and “drive the recession wave” rather than “ride the recession wave”. Winners in 2010 will continue to innovate in the form of new formats, service offerings and differentiated products—a list of best bets for 2010 is described below.

Winning Brands Will Innovate and Differentiate

Sales of store brands have grown by $12 billion (up 17%) vs. two years ago as shoppers focus on value. As the economy improves, value is still important, but smart marketers are differentiating brands through innovation—with new products, new flavors, new packaging and with marketing/media campaigns with a heavy emphasis on social media to build rapid awareness and product trial. Brands that fail to innovate may also fail to win buyers back from store brands.

Product Assortment is a Point of Differentiation

Some retailers have followed the lead of Walmart’s “Project Impact” with cleaner aisles and limited assortment. Others have an opportunity to set themselves apart with a wider selection of products. Supermarkets that struggle to compete with Walmart’s prices will find an advantage with shoppers looking for variety. The trick is finding which categories require the broadest selection.

Healthy Eating Is a Solid Measure of Consumer Confidence

As the economy improves, consumers will focus on health and wellness priorities. An increase in sales of foods labeled “organic”, “natural” and “high fiber” as well as diet aids and reduced calorie/fat frozen dinners and entrees will be an indicator that consumer confidence is growing. Look for the first signs after the holidays, when consumers tend to start those New Year diets.

Manufacturers Get Stingy with Trade Promotion Spending

A whopping 50 million products each year—43% of supermarket purchases—are sold with a feature ad, display or price reduction funded primarily by manufacturers. An increase in coupon activity and new advertising opportunities such as cell phone apps and in-store TV networks will stretch promotion budgets. Retailers need to demonstrate sales performance to get their fair share of trade funds.

Direct to Consumer Options Thrive

Online price wars and the squeeze on in-store assortment will fuel large and small manufacturers to give consumers options to buy direct from manufacturers or from online services from the likes of Amazon, and

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