Crowding is a phenomenon that tends to be created by burgeoning trends and can happen in any fast-moving consumer goods (FMCG) category or segment. Here’s how it often materializes:
- Consumer tastes and preferences evolve and new trends emerge.
- To win over shoppers, retailers and manufacturers innovate around these trends.
- Sometimes the initial rush to innovate adds copy-cat items to the shelf.
- As a result, consumers are faced with too many options that have the same benefit.
It’s scenarios like these that not only contribute to an increased number of items on the shelf, but also erode products’ pricing power and promotional efficiency. To justify their product’s role in the category, manufacturers sometimes go the quick route of slashing prices and putting their product on sale to trigger a rise in purchasing. When they take this approach and execute incorrectly, sales could decline.
We see this happening across categories. For example, sales growth has slowed in the craft beer segment in recent years, contrasting earlier periods of explosive growth.
During the 2008 downturn, consumers sought solace in affordable luxuries, such as craft beer. So much so, that retail sales soared and reached an eye-popping growth rate of 23% a mere five years ago. Today, however, sales are flat and share in this segment have declined to about 13%. And, even though innovative value adds such as sours and Imperial IPAs help to continue to drive sales at U.S. retail outlets, overall category growth is tougher to come by.