IRI Times & Trends: Merchandising for Growth

In brief

CPG volume trends are flat and industry growth is largely coming from price increases. Promotional activity is being used as a lever to drive engagement, but marketers have fallen victim to a vicious cycle: funneling more and more resources into trade to increase promotional intensity and spur purchase behavior, all the while sales lift from said programs is on the decline. The CPG industry is in trouble, and the time for change is now.

In 2012, 39% of categories were getting lift of 90% or more from merchandising efforts. Today, only 30% achieve lift of this magnitude. Erosion of lift is not new; it has been occurring for several years. Declines are occurring across retail channels. On the whole during the past few years, average lift is down nine points across IRI’s multi-outlet geography.

Ground-up redesign of price and promotion strategies can yield up to 2% in annual growth, or up to $12 billion for the CPG industry. CPG marketers must rebuild their strategies, beginning with the creation of a comprehensive pricing structure (price pack architecture) that cuts across the brand portfolio:

• Broad and diverse product assortment at price points to meet the appetites of a wide spectrum of shoppers.

• Solid value proposition.

• Lasting competitive advantage, with improved profits and margin and solid customer loyalty.