Consumers move two ways after an unsettled 2011

March 15, 2012

Retailers and CPG need to satisfy both pessimists and optimists to retain trips and set the stage for growth.

Tallying up the winners and losers of 2011, it seems fair to say the past year was a positive for drug, club and dollar stores and a negative for supermarkets and Walmart, both of which lost dollar share.

The year was also a plus for store brands as an alternative to help shoppers save. SymphonyIRI Group projects they’ll continue to account for 22%-23% of unit sales and 18%-20% of dollar sales in 2012, as retailers widen assortments and keep effective tiered strategies in place.

Also, beleaguered consumers belong on the down side, since they continue to buy by price first in order to feed their families while coping with rising food costs, unemployment and underemployment, low housing values, depleted nest eggs, high anxiety and more.

Where does this leave the CPG suppliers to all these end-users through all these channels? Dependent on the economy as the single largest influencer in 2012, and wrestling with rising commodity prices, says CPG 2011 Year in Review:  The Search For Footing in an Evolving Marketplace, a report from SymphonyIRI Group.

The study says consumers are moving in two directions in this unsettled economy. The pessimistic struggle and sustain their money-saving strategies – switching channels, stores and brands, and pre-planning trips. However, hope resides among the optimistic, who see signs of economic relief and are “trying new products, and spending on gourmet or premium items."

They stand in stark contrast.  A closer look at the pessimists, who comprise the majority, shows 52% shop at the stores with the lowest prices on necessities, and 40% shop in multiple stores to secure the lowest prices for all items on their lists. One-quarter of shoppers have difficulty affording their weekly groceries, according to SymphonyIRI MarketPulse, Q4 2011.

So they make smaller-basket Quick Trips, which favor the drug and dollar stores, which are convenient in terms of location and store size and have a larger food presence. Meanwhile, the club channel has grown share “fairly steadily since 2008” despite the shift away from stock-up trips. Club stores attract 51% of consumers, including heavy shoppers they’ve won away from supercenters and dollar stores, says the CPG report.

The optimists, on the other hand, are comprised mainly of the 27% of consumers who expect their personal financial position to improve in 2012; they remain frugal, as they look for ways to live better on less. This is where opportunities lie for CPG and retailers, as long as they bring out innovative products that “are relevant and reassuring of solid value,” suggests the report, urging trading partners to understand “what is in the basket that shoppers can or cannot live without.  Use that knowledge to develop messaging, cross-promotion and cross-merchandising programs."

Indeed, innovation is “the primary private-label mitigation strategy” of brands, says SymphonyIRI Group, which cites single-cup coffee as an example. It contributed to the coffee and tea sector accounting for 14% of the most successful new beverages launches in 2010 versus its historical average of just 8%. Innovation was strong in 2011 in vitamins, weight control/nutrition liquids/powders, and nail and eye cosmetics, to name a few.