CPG Merchandising Trends

EXECUTIVE SUMMARY As mass media's ability to effectively reach consumers continues to erode and consumers' drive for value increasingly guides shopping decisions, merchandising has become one of the most powerful tools available to manufacturers and retailers to influence consumer behavior.Merchandising can be a highly effective means of driving short-term sales, as evidenced by the fact that, across a majority of CPG categories, volume lift from merchandising events averages better than 50%. But its role has expanded far beyond short-term volume lift: Merchandising helps shape consumers' value perceptions of a brand or store, can be used to effectively reach specific consumer segments, drives brand and product awareness, and increases store traffic.Given the broad-reaching impact of merchandising events, it is critical that manufacturers implement the right merchandising level and mix, and that retailers effectively allocate their limited feature ad and display space. This unique report provides an in-depth assessment of merchandising activity and effectiveness across categories to enable CPG marketers to benchmark their merchandising practices and performance and highlight potential improvement opportunities.INDUSTRY OVERVIEW Among a majority of CPG categories, at least one-third of volume is sold with merchandising support. Over two-thirds of CPG categories within food, drug, and mass channels (excluding Wal-Mart) sell 30% or more of their volume with merchandising: feature ads, displays and/or price reductions. At the high end is the carbonated beverages category, in which more than three-quarters of volume is sold with merchandising. Merchandising activity is on the rise, but effectiveness is declining. Nearly two-thirds of CPG categories have increased merchandising activity versus the prior year. However, nearly as many, 60%, have seen declining volume lift. Lift from feature ads only and price reduction only decreased in the largest number of categories, suggesting the growing importance of capturing consumers' attention in-store through display. CATEGORY OPPORTUNITYEight of the 10 most heavily merchandised categories are snack foods/desserts or beverages. High merchandising levels among snack foods/desserts and beverages reflect intense category competition, significant new product activity, the discretionary nature of purchases and relatively long shelf lives that enable stock-up. Stock-up categories and higher-ticket items top the list of categories achieving the greatest sales lift from merchandising. Stock-up categories, such as toilet paper, paper towels and shelf stable seafood earn the greatest average volume lift from merchandising activity. Higher-ticket items such as coffee and cold cereal also yield high response. The IRI analysis highlighted several potential merchandising mix enhancement opportunities across product segments. With relatively low activity but high volume lift, the following potential mix shifts should be explored by retailers and manufacturers within the context of overall merchandising objectives: Beverages:Increase mix of display activity within coffee and aseptic juices Increase mix of feature activity within bottled water, shelf stable juices and ready-to-drink tea/coffee Shift focus from "price reduction only" events within wine to combined feature/display eventsSnacks/Desserts: Increase total merchandising activity within chocolate candy Increase combined feature & display activity within cookies and non-chocolate candy Health & Beauty Care:Increase display and feature activity within soap and toothpasteHousecare: Increase display activity among several leading categories, including laundry detergent, dish detergent and bleach (support displays with feature ads when possible, given the exceptionally high lift of combined feature and display activity) Increase feature activity within foils/wraps and bleachMERCHANDISING TACTICS Display is most effective in generating lift among meal components, everyday necessities and select impulse categories. Everyday necessities, such as toilet paper, paper towels and long shelf-life meal components including canned vegetables, shelf-stable dinners and cold cereal are among the categories earning the greatest volume lift with displays. Both chocolate and non-chocolate candy also made the top 10. Perishables and less frequently purchased categories, such as beer, spirits and cold/allergy/sinus tablets yield lower response when on display. Retailers should take relative lift into account when allocating display space but must also consider other factors such as margin, total basket ring and appeal to desirable consumer segments. Feature ads drive exceptional volume gains within stock-up categories and higher-ticket products with broad appeal. As with displays, everyday necessities conducive to stock-up such as toilet paper and paper towels do well with feature ads. In addition, however, higher-ticket items with broad appeal such as butter, breakfast meats and coffee earn substantial volume gains. By contrast, products targeting a more narrow audience, such as diapers, hair color and cosmetics, receive relatively low volume lift. Price reduction alone is relatively ineffective in less frequently purchased categories. Among categories purchased infrequently, such as cosmetics, skin care and pet supplies, price reductions without feature and/or display support yield low volume lift; consumers are not likely scouting for deals in these categories unless they are specifically planning to make purchases. ACTION ITEMSMarketers have stepped up merchandising because it works. The vast majority of CPG categories (roughly three-fourths) earned an average volume lift within Food, Drug, and Mass channels (excluding Wal-Mart) of 50% or more through merchandising. Nearly one-third of categories saw average lifts of 100% or greater, which illustrates the tremendous value of merchandising tactics when conditions are right. The challenge for marketers is to make merchandising work even better and more efficiently -- particularly given the fact that there is a limit to stores' display capacity and the number of products that can be featured in an ad. What the trends show, however, is a decline in effectiveness, as measured by average volume lift with any merchandising. Across merchandising tactics, lift from feature only and price reduction only decreased in over 60% of categories, suggesting that reaching consumers in-store through display is becoming increasingly important. Note: Download the file at right for more category-level discussion and statistics.ACTION ITEMSFor Manufacturers Evaluate current merchandising practices and performance relative to category and competitive benchmarks. Identify price and promotional sensitivity for your brands and categories prior to developing merchandising strategies. Test market major merchandising initiatives prior to extensive rollouts. Tailor merchandising tactics to specific markets/stores as needed to address different consumer and competitive profiles. Measure and monitor store-level merchandising performance and retail execution; identify and address under-performing stores. Explore specific merchandising mix enhancement opportunities discussed on page 4 (see attachment).For Retailers Evaluate current merchandising practices and performance relative to industry and competitive benchmarks. Measure and monitor store-level merchandising performance and retail execution; identify and address under-performing stores; explore incentive program based on retail execution of merchandising initiatives. Allocate display and feature ad space based upon an evaluation of several factors, including relative lift, appeal to desirable consumer segments, average basket ring with vs. without products, impact on consumers' price perceptions, etc. Explore specific merchandising enhancement opportunities discussed on page 4 (see attachment).

CPG Merchandising Trends

P2PI MEMBERS

JOIN P2PI

Related Topics

Related Images

Business Topic

Market Segment