5 Predictions to Build the Bottom Line

Posted on December 6, 2017 by Caitlin Orosz under Industry News

2017 was another transformative year for consumer goods manufacturers; Aramark bought Avendra and AmerPride, major brands gave up their Grocery Manufacturers Association memberships, and to expand their portfolios, leading brands acquired other brands [remember when Amazon bought Whole Foods?].

The mainstay complexities of foodservice and retail remain — GPO influences, distributor negotiations, volume planning, and consumer behaviors — and will continue to obscure the consumer goods environment.

Anticipating industry trends could ease the impact to both manufacturing sectors. Here are our 5 predictions for CPG retail & foodservice trends — get ahead of them to boost your bottom line.

 

predictions for 2018

1)  Private Label Continues to Gain Steam

 

  • Retailers and distributors will keep providing high-quality, lower price products and buyers will continue to respond. Nielsen says that last year, nearly one in every five items sold in US supermarkets was a store brand. Private brands claimed 18.4% dollar share, and total market size is estimated to be $150 billion.

 

  • Private labels put a manufacturer’s brands under pressure. How are you innovating to ensure that your product is preferred.Do you expand product discounts, or do you seek to break away via differentiation?

 

  • Private labels will continue to be a formidable competitor across the board. In 2018, be sure that your customer, whether it’s the operator, distributor or end-user, would take notice if your product was no longer the product they received or consumed? [Read: Whose Customer Is It?]

 

2)  Sustainable Brands Sustain Growth

 

  • Today’s consumers spend their dollars with brands that promote sustainability and show corporate responsibility, plus they know their purchasing decisions make a difference. The trend reaches beyond canvas shoes and hipster eyeglasses. Big Heart Pet Foods, Sunny-D and Organic Valley are recognized food manufacturers practicing sustainability. Smithfield Foods, met its normalized CHG emissions reduction goal ahead of the 2020 deadline, has also reported several sustainability achievements; establishing an ingredient glossary and making progress on natural resource reduction targets.

 

  • About 70% of consumers want brands to be more transparent about their approach to addressing issues such as environmental impact and animal welfare. Nearly all would pay more when brands offer a product with social consciousness, so long as they understand and believe the ethical message

 

  • According to Mintel, 56% of US consumers stopped buying from companies they think are unethical. Has your brand considered diversifying its products or mission for more eco-friendly products? Consider the end-to-end story – what do you do in your offices, in your supply chain, with raw materials, with waste?

 

3)  Trade Promotion Channels Go Digital

 

  • McKinsey reports that as much as 30% [or $50 billion] of the CPG industry’s sales growth in the next five years will come from online orders. “Manufacturers must act with exceptional agility to keep pace and optimize spending,” says Brad Golden of Kantar Retail.

 

  • Trade promotion remains one of the industry’s biggest line items, accounting for 46% of spending. Digital capped traditional advertising as a share of total CPG spending for the first time in 2016. Digital’s lead should widen this year, with brand marketers planning to spend 19.9% of their total marketing outlays on digital vs. only 13.2% on traditional advertising, according to Cadent.

 

  • A recent report shows that manufacturers are shifting trade dollars to grow channels and focus on the best customers. Are you renewing historical spending rates year after year, or do you drive profitable decision-making through new channels? [Read: 6 Steps to Identify Customer Segments]

 

4)  Meal Solutions Will Meet Their Match

 

  • The popularity of online ordering has been incredibly disruptive to the $650 billion US grocery business. Traditional segments will strike back In 2018 and meal kit services will diversify products and offerings to stay ahead of the curve.

 

  • Food manufacturers are entering the space as well, not satisfied with simply offering the ingredients to the service provider. Tyson Foods launched Tyson TasteMakers, a line of chef-inspired, ready-to-cook meals.

 

  • Restaurants are taking on meal kits too. Popular operators like Qdoba and Chick-Fil-A have customized meal kits, disguised as takeout offers. Packaged Facts’ reported that 17% of US adults receive or buy meal kit services.

 

  • And, grocers see an advantage to selling meal kits, Phil Lempert [a supermarket analyst] says, “you can buy in on impulse, and it’s less expensive.”

 

  • Will the future of meal kits be inside a grocery store? Will more operators dive into the meal kit business? Is your business addressing meal kit services as a significant threat?

 

5)  Demand the Dollars Work

 

  • Trade promotion dollars can account for as much as 25% of gross revenue for major CPG manufacturers. The spend is significant across both retail and foodservice. It seems that customers are demanding more dollars every year, but do you know if these dollars are a good deal?

 

  • With increasing channels to market, it’s likely that your spend in traditional channels may not be netting the same results as in years past. Make sure you know your numbers. Make sure access to those insights is easy for anyone to uncover at any time. Data visualization is critical for the sales team. If you’re working in Excel or using an antiquated TPM system, it’s time to upgrade. You need to know exactly where the dollars and volume make sense and where they don’t. Strong TPM solutions can provide this information in accessible and highly visual formats.

 

  • With accurate TPM data, you decide what trends are promising [or menacing] to your business. With effective, real-time information, you can increase sales and gain better efficiency into your trade promotions. Demand that your dollars are working. Don’t settle for renewing agreements that no longer drive your business [Watch: Customer Reaction to FORGE Analytics Platform]

 

From technology solutions, we obtain data that helps us understand and support our business — what promotions are profitable, which customers are buying [what customers aren’t buying], and what distribution partner is most successful?

As we move into the new year, foodservice and retail professionals will evolve, promote and create new strategies to keep pace with the dynamic consumer environment.