Todd Hale, SVP, Consumer & Shopper Insights
Higher prices, less promotional support, and soaring temperatures have contributed to declining U.S. consumer-packaged goods volume sales since the fall of 2011, with more downward pressure expected for the months ahead.
Decreased promotion support and higher prices had the greatest impact on category sales this past year, but an unusually warm fall and winter created surprising sales trends as well. Inflationary pressure in the meat case (particularly beef) also led to weak sales for complementary center-store categories that help make a complete meal.
Between late September of 2011 and mid-April of 2012, 50 of 64 major food and non-alcoholic beverage categories had declining unit sales.
Sixteen of those categories accounted for 71 percent of the losses and eight were typical cold weather categories as people took advantage of unseasonably warm weather and avoided preparation of traditional hot meals. Categories bearing the brunt of this trend included canned vegetables, soup and frozen prepared foods.
Conversely, 14 edible categories saw unit gains, eight of which being categories historically popular in warm weather months. Category winners included fresh produce, bottled water and ice.
As CPG retailers and manufacturers wrestle with how to turn around the sales slide, they face an additional set of factors not listed above also contributing to soft or negative volume sales, including: the rise of alternative channels (club, dollar, online); prepared-meals focus from retailers; an aging population; gas prices; and sales for the top 150 fast casual restaurants up 8.4% to $21.5 billion in 2011 – near pre-recession levels.
Given the challenges, more than ever, CPG food manufacturers and retailers must collaborate on consumer and shopper solutions. Breakfast, lunch, dinner and snacking solutions that cross fresh and center-store departments and deliver value beyond low prices must take on increasing focus in stores and retailer ads. Easy recipes and tips for left-over food management go a long way with consumers. In lieu of making shoppers walk the entire store to assemble meals, finding secondary locations for center-store and fresh products can promote impulse purchases and make a meal occasion more complete.
Unfortunately, industry watchers looking for better news in the second half of 2012 and into 2013 may be disappointed. Record-breaking temperatures and wide-spread drought conditions this summer are expected to put added pressure on crop, feed and commodity prices for CPG products for the months ahead.