CPG sales off to slow start in 2018 but with optimistic year-end projections, IRI says

The CPG industry registered a sluggish start for Q1 2018 despite the expectation that the Tax Cut and Jobs Act passed at the end of 2017 would result in extra income from lower withholdings and encourage spending, said Susan Viamari, VP of Thought Leadership at IRI.

Mainly driven by price increases of packaged food items, the food and beverage sector registered +2.3% in dollar sales for Q1 2018 versus the same period last year but roughly half of the growth experienced in 2016.

Just under 20% of consumers IRI surveyed said they would be spending more this year as a result of the federal tax cut, while 44% of consumers said their household finances were still strained in Q1 2018, compared to 45% in Q1 2017.

This slow economic start to year for CPG is expected to turn around towards the end of 2018 with projected 5% growth compared to Q4 2017, partly dependent on retailers' ability to take a personalized strategy to addressing consumers’ nutritional needs.

“As retailers, it’s so important to take a much more targeted approach in demonstrating value for those who are your most important shoppers,” Viamari told FoodNavigator-USA.

How to win over consumers

Despite the rise of e-commerce food shopping, the brick-and-mortar retail environment will continue to play a central role in consumer shopping habits, according to Viamari.

“The in-store experience is still hugely valuable and it’s something that pure play ecommerce providers haven’t really gotten their arms around yet,” she said.

“Obviously, when you’re in the store you can touch and feel the product...you can turn over the pineapple.”

In its 2018 Consumer Connect Survey, IRI found that US consumers have a renewed interested in “fresh prepared” food items, but don’t want to spend more time on food prep.

Viamari suggested that retailers need to help connect the nutritional dots for consumers through pairings of certain food items to help streamline the in-store experience even further. This can be seen in more deliberate ways such as the introduction of ready-to-make meal kits into brick-and-mortar, or by placing the Parmesan by fresh tomatoes to suggest a pasta dinner with fresh tomato sauce.

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“There are also opportunities for retailers to drive trips and drive baskets with innovative co-marketing and co merchandizing programs… making it super easy for consumers to solve that need for that occasion, and frankly without a whole heck of a lot of thought,” Viamari added.

Retailers are also benefiting from the trend in consumers making multiple visits to the store rather than a weekly grocery haul.

“Food and beverage benefit in particular that consumers do more ‘just in time’ shopping now versus stocking up, buying what they need, when they need it,” Viamari said.

Could private label take over national brands?

From IRI’s consumer research, in late 2017 through January 2018, private label purchases were on the rise, with millennials standing out as the most avid private label fans – 95% bought private label items on their shopping journeys.

“Consumers are more concerned with what a brand offers rather than what the brand’s name is,” Viamari said.

“Generally speaking, especially with younger shoppers, there’s opportunity to win over shoppers from different brands by telling the right value story.”

Perimeter-of-store not immune to low growth

The perimeter of the store has gained the reputation of the rising star of the grocery store, but even this popular section struggled to register growth.

Overall perimeter sales of fresh food were down 1.8% in Q1 2018 with deli prepared foods experiencing the steepest declines of 6.8%, followed by deli meat at -1.4%, and produce at -1.4%.

However, these negative to low growth numbers are expected to rebound, Viamari added.

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“Coming off the holidays going into the new year, everyone has this ‘ra, ra’ kind of feeling and then reality settles in,” she said.

“You also have to remember that the perimeter in general has been growing in leaps and bounds and you’ve got to expect that there’s going to be a little bit of a slowing down.”