Promotion Problem: They’re Not Buying It

IRI report finds ‘recycled’ CPG merchandising efforts are less effective
frozen food

You win some, you lose some.

Despite manufacturers best promotional and merchandising intentions, certain products still fall flat on convenience-store shelves.

The reason for this sales black hole comes courtesy of misguided strategies and more, as outlined in the Chicago-based IRI report “Merchandising for Growth: Connecting the Dots for Maximum Activation.”

“The reality is that CPG (consumer packaged good) marketers are investing heavily in promotional efforts in the hopes of spurring brand, category and industry growth,” said Susan Viamari, vice president of thought leadership for IRI. “Unfortunately, the results of those efforts are not what marketers had hoped because volume is flat to negative nearly across the board.”

If a strategic approach to pricing and trade promotions is hitting on all cylinders, the result would be a 1% to 2% sales lift—all while “improving margins, building customer loyalty and delivering a lasting competitive advantage,” Viamari said.  

More than one-quarter of volume, on average, is sold with merchandising support, which is defined as feature-only, display-only, feature-and-display or price-only tactics, Viamari said.

During the past year, reliance on merchandising activity to move volume continued to build, increasing across 40% of categories and accounting for 39% of dollar sales, with even sharper upticks in the grocery and drug channels.

Even with the promotional push, lift from merchandising support declined across 72 of the 100 largest CPG categories during the past year. This trend is cutting across the store, with many categories seeing double-digit losses in sales lift while investment in merchandising continues to escalate.

Breakfast meats rely on merchandising for about half of its volume movement, and marketers in the category increased merchandising activity during the past year to stave off losses from escalating prices. Breakfast meats were met with some success, supporting volume growth of 4.1%.

The coffee sector saw volume sales decline 1.9% during the past year, following several years of strong growth, the IRI report noted. This sector has benefitted from trends around at-home dining and the explosive growth of K-cups. Innovation in this area continues and is well received, but merchandising activity has cooled and lift is down sharply.