The Search for Value

Consumers choosing retailers that answer the “need” factor, SymphonyIRI reports

With all due respect to the pursuit of happiness, these days, the pursuit of product value resonates most with consumers. It’s driving decision-making about where they shop and what they shop for.

The positive news is that many convenience retailers appear to have stepped up their game in 2012, delivering on the craved and often-elusive value proposition across leading consumer packaged goods (CPG) categories.

The emphasis on product value was among several key insights offered recently during a SymphonyIRI Group webinar, “CPG Year in Review,” hosted by Susan Viamari, editor of Times and Trends. Looking at the number of retail channels shopped in 2012, Viamari observed that consumers are no longer beholden to one or two preferred channels in search of value. Rather, they’re scouring for value through the channels that best deliver it, with 44% indicating they select stores to shop where price answers the “need” factor, SymphonyIRI reported. 

One reason: One-quarter of all consumers is having trouble affording groceries, including one-third of Millennials. These young-adult consumers are trying to get their footing underneath them running households, so it’s a critical time for marketers to form strong relationships with them by engaging, informing and influencing them, Viamari said. 

The economic pinch was not been helped by price increases affecting 80% of the leading10 CPG buckets. Some commodity-based products such as peanut butter incurred significant price hikes due to the 2012 summer drought, impinging crop performance.

To surmount these challenges, marketers and their retailer-partners placed a decided emphasis in 2012 on CPG categories that support on-the-go consumption, home-based eating and creating value within health/wellness product lines. According to Viamari, success came via:

  • Leveraging frequent, granular market assessments to maintain a clear understanding of economic, channel and consumer shifts, and using knowledge to align marketing programs on the fly;
  • Developing and prominently touting value proposition founded on need and wants of primary and high-growth consumer segments; and 
  • Investing to develop and maintain 360-degree understanding of the most important shoppers, then developing products and/or highly targeted marketing programs geared toward protecting and growing share and loyalty.

C-stores held their own

Viamari reported that CPG unit sales slipped slightly in 2012, with dollar-sales growth declining largely owed to inflation. Drilling down, the grocery and drug channels’ performance lagged while c-stores proved relatively strong.
The convenience channel’s dollar growth in 2012 was 2.4%. Viamari speculated that c-store growth was attributed to scale—stores are readily available—coupled with the value customers place in getting in and out quickly.

In 2013, there is no letup in consumers’ hunt for value as they continue to be laser-focused and will reduce the number of retail channels visited, she predicted, with value being the litmus test for retailers to pass.

“The pursuit of value is so pervasive, and this is helping provide momentum to value-oriented channels,” she said. The c-store channel saw 18.2% share of sales in 2012, matching 2011 performance. By comparison, grocery notched 40.6% and drug 6.6%, both down from 2011.

CPG categories that supported key consumer rituals, such as self-driven health and beauty care and home-based eating, were among the strongest-performing. “People are striking a balance and investing in being healthier. They are not spending willy-nilly. They want to use products in a conscientious manner,” she said.

Energy to burn

Health and beauty is one thing, energy is another: In 2012, energy drinks far and away led the CPG pack with 14.4% and 15.1% growth in dollar and unit sales, respectively, across all channels. Wine, bottled water, beer/ale/cider, natural cheese and salty snacks all followed in line within the leader board. Carbonated soft drinks (CSDs), fresh bread and rolls, milk, and chocolate candy were the biggest laggards.

Viamari said energy drinks continue to go “gangbusters”—all pulsed by a steady stream of new- market entry and smaller-size packaging. Separately, innovation is also stimulating growth in other categories, including weight control and liquid nutrition (+12.7%), spirits and liquor (+12.6%), ready-to-drink teas/coffee (+6.3%) and crackers (+5.7%).
So, what’s a retailer to do in 2013 to ensure it is delivering value? Start by identifying opportunities and risks. “Retailers should align online and brick-and-mortar strategies, leverage value pricing to the categories that are identified as ‘need,’ and always seek innovation,” said Viamari.

Additionally, marketers and retail partners should work together to better evaluate pricing and promotional strategies, which Viamari said is best demonstrated through understanding trends around packaging and pack sizes. Ensure that assortments are aligned and see that everyday pricing is identified as value without “over-relying” on promotional pricing.

“Marketers must re-wire strategies and marry a couple key ones together to target the right consumers,” Viamari concluded, “because more are becoming laser-focused on value.”