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Where, Oh Where are the Pockets of Growth in CPG?

By Paul Lainis and Larry Levin

 

 

In a time where CPG manufacturers and retailers are struggling to find sustainable growth, there are still a number of options. Growth can certainly come from focusing on the store perimeter, which is currently experiencing growth three times the total store. It can also be found by being a disruptive innovator as we’ve seen recently with several food products, including Chobani yogurt and K-cups.

But demographic trend spotting is another ticket to growth. There has been extraordinary market population growth in 20 key U.S. markets—some of these markets have been cited regularly as booming, others have not. U.S. store growth over the past five years has been sparked by market growth, and the population expansion in these cities has driven disproportionate sales growth for our industry.

IRI recently did study in which we looked at the last 52 weeks (starting August 1, 2014) of point-of-sale data, using all channels at the total store level with dollars as the key analysis. Then we went deeper by identifying key local-market consumer groups that drove these changes and isolated an effective household-level targeting that clearly shows differences in how to reach these diverse groups.

Last year, U.S. population growth was +0.7% while compounded store count growth was +2.5%, and CPG dollar growth was +6.9% over the last few years. As you can see below, most of the cities that had higher population growth also had significant store count growth and dollar growth in CPG.
 


While there are several marketplace dynamics that are driving changes in our industry right now, the three macro trends that CPG manufacturers and retailers should be focusing on is the growing importance of multi-cultural households, the emergence of millennials and, of course, the use and adoption of digital, social and mobile media platforms.

Obviously big population shifts are well underway. Hispanics’ population growth rate is three times the general population, and they have higher spending power than the general population due to their larger households. And, while today millennials account for nearly one in seven dollars across the total store, in just four short years this will jump to almost one in three dollars, putting them on par with the most powerful generation of all time, baby boomers.

At the same time, CPG categories are becoming increasingly affected by digital, with 75 percent of consumers planning to use a smartphone or tablet for future shopping, 25 percent interacting digitally before they go to the store, and eight percent using a digital device while they shop in the store. These numbers are only going to rise. Of course, there are considerable differences in shoppers’ digital interactions based on their overall engagement with the category.

While understanding and planning for these big trends is key, companies still need to effectively segment and target the right consumer groups. Whether it’s better understanding tech-savvy consumers (including millennials), Middle America families and/or boomers, knowing their preferred shopping channels and categories by market and other preferences is key to activating them.

U.S. demographic changes, local markets’ population growth, the evolving shopper journey and the rise of digital provide huge opportunities for CPG retailers and manufacturers to lead. Are you ready?

If you want to know more about our growth markets shopper study, contact us at Paul.Lainis@IRIworldwide.com and Larry.Levin@IRIworldwide.com.

 

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