CPG Companies Shift Marketing/​Distribution to Alternative Formats

Last week, I highlighted a Nielsen study that noted the growing trend of consumers packaged goods (CPG) manufacturers changing the traditional business model. Instead of selling their products through manufacturer reps and major retailers, more CPG firms are selling products directly to consumers. As pressure on the bottom line continues, CPG companies are looking for other ways to sell to consumers and these changes will impact their marketing strategies.

CPG companies who participated in a recent Consumer Goods Technology survey noted that their direct-​to-​consumer selling efforts look something like this:

  • Through 3rd party websites: 39%
  • Not currently doing so: 36%
  • Through our own website: 36%
  • Through our own physical retail outlets: 21%
  • Plan to do so within 2 years: 3%

Each of these channels tends to boost sales for specific product types. For example, a manufacturer’s own website does well when promoting high volume, high margin, and differentiated items like diapers or beauty products. When a CPG company sells through its own stores, green products and fashion items perform well. Selling channels that involve a 3rd party online site tend to dilute the CPG firm’s contact with consumers and staples and commodity items are better sellers in these cases. Options such as online selling consortiums are typically all about niches and CPG companies that promote specialty items like ethnic spices can succeed here.

Part of the direct selling effort is being fueled by consumer interest in less-​expensive private label products. To combat the rising sales of private label, 59% of CPG companies say they’re trying to be more innovative with their branded products and 44% say they’re using social media to reach out to consumers. For now, these marketers say that the ROI from their investment in social media is all about consumer insights (81%). They’ll likely use this information to discover the best way to protect and grow market share in the future.

[Source: Consumer Goods Technology. Sales and Marketing Report 2011. Web. 22 Jun. 2011] 
Kathy Crosett
Kathy is the Vice President of Research for SalesFuel. She holds a Masters in Business Administration from the University of Vermont and oversees a staff of researchers, writers and content providers for SalesFuel. Previously, she was co-​owner of several small businesses in the health care services sector.