CPG Trade Promotion to Shift to Dollar, Convenience and Drug Channels
The recession may be ending, but the thrifty habits consumers developed during lean times are here to stay. Evidence of these habits is found in the rising power of the dollar store segment. Consumer Packaged Goods (CPG) companies are taking note and shifting their marketing strategies as a result of this trend.
The dollar channel has increased its share of the CPG market from 1.5% to 1.8% in the past 3 years. Similarly, the convenience, drug and club store channels have also whittled away at the market dominated by grocers and mass merchandisers and supercenters. A recent study put forth by Deloitte explains that CPG companies will begin to shift some of the marketing resources they have long directed to grocers over to the dollar store channel in order to build new B2B relationships and increase sales both to customers who may be leaving the grocery sector and to new customers who are loyal to the dollar format.
In the past 3 years, 51% of CPG firms have seen product sales rise in the dollar channel. To date, 41% have been increasing marketing support in this channel. Going forward, CPG executives believe their top marketing challenges will center on getting the pricing right and on finding the right package size to succeed in the channel. In some cases, CPG companies plan to roll out unique brands or sub-brands for this channel. About 51% of companies who have already introduced unique brands or sub-brands say this strategy has been effective or somewhat effective. And 67% say the same about point of sale promotions they are using at dollar shores.
The average consumer spends $29 a month at a dollar store which is far less than spending in the grocery channel. But if the dollar store format continues to grow and courts customers with more national brand products and improved customer services, CPG companies will want to spend more of their marketing effort to maximize the value of this channel.[Source: The Evolving Dollar Channel and Implications for CPG Companies. Deloitte.com. 2012. Web. 23 Oct. 2012]