CPG Vendors Increase DTC Sales Efforts

The advent of online shopping has  upended many supply chains. Consumers can now download music directly from a musician’s website instead of going to a traditional retailer. Experts are predicting the same market transformation could take place in the book publishing industry. Instead of perusing books in the aisles of a brick and mortar store, consumers can download e‑books from author sites directly to digital readers.  Where do these changes leave the CPG industry? Will the middlemen be cut out?

Up to 40% of CPG manufacturers have seen a reduction in the amount of branded label product facings on retailer shelves because of consumer preference for private label since the recession started . CPG analysts say “as retailers increase their focus on private brand growth, we believe a ‘SKU fight’ is brewing.”  While manufacturers say they’ve had a sales benefit from consumers who are purchasing more food to cook at home, they’re feeling squeezed when it comes to sales of higher-​profit branded products.

To compensate for these problems, a significant percentage of manufacturers are considering selling direct to consumer.  Here’s what manufacturers say about their plans to sell direct:

  • No current plans 47%
  • Yes, currently sell through Web site 28%
  • Yes, currently sell through third-​party online sites 11%
  • Plan to initiate in 2010 8%

Analysts say it’s inevitable that direct-​to-​consumer  path is here to stay and will grow over the next few years. As this sales channel strengthens, the nature of the advertising and promotion agreements between CPG manufacturers and their retail partners is certain to change. Look for manufacturers to increase their DTC marketing and to forge personal relationships with consumers as they seek to boost their brands.

[Source: 2010 Sales and Marketing Report. Consumer Goods Technology. 2010. Web. 30 Jun. 2010] 
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.