Marketer Emphasis on Feature Ads /​Promotions for CPG to Continue

After surging in 2008, prices on many consumer packaged goods (CPG) fell in 2009. And when prices didn’t fall enough on brand-​name products, consumers turned to private label alternatives.  As the outlook for economic recovery remains somewhat murky, especially with the continued high rate of unemployment, newly published studies suggest that the temporary price reductions (TPRs)  manufacturers put in place last year will continue, along with promotional marketing.

Consumers indicate that their product selection continues to be driven by price, according to their responses to an IRI Food Safety report and survey. Here's why consumers say they are making purchases:

  • Price of the item 87%
  • It’s on sale 80%

And consumers are using the following shopping behaviors according to the same survey:

  • Bring along coupons 82%
  • Stock up on sale items 75%
  • Look at store flyer 71%
  • Choose store because of lower prices 68%
  • Buy different brands because they’re on sale 50%

To attract shoppers, manufacturers are ramping up merchandising efforts as follows:

  • Feature ads 43%
  • Feature ads/​display 55%
  • Display 58%
  • Price only 58%

Manufacturers are increasingly working with grocery store accounts to turn around what  Standard & Poor's called a challenging picture “ as they navigate the downward pressure on prices.” The seriousness of the situation was echoed by Supervalu Inc. Chief Executive Craig Herkert who said, "In my 30-​plus years in retail, I've never witnessed the intense level of price reductions and promotional activity now occurring,"

Look for increased advertising both online and in traditional media as well as in-​store as CPG marketers work with grocers and other retailers to improve the profit picture in 2010.

[Sources: Vigna, Paul and Shipman, John. Weak Prices Hit Food Makers, Sellers, Wall Street Journal, 2.4.10; Times & Trends, GMA Online, 2009] 
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.