IRI Charts CPGs' Sluggish 2015, Identifies 2016 Growth Opportunities

Consumer packaged goods continued to struggle for growth last year, confirms a new report from IRI.  

Total U.S. food and nonfood CPG sales volume in grocery, club, drug, mass/super and dollar stores (excluding Walmart) was down 1.7% in the 52 weeks ended Oct. 4, 2015.  

CPG dollar sales increased by just 0.6%, largely due to inflationary pricing, according to IRI.  

That follows volume declines of 1.3% and 0.5% and dollar growth of 1.7% and 1.8%, in 2014 and 2013, respectively. 

Food, Beverage Category Trends

Despite a continuation of "conservative" overall spending behavior, increased competition from restaurants, and the preference shift toward fresh foods, increased at-home eating and innovations in some categories helped edible CPGs perform a bit better than their non-food  counterparts.



Edibles accounted for 64% of CPG sales across IRI's multi-outlet plus convenience stores (MULOC) tracking, for the 52 weeks ended Nov. 1, 2015. 

Looking at food/beverage store departments by volume, beverages saw the largest unit growth (+2.9%), as well as a 5.3% dollar increase. 

Beverages had several of the year's fastest-growing categories by volume, including refrigerated and ready-to-drink coffees and teas (units +10.5% and +10.3%, respectively), energy and sports drinks (units +8.1% and 7%, respectively), and bottled water (units +7.1%). 

Bottled water -- which is among the 10 largest categories -- also saw a 9.2% jump in dollar sales, partly due to a 0.5% increase in price-per-volume. Another top-10 category, carbonated beverages saw volume dip 0.7%, although a 4.3% increase in price-per-volume drove a 1.4% dollar gain.

Frozen foods was the worst-performing department by volume -1.5% in units (although up 1.5% in dollars). Gains in "healthier" categories like frozen fruit and frozen seafood could not offset the losses in other key frozen categories. Notably, frozen dinners/entrees and pizza saw sharp unit declines (-4.6% and 3.6%, respectively).

Within dairy, IRI reports that natural cheese gained 3.3% in units and 4.2% in dollars, while milk units slid 0.7% and dollars dropped 5.2%. (Inflation is expected to help milk's dollar sales in 2016.) Both natural cheese and milk are among the 10 largest store categories. 

In the refrigerated foods and "general" foods sectors, overall units were up 1.1% and down 0.4%, and dollars were up 3.4% and 1.8%, respectively.  

Despite prices increases driven by a 9.2% jump in meat prices, refrigerated lunches posted the largest unit gain of any edible category—up 14.2%, versus a 1.1% gain for refrigerated as a whole. 

IRI notes that Kraft Lunchables Uploaded (shown above), the top Pacesetters product launch of 2014, was a major driver in the category: It generated $143 million in its first year, and grew 5%, to $130 million, in 2015's first 11 months. 

Refrigerated salad/coleslaw saw units gain 7.8%, helped by another hot launch, Dole Chopped Salad Kits. 

The fastest-growing food/beverage categories also included spirits/liquor (units +8.3%); "other sauces" (units +6.8%) and bakery snacks (units +6.1%).

Among the other 10 largest food/beverage categories, beer/ale/alcoholic cider saw a 2.3% unit gain and 4.3% dollar gain; salty snacks were up 2.8% in units and 3.7% in dollars; chocolate candy was down 3.3% in units but up 2.7% in dollars; pet food was down 0.2% in units but up 1.3% in dollars; and fresh bread/rolls was down 0.9% in units and up 0.3 in dollars.

Non-Food CPG Trends

IRI reports that none of the non-food departments posted negative unit sales gains, but growth was flat to slightly up.

Unit growth standouts included electronic smoking products (+23.9%), which helped drive 3.2% unit and 4.8% dollar growth for the tobacco department; anti-smoking products (+17.8%); cosmetic accessories (+12.6%); cold/allergy/sinus liquids (+12.4%); adult incontinence (+10.7%); lip cosmetics (+9.5%); cigars (+8.4%), culinary items (+8.2%), socks (+5.7%) and weight control products (+5.5%). 

The health care department also performed relatively well: units rose 2.1% and dollars 5.1%, supported by several successful product launches. 

Other non-food departments' performance: General merchandise units declined 0.5%, dollars rose 2.6%; beauty units declined 0.4%, dollars rose 1.8%; and home care units were flat, with dollars up 1.6%.

Trends By Retail Class of Trade

Grocery stores accounted for 55% of edible and 19% of non-edible CPG dollar sales (each up 0.3 percentage points versus previous year).

Club stores had 11% and 12% of edible and non-edible sales, respectively (+0.1 and +0.2 points, respectively).

Drug stores had 3% and 13% of edible and non-edible sales (+0.1 and +0.2 points, respectively).

Mass/super stores had 3% and 8% of edible and non-edible sales (+0.4% and +0.7% points, respectively).

Dollar stores had 2% and 3% of edible and non-edible sales (flat with previous year).

Areas of Growth Opportunity for 2016

IRI's MarketPulse Survey, conducted in Q3 2015, confirms that consumers plan to continue their conservative, value-driven spending behavior in 2016 (31% will bring coupons from home, 29% use loyalty-card discounts, and 22% will bring newspaper circular coupons from home, for example).

Furthermore, 57% of consumers will make their purchase decisions before they enter the retail store, "so marketers must continue their efforts to engage shoppers early in the planning process," note the analysts.

Despite the headwinds, IRI summarizes several trends that represent opportunities for growth — including the Internet, which will account for about 50% of industry growth ($28 billion in growth) between 2013 and 2018.

Trends to leverage include:

*Omnichannel retail, which can enable manufacturers and retailers to harness in-depth insights about how consumers travel online to understand the new path to purchase and drive in-store growth.

*Demographic shifts: "The growth and transformation of U.S. households are altering shopper attitudes and behaviors," notes the report. "Keep a finger on the pulse of increasing ethnic diversity and the explosion of non-traditional families."

*Doing more with less media: "Consumers are constantly barraged with marketing messages—cut through the noise in the marketplace and focus on quality versus quantity," advises IRI.

*CPG manufacturer consolidation may present opportunities for specialized acquisitions to fill white-space growth opportunities.

*Smaller stores:  The urbanization of America will drive growth of smaller footprint stores. "Meet urban shopper needs with localized specialty outlets," advises IRI.

*Healthy innovations: Consumers are embracing a wide variety of healthier-living strategies. Look across CPG aisles for new ways to deliver healthier options for shoppers and the environment.

*Transparency in all things:Answer consumers’ thirst for transparency and authenticity.

*Snacking: Grazing and snacks-as-meals continue to create a revolution in consumer eating behavior.

*Marrying big data with technology, to derive genuinely useful insights.

*Driving growth by improving efficiency and productivity in current stores, rather than expanding store distribution.  

The full report, "Taking Stock of CPG Past and Future," can be downloaded from IRI's site.

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