August 2005 Times & Trends Executive Summary:
CPG Merchandising Trends: Activity, Effectiveness and Optimization

IRI's Times & Trends highlights new developments and critical events across all major CPG categories and channels, providing powerful benchmarking data to help guide your strategic decisions. This month’s Times & Trends provides an in-depth analysis of CPG merchandising trends across categories and tactics.
This free summary is also accessible via the GMA Web site  at http://www.gmabrands.com/publications/gmairi.cfm

INTRODUCTION

As mass media’s ability to effectively reach consumers continues to erode, and consumers’ drive for value increasingly guides shopping behavior, merchandising has become one of the most powerful tools available to manufacturers and retailers to influence consumer behavior.

While merchandising can be a highly effective means of driving short-term sales, as evidenced by the fact that across a majority of CPG categories, volume lift from merchandising events averages over 50%, its role has expanded far beyond short-term volume lift: merchandising helps shape consumers’ value perceptions of a brand or store, can be used to effectively reach specific consumer segments, drives brand and product awareness, and increases store traffic.

Given the broad-reaching impact of merchandising events, it is critical that manufacturers implement the right merchandising level and mix and that retailers effectively allocate limited feature ad and display space. This unique report provides an in-depth assessment of merchandising activity and effectiveness across categories to enable CPG marketers to benchmark their merchandising practices and performance and highlight potential improvement opportunities.
 

INDUSTRY OVERVIEW

  • Among a majority of CPG categories, at least one-third of volume is sold with merchandising support. Over two-thirds of CPG categories within food, drug, mass channels (excluding Wal-Mart) sell 30% or more of their volume with merchandising (ie. feature ads, displays and/or price reduction.) At the high end is the carbonated beverages category, in which over three-quarters of volume is sold with merchandising.
     

  • Merchandising activity is on the rise, but effectiveness is declining. Nearly two-thirds of CPG categories have increased merchandising activity versus prior year; however, nearly as many, 60%, have seen declining volume lift. Lift from feature ads only and price reduction only decreased in the largest number of categories, suggesting growing importance of capturing consumers’ attention in-store through display. Closely measuring and monitoring merchandising performance and implementing store-level improvement plans has become essential.
     

CATEGORY PERFORMANCE

  • Eight of the top ten most heavily merchandised categories are snack foods/desserts or beverages. High merchandising levels among snack foods/desserts and beverages reflect intense category competition, significant new product activity, the discretionary nature of purchases and relatively long shelf lives that enable stock-up.
     

  • Stock-up categories and higher-ticket items top the list of categories achieving the greatest sales lift from merchandising. Stock-up categories, such as toilet paper, paper towels and shelf stable seafood earn the greatest average volume lift from merchandising activity. Higher-ticket items such as coffee and cold cereal also yield high response.

   

MERCHANDISING TACTICS

  • Display is most effective in generating lift among meal components, everyday necessities and select impulse categories. Everyday necessities, such as toilet paper and paper towels and long-shelf-life meal components including canned vegetables, shelf-stable dinners and cold cereal are among the categories earning the greatest volume lift with displays. Both chocolate and non-chocolate candy also made the top ten list. Perishables and less frequently purchased categories, such as beer, spirits and cold/allergy/sinus tablets yield lower response when on display. Retailers should take relative lift into account when allocating display space allocation but must also consider other factors such as margin, total basket ring and appeal to desirable consumer segments.
     

  • Feature ads drive exceptional volume gains within stock-up categories and higher-ticket products with broad appeal. As with displays, everyday necessities conducive to stock-up such as toilet paper and paper towels do well with feature ads. In addition, however, higher-ticket items with broad appeal such as butter, breakfast meats and coffee earn substantial volume gains. By contrast, products targeting a more narrow audience, such as diapers, hair color and cosmetics receive relatively low volume lift.
     

  • Price reduction alone is relatively ineffective in less frequently purchased categories. Among categories purchased infrequently, such as cosmetics, skin care and pet supplies, price reductions without feature and/or display support yield low volume lift; consumers are not likely scouting for deals in these categories unless they are specifically planning to make purchases.

     

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Source: IRI's Times & Trends Reports
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