INTRODUCTION

Merchandising -- feature ads, displays and/or temporary price reductions -- has long been one of the most effective tools available to CPG manufacturers and retailers to influence consumer purchase decisions.

Yet, as consumer decisions have become more complex due to both product proliferation (there are now nearly one million CPG products available) and merchandising proliferation, merchandising strategies and tactics have not kept pace to address evolving consumer needs.

That may be changing. Early indicators suggest that CPG practices may be on the verge of a major transformation, with an increased focus on simplifying the consumer shopping experience.

This report summarizes findings from an in-depth assessment of trends in merchandising activity and effectiveness, and highlights best practices as CPG marketers begin to move towards a consumer-centric approach to merchandising.



KEY FINDINGS

Merchandising remains a critical tool across CPG categories. CPG manufacturers and retailers continue to heavily leverage merchandising to influence consumer shopping and purchase behavior: in two-thirds of CPG categories, 30 percent or more volume is sold with merchandising support. Snack foods/desserts and beverages are the most heavily-merchandised categories. With nearly three-quarters of volume sold with merchandising support, carbonated beverages top the list.

CPG merchandising opportunity is shrinking. Over the past two years, as major grocers adopt new upscale formats and seek to “unclutter” stores, the amount of available grocery display space is declining. These declines have occurred in eight of the 10 categories with the highest display activity. Further, total merchandising activity has declined in half of grocery store categories and nearly two-thirds of drug store categories. CPG manufacturers will increasingly seek alternatives to fill this gap and will place more emphasis on driving return for each merchandising event.

 

   
Source: IRI In-Store Solutions Group Perimeter View

Merchandising effectiveness is declining across a wide range of CPG categories. Within food drug, and mass channels (excluding Wal-Mart), volume lift from merchandising declined versus last year in more than 50 percent of CPG categories. Pre-event testing and store-level measurement and monitoring of merchandising initiatives will become more critical.

Marketers are shifting merchandising focus to stable and growing categories. The most significant increases in merchandising activity occurred in categories in which dollar sales are flat or increasing (e.g., frozen poultry, refrigerated entrees). By contrast, marketers decreased support in declining categories (e.g., sugar, milk, shelf-stable seafood) – leaving a potential window of opportunity for share gain among brands that have maintained merchandising support in these categories.

CPG marketers will increase focus on merchandising innovation. In response to declining merchandising opportunity and effectiveness, CPG marketers will step up merchandising innovation to simplify the consumer shopping experience, break through the clutter, better align with consumer shopping patterns and reach targeted consumer segments. Recent successes of innovative, consumer-centric merchandising strategies and tactics (e.g., Campbell’s new “IQ Mazimizer” shelving system and the Gillette Fusion launch) will pave the way.