2006 CPG YEAR IN REVIEW
 EXECUTIVE OVERVIEW
JANUARY 2007

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 issue provides a detailed overview of CPG industry performance in 2006. This free summary is also accessible via the GMA/FPA Web site at http://www.gmabrands.com/publications/gmairi.cfm

INTRODUCTION
Following a grueling 2005 that was marked by a devastating hurricane season and far-reaching new labeling regulations, the CPG industry took stock during the relative calm of 2006.

Reverberations from the events of 2005 carried over into the new year. Gas and oil prices spiked, and sugar crops took a beating. This translated into fewer shopping trips for consumers, and rising costs for manufacturers and retailers. Eventually, these rising costs made their way to consumers, with average price increases of 4.1 percent in 2006 across CPG categories.

IRI’s January 2007 Times & Trends explores performance across categories and channels over the past year, key factors influencing growth, and what to expect in 2007 and beyond.



 KEY FINDINGS

Total CPG industry sales increased 2.5 percent in 2006. The industry’s 2006 performance marked a significant improvement over 2005’s 1.6 percent growth rate; however, price increases (on average +4.1 percent) played a major role in driving dollar sales growth this year. With 4 percent sales growth in 2006, drug stores once again outpaced total industry growth.
 

Beverages and home care were the growth leaders in 2006. Led by products offering health and wellness benefits, including ready-to-drink teas, bottled water and sports drinks, beverages continued their multi-year growth streak; home care products also stepped up growth this year through innovation in laundry care and cleaning.

Consumers focus on total health. Consumers’ shift in priorities from pure weight management to total health management is reflected in slower growth among “light” products, while organics and functional food and beverages ride a growth wave. However, there will be continued growth potential in light alternatives within categories such as salty snacks and cookies in which these products currently account for a low share, and within specific consumer segments more heavily focused on dieting.

The slowdown in channel migration extended into 2006. The grocery channel suffered only a modest share loss this year, as the supercenter channel continues to mature, and traditional grocers continue to gain traction through new formats and more targeted marketing.

Despite only a small share gain overall, Wal-Mart share shifted significantly at the category level. While Wal-Mart secured only a half-point share gain in CPG dollar sales this year, there were sizable share shifts across categories, with large share increases in anti-smoking products and mouthwash, for instance, and significant share losses in baby accessories and pet supplies.

Targeted product development and marketing will drive growth in 2007. Trends to watch in 2007 include a growing environmental and social consciousness, a surge in kid-focused products and services, an increased demand for gourmet, and a heightened focus on healthcare marketing among retailers seeking to capture share among the booming 55+ market. These trends will drive new growth opportunities through targeted marketing and product development.

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Source: IRI's Times & Trends Reports
Information Resources, Inc. (IRI) is the world’s leading provider of enterprise market information solutions and services to the consumer packaged goods (CPG), retail, and healthcare industries.