Optimizing for CPG growth in a new world of worth


Optimizing for CPG growth in a new world of worth

Our NIQ BASES Managing Director shares the two most important activities manufacturers can tackle to drive CPG value — and growth — in today’s market.

Creating value for CPG shoppers

The CPG industry is navigating a new world of worth, with all sights set on value. Despite some recent signs of improvement in inflation rates, high prices and reduced spending power have consumers seeking more value as they switch brands, stock up on deals, or move from store to store in search of the best price. Retailers, in turn, are adapting to what consumers value by reducing assortments, doubling down on private label, and rethinking the in-store experience. Manufacturers, meanwhile, are refocusing on their own brand value as they take stock of product portfolios and defend market share. 

In volatile times, there is an imperative to step back and assess — to uproot budget-draining inefficiencies while seeking out and investing in new avenues for growth. One of the most frequently asked questions we field from our clients centers around this theme: “How can I drive more value from my portfolio, research & development, or innovation strategy?” 

From my perspective, the two most important activities manufacturers can undertake right now to drive CPG value — and growth — are proactive, ongoing assessments of: 

  • Your brand and value proposition (What can you offer both consumers and retailers?) 
  • Your product portfolio (How hard is it working for you?) 

Proactively protect your footprint 

With value motivators driving CPG growth and retailer shelf space shrinking, it’s critical to proactively ensure your brand’s footprint remains competitively planted in the minds of consumers and retailers. Being reactive comes with a cost: Our research shows that once sales are in decline, it’s usually too late to turn things around without significant financial investment — a formidable challenge under any circumstances, and even less ideal during lean times.  

If you’re familiar with the work of Professor Byron Sharp of the Ehrenberg-Bass Institute for Marketing Science, then his advice should be familiar: “The key marketing task is to make a brand easy to buy; this requires building mental and physical availability. Everything else is secondary.”  

This means being top of mind for consumers when they have a job to be done — and being present on-shelf (physical or virtual) through greater distribution. To achieve these objectives, your brand and innovation road map must adapt to the evolving needs of consumers and retailers, delivering a clear value proposition to both parties. This is not a “one-and-done” process: Commit to ongoing engagement as a sign of your investment in, care for, and growth with them.

We recently modeled consumer shopping behavior in a discretionary category to determine whether “crisis-primed” shoppers — who were reminded about inflationary challenges prior to their shopping trip — would behave differently than the unprimed sample. Unsurprisingly, many of the crisis-primed shoppers shifted to more budget-friendly tiers, but multipack purchases in all price segments also increased. It signals that value is a spectrum: Value means different things to different people, and it comes in many different forms. 

Manufacturers need to think holistically about their pricing and portfolio strategy, acting on their consumer and retailer learnings to ensure they’re delivering the right brand, in the right pack, at the right price. This involves monitoring how you’re evolving in that space relative to the competition and your historical past. Seize opportunities to disrupt by challenging consumption moments, like introducing new formats or creating unexpected occasions—in short, by proactively understanding what “value” means to your consumers and acting on it. 

Your product portfolio: Working hard for the money? 

In this age of cost-cutting and driving efficiencies, it’s a no-brainer to ensure that your entire portfolio — whether it headlines virtual shelves or caters to local mom-and-pops—is working hard for you. Are you prioritizing and measuring incrementality?  

Incrementality is a signal that everyone agrees is important, but rarely has the discipline to consistently measure. In a past client survey, we asked manufacturers to rank the metrics they utilize when prioritizing innovations. Not only did they not emphasize incrementality early enough (only 22% ranked it a number 1 priority), only one in five said they use it as a firm stage-gate action standard.  

In our present economic environment, you cannot afford to carry products that are simply occupying space — and retailers have no tolerance for it. Take stock of your portfolio. Identify high-performing, individual SKUs. Then, determine whether they are actually adding to revenue or cannibalizing other on-shelf items. From there, you can identify items that provide incremental opportunity and those that are less productive.  

Keep in mind what I stated earlier: Proactivity is key. Once you begin losing market share, you are either too late to recover, or stuck with an expensive job for repair. When you confidently understand the balance of your portfolio, you can leverage your learnings about consumer and retailer needs to focus on incremental innovations that target (and delight!) new users, offer a valuable trade-up opportunity, or provide new, desirable ways to interact with your brand. 

Static = stagnation 

Successful CPG manufacturers are never static. Being proactive versus reactive can mean the difference between increased dollar share and delisting. This is especially true from what we’ve observed in our post-COVID world: Innovators who keep their feet on the gas pedal despite grueling headwinds experience stronger growth than those who do not.

From concept testing to activation, approach your innovation strategy with a holistic, full view of consumer and retailer needs. Understand your value proposition and how your current portfolio stacks up. Then, keep your finger on their pulse through ongoing measurement and evaluation. The investment may feel all-consuming when resources are limited—but will ensure your brand value is well positioned for the long haul. 

Want to learn more?

Read our latest analysis, “Is the price (pack architecture) right? The art and science of portfolio optimization” or contact a BASES representative for a one-on-one walkthrough of our findings and recommendations