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How Manufacturers Can Leverage CPG Market Research and Strategic Consulting to Face a Shifting Marketplace

Posted by TrendSource on 2/28/19 9:28 AM

Welcome to the second of our two-part series on the changing state of CPG and grocery. Last week we discussed the unique challenges manufacturers are currently facing as the relationship between consumer, retailer, and manufacturer all undergo radical shifts.

We painted a pretty troubling picture but, fear not, we have returned sporting our strategic consulting hat to offer manufacturers a game plan moving forward.

So, once again, let’s push our cart around the middle aisles as we put in the CPG market research to assess what, exactly, manufacturers can do to optimize their in-store and omnichannel operations for the years to come.

Accepting But Not Overstating our Digital Future

First thing’s first. We spend a lot of time talking about the digital retail revolution. But this is not to say that all the action, and thus manufactures’ attention, is online. Sure, how we shop has changed—we shop more often but buy less on each trip—but in-person, good ol’ fashioned brick-and-mortar shopping is still a thing and will be for the foreseeable future.

For all the talk of the digital revolution, online grocery is currently 5% of US grocery sales, and projections of future adoption rates—the ones that have grocers digitally fortifying and generally freaking out—put online shopping at 9.7% by 2022.

Yes, 10% of US grocery spend is a huge number and it is only going to increase overtime. So, in the long term, manufacturers must prepare for the omnichannel ch-ch-ch-changes to come as consumers change their shopping habits, patterns, and preferences.

No, we aren’t all going to get shopping robots anytime soon (although that would be an interesting angle for a Terminator reboot: Arnold meets Alexa—a half sci fi, half rom com crowd pleaser if I’ve ever imagined one). But the trend is only going in one direction, up. So, prepare to move your eggs into digital baskets as quickly and efficiently as possible, but don’t put all of them in the online basket just yet.

strategic consulting eggs in basket

Of Audits and Analytics

For in-store shelf optimization, manufactures must go deep on the CPG market research, and a lot of that requires audits and advanced analytics.

Manufacturers need insights into regions, banners, channels, and all sorts of other variables when making in-store decisions, and marrying stock audits with data analyses like predictive modeling can take you pretty far.  

Whether through, eye-in-the-sky cameras, robots, or field agent leg work, as data is fed into such analytical platforms, they offer insights in shelf placement, stock levels, and product elasticity.

Those first two are self-explanatory, but a quick note about that last one, because it is important. As shopping trips become more frequent but less substantial, grocers have invested in smaller stores, and smaller stores mean less shelf space for everybody. And of course, as we noted last week, these shelves are increasingly crowded with upstarts and private label.

With shelf space limited, manufacturers must identify which of their products are elastic and which are inelastic. In this case, elastic products are those that see sales increases with increased shelf space; inelastic are those with steady sales regardless of shelf space.

Identifying which products benefit from more and better shelf space vs those that do not is key to optimizing in-store merchandising. This knowledge can offer manufacturers’ a seemingly impossible opportunity—to increase sales without increasing shelf space.

And, again, that’s where big data analytics can help. Such platforms can also determine the best product assortment and location for particular store types, regions, and even individual locations; it can offer insights into displays, pricing, and promotion strategies.

It doesn’t take a Skynet scientist to tell you that the same solutions be deployed for warehouses and fulfillment centers. So, implementing such solutions across all omnichannel points is not only possible but also increasingly imperative.

Click and Collect Optimization is Low-Hanging Omnichannel Fruit

As manufacturers face their digital future, one way to bridge the gap between today and a distant digital-only tomorrow is through click-and-collect.

This is the least disruptive of manufacturers’ digital options and one in which the grocer does most of the heavy lifting. Companies can still send deliveries to grocery stores and rely on grocers to get the products into consumers’ hands.

But there is nonetheless work to be done. Manufacturers must reinvision their products journey from distribution center to end user. This may require different packaging, different promotional strategies, and different products entirely—that’s where the market research comes in.

If the majority of a products sales, for example, come from impulse aisle purchases (where your humble blogger recently bought this issue of GQ) then manufacturers must reconsider their customer journey in an omnichannel age. Same goes for product packaging meant to stand out on a shelf but not withstand a click-and-collect journey.  

Adapting to click-and-collect may require creative advertising and marketing strategies, as well as new promotions, but again, it will most definitely require market research.

DTC Is Not For Everybody

And finally, certain CPG brands need to have a long hard talk with themselves in the mirror and decide if their products support or demand a direct-to-consumer (DTC) channel. It sure is tempting—cut out the retail middle man and ship directly to your loyal customers, but very few brands have taken this path because, for most products, it simply doesn’t make sense.

It requires manufacturers to build out their delivery operations, which changes everything from warehouse size to supply chain, and also demands that companies figure out the dreaded last mile of shipping. For higher margin, inelastic items like razors, this makes sense—that’s why Unilever has invested in Dollar Shave Club.

CPG market research DTC shaving

But for the majority of manufacturers grocery products, going DTC is impractical and unnecessary. I may buy my biscuits and butter online, but I do not do so directly from Pillsbury and Kerrygold.

Yes, many upstart manufacturers are selling their products almost entirely on the DTC channel (our favorite hot sauce, for instance). But these are niche, expensive products that built their business around this channel. Other examples like wine-of-the-month (or wine-o month) clubs similarly rely on end user enthusiasm and product cost to be viable.

Here’s a free insight: shipping $15/bottle hot sauce is different than $2.50/bottle sports drinks.

CPG Market Research and Strategic Consulting

But in all seriousness, this is complex stuff. We’re exhausted and we didn’t even get into acquisitions, new product development, and infrastructure optimization. With so many variables and data streams out there, the one thing we can say for certain is that you can’t do it alone.

You need to be putting in the market research—whether with us or somebody else, you need an outside perspective and solution. That said, of course, we’d love it to be us.

2018 Grocery Industry Study

Topics: Market Research, Strategic Consulting, Grocery, Technology, CPG

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