Driving growth in a down market

It looks like a good news story: CPG sales in 2023 are trending upwards at +5.7%. But, the figure is fuelled by higher prices – not volume. “If we look at it from a dollar perspective, we’re actually not doing too bad,” NielsenIQ’s Carman Allison, told attendees at Canadian Grocer’s recent GroceryConnex conference (held Nov. 20, 2023). “But if you pull back and look at volume metrics, that’s where we’re seeing a lot of concern right now. Growth is starting to slow in our industry.” Volume growth is down 1% and lags national population growth (+2.9%). 

In his presentation, “Value versus volume: Getting back to real growth,” the vice-president of thought leadership, North America, said though inflation has come down, there’s still an “inflationary ball and chain” dragging consumers around. In a recent NielsenIQ survey, 37% of Canadians said they’re in a worse financial position this year versus last year, with 87% saying they’re worse off due to increased costs of living. To ease the strain, Canadians are reducing non-essential CPG purchases (32%) and shifting to larger sizes (33%). They’re also changing food habits by eating leftovers (82%); avoiding food waste (41%); and eating less (20%) – all contributing to volume sales decline.

The million-dollar question for grocers and CPG companies is: how to grow in a declining market? Allison laid out four ways:

Promote with purpose

As more promotions move to price-cuts, 38% of promotions aren’t breaking even. “This is an area where we basically can pull back a little bit on promotions, really scrutinize and look for ways to be more profitable on promotions overall,” said Allison. 

Maximize assortment

Both conventional and discount retailers are cutting assortment, which may be the wrong choice. Nearly 40% of consumers will buy elsewhere if they can’t find the products they’re looking for. “If you don’t have the right assortment… you’re potentially going to lose the sale,” Allison said. “We need to be more strategic with assortment, because assortment is your differentiator.”

Innovate to stay relevant

While product innovation may be on the back burner, “this is the time when we need to come forward with innovation,” Allison said. He noted that manufacturers that had increased innovation in 2022 were 1.8 times more likely to grow overall sales than those with stagnant or declining innovation.

Reach consumers where they are

The consumer wallet continues to evolve, with 48% of shoppers buying both in store and online. Online sales are gaining momentum and now represent 3.2% of CPG sales in grocer/drug/mass channels. “We need to have strategies that are focused on a balance of online and in-store strategies,” said Allison.

This article first appeared in Canadian Grocer’s December 2023/January 2024 issue.