With consumers still concerned about high prices at the grocery store, there is some good news coming from the industry that will appeal to value-conscious shoppers: Retailers are focusing on private brand offerings and promotions and almost half of CPG manufacturers say they are not planning any price increases in the next six months.
Those findings and more are based on data from the newly released Advantage Outlook 2024 report surveying executives at dozens of CPG manufacturers and grocery retailers.
“Value means different things to different consumers,” says Jill Blanchard, president of enterprise client solutions for Advantage Solutions. “It could mean a deeper discount. It could mean private brands. It could mean a lower everyday price or buying a larger size. What we’re seeing in the Advantage Outlook is a variety of growth strategies that manufacturers and retailers are planning geared toward providing value to the consumer.”
Manufacturers’ top three strategies to deliver value to shoppers include promotions (66%), larger pack sizes (40%) and marketing the cost-effectiveness of brands and categories (37%). While retailers will also focus on promotions (47%) and larger pack sizes (53%), their top strategy by a wide margin is private brand production (75%).
Digging deeper into how high-performing retailers are succeeding, Blanchard says they are raising their everyday prices less than the lower-performing retailers, they sell a larger selection of private brands, carry more items and have more quality merchandising and deeper discounts.
Tempered optimism
When it comes to unit volume growth in their businesses, CPG manufacturers are far more optimistic than retailers this year, with almost 80% of manufacturers planning for growth for their business while just under half of retailers expressed optimism.
There is less optimism about growth for the overall CPG industry from manufacturers and retailers, however — just 54% of manufacturers expect growth, most of that modest, while 44% of retailers predict CPG industry growth.
“There’s an interesting difference between how manufacturers feel about their own growth compared to overall CPG growth, dropping from 80% optimistic to a little bit over 50%,” Blanchard says. “That 80% planning for 1%-4% growth is pretty bullish and probably an extension of the overconfidence that we saw in manufacturers during the holiday season when they also predicted unit volume growth that didn’t come to fruition. We actually saw a 2% decline in unit volume in the fourth quarter.”
Here’s a look at other highlights from the Advantage Outlook:
- Nearly half of CPG manufacturers (48%) are not planning any pricing actions over the next six months. However, more than a third will increase prices on select and non-core items in their portfolio. “There are two reasons for that,” Blanchard says. “One, a lot of manufacturers have already taken increases on their core items and now they’re coming back and looking at the non-core items. Second, taking price increases on the non-core products has less risk and usually adds more margin to the overall portfolio.”
- Across the store, package sizes have increased 5.9% over the last year, but this varies across categories. Sizes for fresh and perimeter categories and general merchandise are shrinking while pet food and snacks are getting larger.
- Across-the-board declines in 2023 unit sales were mostly offset by price gains, according to NielsenIQ data, driving an overall dollar growth of 4% in food and 2% in non-food. Pet care, for instance, saw a 3% drop in unit sales, but a 9% increase in dollar sales in 2023.
- More than half of retailers have lowered their inventory, most of it modestly. Over the next six months, most retailers will keep inventory flat, but 28% plan to decrease.
- According to manufacturers surveyed, the top retailers winning with online and e-commerce strategies are Walmart, Amazon, Kroger and Target.
The Advantage Outlook, a quarterly survey that includes responses from senior-level executives at dozens of the leading retailers and consumer products companies across the U.S., is produced in collaboration with Nielsen IQ and offers unique insights into the top trends in retail.