The new year could shape up to be quite a ride from quarter to quarter."
After a rollercoaster year, brands and grocery retailers are on the same page with many of their 2021 predictions and priorities — with a few differences along the way.
Results of a survey of consumer packaged goods manufacturers and key grocery retailers by our Advantage Sales analytics, insights and intelligence team reveals our business partners’ views on anticipated volume, supply chain capabilities and promotional spending and offers insights into opportunities for greater communication, understanding and partnership.
According to our business partners:
Volume will start strong in 2021, then drop relative to COVID-19’s springtime pantry-loading surge.
The new year could shape up to be quite a ride from quarter to quarter, as our business partners predict Q1 to show flat to low double-digit gains in volume compared to the same period in 2020, and Q2 is forecast for low single-to-double digit declines measured against the pandemic-related pantry-loading gains last spring. For the last two quarters of 2021, brands predict flat to low single-digit gains, while retailers aren’t predicting these gains until the fourth quarter.
Macroeconomic indicators also predict a challenging Q2. Structural employment issues may take shape and government stimuli and unemployment benefits are predicted to lessen from current state, which will likely have a large influence on consumer spending. Simultaneously, many consumer goods companies are projected to have more stable supply chains, creating a competitive strain in the marketplace. While we know what happened in Q2 of 2020 will impact year-over-year volume comparisons, we will have to closely watch these macroeconomic influencers in Q1 and be ready to adjust in Q2 for different scenarios.
Manufacturers and retailers continue to have supply chain concerns.
While both are keenly focused on supply chain issues, our business partners have differing priorities. Manufacturers’ (83%) primary concern is transportation, while retailers have their eyes on continued production and supply disruptions.
It’s clear that retailers are skeptical about supply after suffering through empty shelves this year. A full 90% of retailers surveyed expect persistent out-of-stocks to plague 2021, compared to just four in 10 manufacturer respondents. As manufacturers come back into supply, they’ll need to work with their retail partners to rebuild confidence in their ability to keep shelves full.
Online promotional spending will increase significantly.
Manufacturers and retailers also have very different perspectives on future promotional spending but share a belief (more than 90% of respondents) there will be much more spending on e-commerce platforms. Still, seven in 10 of our brand clients do not anticipate a need to increase trade marketing funds, while 83% of retailers do foresee a needed increase. As grocery retailers roll out enhanced e-commerce platforms and anticipate new funding, this is an opportunity for retailers and brands to look at trade marketing spending holistically with a keener eye on digital initiatives.
Looking a bit deeper into our business partners’ views, most brands surveyed project their marketing funds will focus on digital marketing (94% of respondents) and retailer events (32%). However, when asked which promotional vehicle is the most effective, the majority response is display, a mainstay in brick-and-mortar promotions.
According to our retailer customers, marketing funds will be most focused on digital media (92%), price promotions (75%), in-store marketing (58%) and displays (50%).
In short, retailers report COVID-19 has forced them to reassess why they stock the products they do; compelled them to change their approach to assortment recommendations; driven them to think more about the number of days of supply of products they have on their shelves, rather than having a broad assortment; and pushed them to recognize new promotional vehicles that drive category sales.
Clearly, while the pandemic has caused pain and chaos, it has also shined a bright spotlight on these and other areas of opportunities for brands and retailers to quickly and smartly adjust and collaborate more closely to take their businesses to the next level.