There was an interesting view last week published in the Wall Street Journal that described how consumer habits are changing and how consumer packaging goods companies (CPG) are responding to those changes.
It basically said for most mature categories, the CPG competitive responses to each other creates a vicious circle that makes it difficult for companies to achieve real growth.
Consumer buying habits are changing, in part because their needs change. People buy less cereal and soda because tastes change, or use less laundry detergent because of high efficiency washing machines, or use fewer razorblades because beards and/or stubble are “in.” Or, they buy less because they are still feeling the effects of the recession and are spending-challenged.
This leads CPG companies to respond with “a blitz of deals and coupons in conjunction with retailers. Indeed, over a third of packaged food and household products are now sold with discounts, as retailers and manufacturers struggle to get people to open their wallets.” And in some categories – like soda, potato chips and toilet paper – the research suggests that “more than 50% of consumers’ purchases include discounts.”
Add to this the growth of value-driven formats – including club stores, dollar stores, and limited assortment stores – and the improvement of store brands as trends that tamp down on what people spend in a wide variety of categories.
And, it gets worse … because it is increasingly difficult for retailers and manufacturers to generate sampling and impulse purchases at store level, because more people than ever are doing their shopping on the internet.
And, the story says, “Unemployment remains high, meaning pennies are pinched. The population is aging, and research shows older people tend to consume and spend less. Some cash-strapped consumers would rather spend money on their cellphone bills than shell out more money for everyday items.”
And, “consumers are devoting a shrinking share of their wallets to packaged goods as other costs of living rise more sharply, such as health care and education.
It is good news that some categories are showing growth such as energy products and beverages, and better-for-you health products such as yogurt.