Winning in the upcoming years will require a personalised approach, deeply rooted in understanding shoppers’ preferences and habits. The times of ‘one size fits all’ are over. To succeed, consumer packaged goods (CPG) companies need to equip their commercial teams with the processes and insights that not only allow them to take real-time decisions but also to respond to the everchanging trade, consumer and shopper landscape.
UK consumers continue to reduce their overall expenditure across day-to-day and discretionary categories, due to the squeeze on their purchasing power. According to The Deloitte Consumer Tracker data, consumers are not only cutting spending on all non-essential goods, they are also trading down including buying cheaper brands such as supermarkets’ own labels and buying more on promotions or switching stores in favour of the discounters.1
The pressures on consumers are not distributed equally. Recent Office for National Statistics (ONS) figures indicate that the gap in the level of inflation between the richest and the poorest households is at its widest in over a decade. The IRI Inflation report shows that prices of premium and super premium categories have been growing at a slower rate than the lower price tiers, impacting the least well-off disproportionately.2
As a result, lower income households might be more likely to switch to discounters or own labels, while affluent consumers can withstand higher price increases. In addition, consumers are not cutting down as much on purchases seen as relatively inexpensive indulgences, such as items in the beauty and personal care categories. It is essential for the retailers to have a differentiated offering and approach depending on the price sensitivity of their key consumer groups.
Our view is that despite macroeconomic headwinds and contracting consumer demand, CPG companies have an array of options to protect their share and profit performance while delivering benefits to consumers and trade partners.
Retaining consumers within the branded portfolio and protecting long-term value of the strongest brands are key to CPG companies’ short- and long-term success. These objectives can be achieved through a possible three-step approach:
Although many UK consumers are switching to discounters, established grocers continue to innovate while protecting or growing their market share. CPG companies will need to assess carefully which trade partners are most aligned to their long-term strategies and balance their offering and investment accordingly. To achieve that, CPG leaders should consider:
The changing consumer and trade landscape requires a more tailored commercial approach. CPG companies will need to define and execute increasingly granular commercial plans (at a SKU, store format and postcode level) to deliver profitable growth. To achieve this ambition, CPG companies will need to consider doing more of the following:
Endnotes
1The Deloitte Consumer tracker Q4 2022 The Deloitte Consumer Tracker Q4 2022 | Deloitte UK