Digital CPG Blog

Green may only be the new black when times are good.

“As recession gripped the country,” reports the New York Times, “the consumer’s love affair with green products, from recycled toilet paper to organic foods to hybrid cars, faded like a bad infatuation. While farmers’ markets and Prius sales are humming along now, household product makers like Clorox just can’t seem to persuade mainstream customers to buy green again.”

Sales of Clorox’s Green Works have fallen to about $60 million a year in comparison to its year of launch when sales topped $100 million.

“Every consumer says, ‘I want to help the environment, I’m looking for eco-friendly products,’ ” said David Donnan, a partner in the consumer products practice at the consulting firm A. T. Kearney. “But if it’s one or two pennies higher in price, they’re not going to buy it. There is a discrepancy between what people say and what they do.”

Does this surprise you?

It seems we report on private label’s increased market share almost every other week. But today is not entirely dreary for national CPG brands – we’ve got both good and bad news.

First, the bad news: “The global market share of private label food products is expected to double, from its current 25% to 50%, by 2025,” according to a new report from the Food and Agri Research division of Rabobank, an international financial services provider.

But the good news: “The report, however, also concludes that top or “A” brands are expected to retain their market shares. It’s the smaller, often local, “B” brands that will face mounting downward pressure on volumes, as retailers stop carrying them in favor of using their shelf space for their own private label brands.”

So even though the innovative and scrappy local brands are getting knocked off, national brands finally get a break.

The race for who can dominate e-commerce just got heated. Last month saw two significant announcements from major retailers Walmart and Walgreens.

First, Walgreens announced the company was in a deal to acquire Drugstore.com. “Our acquisition of drugstore.com today significantly accelerates our online strategy to leverage the best community store network in America by becoming the most convenient choice for health and daily living needs whether customers shop online or in our stores,” said Gregg Wasson, president and CEO of Walgreens, in a press release.

“This acquisition offers a unique opportunity that will provide us immediate access to more than three million savvy, online loyal customers, and will allow us to move even closer to our existing customers through relationships with new vendors and partners, adding approximately 60,000 products to our already strong online offering,” said Mr. Wasson.

Next, Walmart launched a full-scale, national rollout of Pick Up Today. “The service enables customers to purchase items online and receive free same-day pickup at a local Walmart store, providing even more savings and convenience to customers,” reports CGT.

“Wal-Mart is uniquely positioned to combine the power of e-commerce with our national retail footprint to offer a leading, multichannel experience that delivers the best savings and convenience to our customers,” says Steve Nave, senior vice president and general manager of Walmart.com. “We’ve seen strong customer response from initial tests of ‘Pick Up Today,’ and we’re pleased to expand the program to customers nationwide in the coming months.”

Interesting and different strategies for each retailer. It will be edge-of-your-seat material as to who can win the e-commerce game.

“In the just completed shopper research on private label usage conducted by Perception Research Services (PRS), fewer shoppers reported purchasing private label products on a regular basis, compared to the last wave of research conducted in July 2010 (84 percent vs. 94 percent), but those buying private label goods are buying more of it (average number purchased up 25 percent from 4.8 to 6),” reports Consumer Goods Technology.

Paper products continues to be the leading private label category purchased, with increases evidenced across almost all categories, and the largest seen for cereal (+20 percent), cleaning products (+19 percent)

“The data suggests that while the penetration of private label usage may have peaked, a significant portion of ‘triers’ have been converted to ‘believers’ who now choose the private label alternative for more types of products.”

Indeed, national brands will have to do a lot to now tempt those customers back. And might I suggest that any changes or strategies implemented for such an outcome have nothing to do with package design or messaging? To pay more, consumers are going to need an experience, not just a product. Generic brands don’t give this at all, and right now, national brands don’t either. But this is one area where the national brand is poised to be able to make a bigger impact because of all the history and meaningfulness surrounding their products.

Think of your product and your marketing campaigns as a complete experience for the customer and you may just be able to beat private label in the ring.

Oopsies. Rising commodity costs mean CPG companies are facing the difficulty, despite the gradual economic recovery, of passing these along to consumers. “Making matters worse are price wars aimed at protecting market share,” reports the Wall Street Journal.

“Sentiment toward the sector, usually a safe haven because consumers will buy toothpaste and soap even when cash is tight, has soured recently. Over the past 12 months, shares of companies that make nondurable household products have underperformed, rising only about 3% compared with the broader market’s roughly 20% gain.”

Could it be that they are competing with private label? Hmm…

“Basically, all of these companies have to explain what’s going on,” says Jay Freedman, a managing partner at Crystal Rock Capital Management, who plans to attend the conference. “There’s probably more dislocation than there’s been in a long time.”

While the article goes on to talk about the tough decisions these companies will need to make (firing and lay-offs, cutting costs), I believe they should also be pushing their money and strategy into new ways to reach their existing and new markets. CPG desperately needs to figure out the direct to consumer and e-commerce models and fast to have any chance of succeeding. But in an industry that is traditionally slow-moving, it will be interesting to see if investors can put enough pressure on the household companies to show results efficiently.

Uh oh. Just  because there aren’t lines online doesn’t mean consumers are happy with their e-commerce experience. The annual ACSI (American Customer Satisfaction Index) E-Commerce report was released from ForeSee Results last week and explains that customer satisfaction with e-commerce websites is slumping to its lowest score since 2004.

The report shows that online retail dips 3.6% to 80 on the ACSI’s 100-point scale, as customer satisfaction with smaller e-retailers suffers a major drop.  The “all others” category, which is an aggregate of smaller e-retailers and other companies not individually measured, plunges 6% to 78.

Download the full report here.

We first told you about the just-in-time consumer back in December, and now Nielsen has done the research to back up the trend.

“We can confirm that the biggest increases in small trips to the big-box supercenters and club retail channels have increased and Nielsen’s research shows that those increases are driven by affluent consumers. On the flip side, while smaller trips are of greater importance to the grocery, drug, convenience/gas and dollar channels, larger trips are gaining ground. Here too there are differences across income classification, providing opportunities for retailer/store-specific and consumer segment trip-type solutions.”

To see exactly what’s going on where, check out what’s going on by channel:

• Grocery – Immediate trips fell in importance by almost one percent as the channel saw minor gains in fill-in, routine and stock-up trips.
• Supercenters – Immediate and fill-in trips have gained in importance over the past two years, while routine and stock-up trips declined.
• Mass merchandisers (excluding supercenters) – Fill-in trips showed slight gains, while all other trip types posted minor declines.
• Drug – Fill-in and routine trips were up, while immediate trips declined.
• Warehouse Club – There was an up-tick in immediate trips, but the staple of club stores – routine and stock-up trips declined.
• Convenience/gas – Immediate trips – the hallmark of this channel – have declined by more than two percent, most likely due to rising gas prices.
• Dollar – Basket size increased, but the immediate trip type continued to dominate.

What should you takeaway from all this?

“Smaller immediate trips continue to capture the greatest share of Americans’ shopping trips. The interesting trend, though, is how the smaller trip is gaining in importance at the larger formats such as supercenters (which have seen an erosion in larger trips over the past two years), while formats such as grocery are seeing increases in larger trips. There are differences across income groups, with more affluent consumers hitting the big-box retailers for more immediate needs and trip compression among lower income consumers.”

You may not need to pay your trendy ad agency any longer. It turns out witty ads, although they are often popular, do not often translate to commercial success.

The old adage that popularity doesn’t equal success, AdAge reports, might just be true. “Effectiveness is a much different measure than “likability,” which Target’s holiday campaign featuring comedian Maria Bamford was reported to have achieved in spades this holiday season. Interestingly, despite the fun and likability of the Target ads, the creative was far less effective than many other holiday ads and failed to even make it into Ace Metrix’ top 10 most effective holiday ads list.”

“Philanthropic ads for major brands continue to show strong advertising value,” the articles continue. “Consumers respond better to a message about what companies are doing for them, instead of a straight sales pitch.”

“Nine times out of 10, funny ads win the popularity contests, but ‘likability’ is only one dimension of an ad’s overall effectiveness. Just because an ad is funny or popular doesn’t mean it is effective at driving consumer behavior.”

Photo Credit: Wall Street Journal.

There’s a new consumer shopping, and she’s all about receiving goods just-in-time, reports Ellen Byron of the Wall Street Journal. Byron describes customers that will eat out of their pantry and are averse to hoarding to save money, preferring instead to put more money towards savings or mortgage payments.

And now that the recession is showing signs of lifting, those consumer’s “antipathy to hoarding hasn’t changed. ‘I’ve stopped purchasing things just to have them on hand,’ [a consumer] says.”

No longer does buying in bulk seem like the best strategy to many shoppers to stay frugal.

“Consumers are saying, ‘I’m going to buy what I need for a specific period of time,’ rather than loading up and buying two or three extra units just because they can get a good price on it,” says Richard Wolford, CEO of Del Monte Foods Co. He calls the phenomenon “need it now.”

“Procter & Gamble Co. has been tracking consumers’ pantries since mid-2008, believing them to be a reliable gauge of how the recession has changed shoppers’ behavior,” Byron reports. “About one-third of consumers are changing their pantry levels, P&G’s research indicates, with about 75% of those cutting back on inventory.”

“There’s almost a confidence and pride in the ability to make tailored choices for themselves,” says Joan Lewis, P&G’s global consumer and market knowledge officer.

As someone who has been shopping like this for years, I highly recommend you go and read the entire WSJ article. And then, let us know what you think – are you seeing the shopping habits of your consumers change? Have your own changed?

Retailers are finding their customers on Facebook… and a lot of them.

In a recent study, the results “speak to the power of Facebook: The retailers surveyed by Media Logic with 1 million or more likers averaged nearly 40 percent growth between mid-July and mid-September.”

Other key findings included:

- Blogs, microsites, commerce sites and stores are all being swept up and into the social revolution. Retailers are connecting their online and real-world properties into what are effectively media networks owned and operated by the brands.

– Promotions in the form of social games and contests, hosted both within Facebook and on microsites, are drawing huge numbers of participants and, thus far, tireless engagement. Fans and followers must now be considered significant cooperative marketing partners as they remarket the brand messages.