CHICAGO -- During the past year, grocery and drug channels experienced flat to negative trip frequency and declining basket size, while the Internet saw a modest uptick in both frequency and trip spending, according to IRI in the new Times & Trends report, "Channel Migration: The Road to Growth Has Many Lanes."
With more than 2,500 unique paths to purchase to potentially follow, there is no longer an "average shopper," said the report.
"Following years of economic trials, the 'golden ring' of CPG shopping is value," said Susan Viamari, editor for thought leadership at IRI. "Today, more than 80% of shoppers visit three or more channels to carry out their CPG shopping journey. And, as more nodes crop up along the path to purchase, capturing shoppers' attention and wallet will become increasingly complex. Retailers and manufacturers must provide value to each and every shopper through individualized targeting and flawless execution."
Dollar channel trips also were largely flat; however, the average basket size rose considerably, with an increase of 3%. And, club trips slipped slightly, but spending growth outpaced the industry average at 0.9%. These shifts underscore the depths of consumers' willingness to try new channels and banners along their pursuit for value.
Grocery share of spending is quite similar across consumer segments compared to other CPG channels, where share trends sometimes vary rather drastically across consumer segments. The drug channel, for instance, wins a disproportionate share of spending from Hispanic shoppers, who spend heavily on beauty and personal care products. Lower-earning households spend disproportionately in the dollar channel--nearly double the average rate. While higher-earning households still index on the low side, the channel is effectively defending its base across this wealthier segment, thanks to ongoing efforts to hone assortments, spruce stores and diversify formats.
Internet share of spending is fairly consistent across most consumer segments. Generation X, households earning $70,000 to $99,999 annually and those with children are notable exceptions. Here again, though, retailers are effectively defending the base.
During the past several years, trip mission patterns have changed considerably. The club channel is getting more of its dollars from pantry stock-up missions, and the drug channel is playing more of a fill-in role. These shifts underscore the channel-blurring phenomenon that is taking place.
In addition, the grocery channel has lost share in core food and beverage departments, including refrigerated, general foods and beverages. Club is winning in beverages and general food, while also gaining nearly one-half share point in liquor. Mass/super lost ground in a number of departments, including home care and general merchandise, once again to the benefit of club. The dollar channel is holding steady across major departments, with slight upticks here and there, such as gains in beauty.
The ranks of the fastest-growing CPG categories illustrate the powerful influence that home-based eating trends are having on the industry. But, a look at top-growth categories across channels demonstrates that consumers are turning to varied and sometimes even unexpected channels to fulfill their CPG needs.
The following are the top-growth categories by channel:
- Grocery: Coffee, refrigerated meat, spirits/liquor.
- Drug: Cold/allergy/sinus liquids, lip treatment, wine.
- Mass/Super: Coffee, refrigerated meat, yogurt.
- Dollar: Cigarettes, frozen dinners/entrees, milk.
- Club: Refrigerated salad/coleslaw, snack nuts/seeds/corn nuts, yogurt.
- Internet (pick up/mail order): Coffee, dog food, weight control.
- Internet (delivery): Canned fruit, deli meat, canned beans.
"Consumer engagement and the CPG journey have forever changed," said Viamari. "CPG marketers must adopt a strong multi-channel relevance, including a strong and seamless digital presence, or they will undoubtedly become obsolete. To ensure growth, marketers must execute well against four key strategies: protect and grow the base; maintain solid availability against existing and evolving channel preferences and behaviors; optimize marketing mix by media and retail channel; and develop channel-specific products and packages."
Chicago-based IRI is a leader in delivering market and shopper information and predictive analysis for clients in the CPG, retail and over-the-counter health care industries.
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