The transformation underway in the U.S. economy has left consumers struggling to make ends meet.  Roughly half of U.S. consumers in households with income under $55,000 per year -- 60% of the population -- are having difficulty buying the groceries they need.

This environment has driven unprecedented changes in what consumers buy, where they shop and even how they eat. For many consumers, these changes have included an increased reliance on supercenters. Low prices and one-stop shopping have proven to be an incredibly powerful combination at a time when consumers are forced to strategize to maximize gas and stretch budgets as far as they will go.
Wal-Mart is exceptionally well-positioned for growth.  Not only has the company put measures in place to ensure that prices stay low, but Wal-Mart has also invested heavily to deliver a more positive shopping experience.

This report explores Wal-Mart’s role in helping consumers navigate this transforming economy and what this means for manufacturers and competing retailers

As the U.S. economy undergoes a transformation, so, too, has the consumer.

While consumer behavior change is notoriously slow and gradual, changes in purchase and shopping behavior over the past year have occurred with remarkable speed and frequency – a testament to the severity of economic hardship many consumers are experiencing.

With budgets strained to the breaking point by rising prices for gas, energy, food and other necessities, consumers have had to continually re-evaluate what they buy and where they shop.

For retailers and manufacturers, go-to-market strategies have become infinitely more complicated. Competing in a transforming economy requires re-assessing nearly every consumer-facing business process, including product development, advertising, pricing, promotion, merchandising and assortment, to ensure alignment with shifting consumer and business priorities – and with far greater frequency than in the past, given the pace of market change.

The 45-million-strong Hispanic consumer market in the U.S. drives $34 billion in CPG spending today – a number projected to grow to $52 billion by 2015. Given the extraordinary market potential, why have so few leading retailers and manufacturers cracked the code on how to capture this opportunity for their brands and stores?

The answer lies in the complexities of the market. While Hispanic consumers may share some common characteristics, this is by no means a homogenous group. It is comprised of numerous sub-segments, based on multiple factors, including language spoken, level of acculturation and country of origin.
This report highlights differences within the Hispanic market vs the general population and across Hispanic sub-segments that warrant consideration in product and packaging development, marketing and merchandising plans. In addition, the report showcases innovative manufacturer and retailer initiatives that are moving the needle within this critical market segment.

Now in its thirteenth year, the annual IRI New Product Pacesetters report showcases the year’s most successful new CPG brands.  These brands truly beat the odds: less than one-quarter of new brands exceed the $7.5 million hurdle for year-one sales that is required to earn Pacesetter status.

Several new Pacesetters accomplished this goal by creating new markets, leveraging advanced consumer insights and new technologies.  Others hit the mark by delivering high-demand benefits to targeted consumer segments or by extending to new dayparts. Many of this year’s Pacesetters supported brand launches with lifestyle-based marketing initiatives, which present the brand as part of a solution, not just a purchase.

This report details the most successful new CPG brands and the unique consumer benefits and positioning that made them a success

The rules of the game are continually in flux across CPG markets as consumers shift expectations and reward retailers and manufacturers who best meet their evolving needs.

Winning in this environment requires being at least one step ahead – catching a trend as it is just emerging, and sometimes addressing a need that consumers did not even realize they had.

A key component of this process is tracking macro consumer trends and assessing what these trends mean for your business.  To that end, this report identifies eight emerging trends that will deliver new growth potential for CPG manufacturers and retailers over the next year and beyond.

Savvy marketers who effectively tap into these trends have the opportunity to create the new rules, not simply react to them.

2007 may best be remembered as the year in which value shopping made its resurgence.

Supercenters gained more than a full share point this year, after two years of modest gains.  Private label share was up a half point in the fourth quarter, following five years of relatively flat share overall. The primary driver? Price.

Average CPG prices increased 4.2% last year, with double-digit increases across several key categories, including milk, eggs and refrigerated juices. These increases would be difficult for many consumers to absorb at any time, but an extremely weak housing market and skyrocketing energy costs plagued consumers simultaneously. Slow economic growth hindered CPG demand growth.

The year also delivered exciting new retail formats, health and wellness products, convenience products and sustainability initiatives. These efforts yielded store, category and brand growth as well as consumer benefits and will drive solid momentum as we move through 2008.

This report explores industry performance in 2007, drivers of performance, and what to expect in the coming year.

Sustainability -- meeting the needs of today without compromising the ability of future generations to meet their own needs -- has evolved from buzzword to guiding business principle with the power to literally reshape the CPG and retail industries.

A majority of leading CPG retailers and manufacturers now have sustainability programs in place, with most focused primarily on supply-chain improvements. Powerful forces are driving this change: recognition of an urgent need to protect the environment, substantial cost savings, major retailer requirements and impending legislation.

Add to this list a new emerging force that will fuel further change and will take the sustainability movement in new directions: the consumer.
As detailed throughout this report, a viable consumer market has emerged for sustainable CPG products and packaging.   This report explores specific growth opportunities for CPG manufacturers and retailers and results of early market development.

Most major CPG retailers in the U.S. and Europe view private label as a critical element of competitive differentiation strategies, yet private label development varies dramatically by country, market, retailer and category.

These differences can be partly explained by differing retail environments. Countries with a high retail concentration, for instance, tend to have high private label share. Dominant retailers have the brand equity and consumer loyalty to extend private label across categories, and the scale to gain required operational efficiencies.

Category dynamics also play a role.  Categories with dominant brands and heavy brand investment in innovation, advertising and promotion typically have low private label share – illustrating brand manufacturers’ ability to impact private label opportunity.

This report explores private label trends across the U.S. and Europe and the key factors influencing private label development to lend insight into what both retailers and manufacturers can do to achieve their objectives with respect to private label while delivering against consumer needs.

The collision of two conflicting trends is ushering in a new era of merchandising.

As retailers increasingly seek to brand the shopping experience and provide a clutter-free shopping environment, many are dramatically reducing displays and store signage. At the same time, manufacturers are increasingly turning to in-store marketing as media fragmentation drives down the efficacy of traditional advertising vehicles.

Where does that leave us?   Both merchandising activity and effectiveness are down, despite growing manufacturer demand, and new approaches to merchandising have yet to take hold on a broad scale.
This report provides insight into current and emerging merchandising trends to provide CPG manufacturers and retailers a framework in which to develop new merchandising strategies for a new retail environment.

For over a decade, supercenters reigned supreme in the cross-channel battle for consumers’ CPG dollars, winning large share gains year after year.  Competing retailers put new strategies in place to protect and grow share, from broadening assortment to developing entirely new formats catering to specific consumer segments.  

As the supercenter format matures, and competing retailer strategies take hold, supercenter share gains are shrinking, and a new cross-channel battleground is emerging -- one that is just as intense, but is far more complex.  The range of  strong competitors has grown, their strengths are varied, and the battles are more targeted – being played out to a much greater extent at the category and consumer-segment level. 

This report examines CPG manufacturer and retailer opportunities and risks in this new era of channel migration and explores what the future holds as express stores come onto the scene.

Consumers are the ultimate multi-taskers.  While marketers often view a consumer narrowly as a potential purchaser of their product or shopper of their stores, the reality is that consumers fulfill multiple roles -- end user, shopper and buyer -- all of which are interrelated.

To influence consumer behavior, marketers who focus on the total consumer will have an edge. An edge that is sorely needed in markets in which demand is not growing on its own, traditional methods of increasing demand are losing their efficacy and the competition for a piece of the pie is intensifying.

This report shares new global insights into consumer behavior across these three roles to form the foundation of marketing and merchandising strategies that drive increased store traffic, larger baskets and brand and category growth.

After decades of seemingly unstoppable growth, the world’s largest retailer has hit an impasse: supercenter expansion is increasingly cannibalizing existing stores (same store sales growth dipped below 2% for the first time in Wal-Mart’s history last year), and an aggressive plan to capture a greater proportion of “upmarket” sales fell flat.   Even the international division, which drove exceptional growth, experienced setbacks, as Wal-Mart pulled out of both Germany and South Korea.

The company is now regrouping and is charting a new course for growth that leverages brand equity as a low price leader and core assets, such as the pharmacy.

This issue of Times & Trends explores drivers of Wal-Mart performance and early results of key strategic initiatives.  The report also highlights new opportunities and risks for CPG manufacturers and retailers resulting from Wal-Mart’s new growth plan.

Medicare Part D outreach. Discounted generic drugs. In-store health clinics. Retailers are increasingly investing in healthcare-based initiatives to drive store traffic, enhance customer loyalty and increase sales.

And, for good reason.  Pharmacy sales are outpacing consumer packaged goods sales by a 3-to-1 ratio.  Health and wellness has become a powerful driver of consumer purchase and shopping behavior, and winning in this space could well determine winners overall.

Yet, despite major strides in developing healthcare marketing strategies that work (and they are working to drive share pharmacy shifts, as detailed throughout this report), few retailers and manufacturers are fully leveraging these initiatives to drive growth across the store.

This issue of Times & Trends explores current retail marketing practices and opportunities to extend these initiatives to drive brand, category and total store growth.

Now in its twelfth year, the annual IRI New Product Pacesetters report celebrates the year’s most successful new CPG brands.  These brands truly beat the odds: less than one quarter of new brands exceed the $7.5 million hurdle for year-one sales that is required to earn Pacesetter status.

The New Product Pacesetters illustrate that despite low historical success rates, success is attainable.

This report provides a detailed assessment of this year’s winners to reveal the product benefits that resonated with consumers, the trends to watch for future new product opportunity and sales benchmarks to consider when evaluating new product introductions.

Following a grueling 2005 that was marked by a devastating hurricane season and far-reaching new labeling regulations, the CPG industry took stock during the relative calm of 2006.

Reverberations from the events of 2005 carried over into the new year.  Gas and oil prices spiked, and sugar crops took a beating.  This translated into fewer shopping trips for consumers, and rising costs for manufacturers and retailers. Eventually, these rising costs made their way to consumers, with average price increases of 4.1% in 2006 across CPG categories.

A combination of price and innovation drove CPG industry growth of 2.5% in 2006 – a marked improvement over 2005’s 1.6% growth rate.

IRI’s January 2007 Times & Trends explores performance across categories and channels over the past year, key factors influencing growth, and what to expect in 2007 and beyond.

Three consumer groups are emerging as critical target segments for CPG manufacturers and retailers: families with young children, Hispanic consumers and lower-income consumers.

As the Echo-Boom enters parenthood, the population of households with young children (i.e., children under the age of 12) is climbing quickly.  This group grows up with challenges which have not been faced by earlier generations- for example, the obesity epidemic- which will largely rule their shopping behavior for the foreseeable future and play a major role in the development of buying and eating habits that will last a lifetime. 

The Hispanic population is a force to be reckoned with.  No other population in history has demonstrated such growth, both in terms of sheer number and spending power.  And the ethnic diversity within the Hispanic population brings a whole new level of complexity to any attempt to serve the market.

Lower-income households, “Getting By” consumers, struggle to meet basic needs on a very tight budget.  Value, by necessity, is the prime driver of shopping behavior within this consumer segment.  Lower-income households are perhaps the most under-served segment in retail today.

This month’s report analyzes shopping and purchase trends across these three emerging segments and highlights specific growth opportunities for each.

With an estimated $535 extra spent on gasoline this past year, coupled with rising CPG product prices due in large part to rising fuel costs, U.S. households have felt their budgets strain.

Yet, as detailed throughout this report, and consistent with findings from the IRI September 2005 gas price assessment, the CPG industry does not appear to have been negatively impacted. In fact, total industry sales actually appear to have benefited as consumers shifted spending from luxuries, such as dining out and entertainment.

What did change, however, is the way in which consumers shop. Across income segments and across channels, consumers significantly reduced shopping trips, accelerating a longer-term trend.

This assessment provides CPG manufacturers and retailers with insights required to see and act upon new opportunities and risks related to gas price cycles.

Merchandising -- feature ads, displays and/or temporary price reductions -- has long been one of the most effective tools available to CPG manufacturers and retailers to influence consumer purchase decisions.

Yet, as consumer decisions have become more complex due to both product proliferation (there are now nearly 1 million CPG products available) and merchandising proliferation, merchandising strategies and tactics have not kept pace to address evolving consumer needs.
That may be changing. Early indicators suggest that CPG practices may be on the verge of a major transformation.

This report summarizes findings from an in-depth assessment of trends in merchandising activity and effectiveness and highlights best practices as CPG marketers begin to move towards a consumer-centric approach to merchandising.

“One-stop-shopping” has clearly become an outdated term: three-quarters of today’s consumers shopped in five or more channels this past year to meet their CPG needs. Multi-channel shopping is now the norm.

Consumer drive for convenience and value pricing, coupled with the industry’s increased points of access and aggressive price/promotion strategies have fueled channel migration for the past decade. The result has been sizable consumer spending shifts across channels – with the dominant flow from grocery and traditional mass merchandisers to supercenters.

These steady, long-term trends have reached a turning point. Channel migration is showing signs of slowing. Supercenters appear to be pulling share predominantly from traditional mass merchandiser stores, while grocers have successfully maintained share.

One of the largest, most powerful consumer segments in history is re-evaluating where they shop and what they buy.

Two major events are driving changes in purchase and shopping behavior among consumers aged 55+: 1) over the next decade, roughly 31 million pre-seniors (now age 55-64) will turn 65 and 2) seniors (age 65+) gained access to prescription insurance through Medicare Part D on January 1, 2006, and over 33 million have enrolled.

CPG and healthcare manufacturers and retailers have a unique opportunity to protect and grow their business within this critical and rapidly growing segment as 55+ consumers progress through these transitions.
This report summarizes results from an extensive analysis of purchase behavior among 55+ consumers to assess current and likely future impact of these events.

Change is underway at the world’s largest retailer, and, as history has shown, when Wal-Mart changes, the industry changes.

Wal-Mart’s growth rates, while still extraordinary, have steadily decelerated over the past five years. Supercenter expansion, the company’s primary growth engine, is no longer netting new consumers. And, core lower-income consumers have been forced to decrease discretionary spending due to rising gas and heating costs.
In true Wal-Mart fashion, the company has responded to this situation with a comprehensive transformation plan.

The insights provided in this report are intended to help CPG manufacturers and retailers see potential new category, brand and store growth opportunities and risks that will arise from changes underway at Wal-Mart; act on these opportunities with speed and confidence and win at the shelf.

Now in its eleventh year, the IRI annual New Product Pacesetters report showcases the most successful new CPG brands. Given the industry’s low new product success rate (less than 25% meet the $7.5 million in year-ones sales required to become a New Product Pacesetter), the Pacesetter brands are truly exceptional. Pacesetter brands beat the odds.

Consumers have rewarded these brands and the retailers who carry them for delivering specific benefits that address their current and emerging needs.

This report identifies leading benefits among food and beverage and non-food brands to highlight what consumers are looking for today and identifies changes in benefit trends to help CPG marketers predict what consumers may be looking for over the next several years.