Consumer Packaged Goods (CPG) manufacturers are making a strategic pivot, slowing down on price hikes and refocusing their energies on product quality and innovation. This shift is occurring in response to grocery retailers amplifying their private-label activity to attract price-conscious shoppers. Independent retailers now face both opportunities and challenges in adapting to this new paradigm.
According to a recent report from Winsight, just 28% of manufacturers plan to increase list prices in the coming six months, a marked decrease from the 46% figure recorded in December. In parallel, a growing cohort of manufacturers (35%) said they do not plan to raise prices, up from 28% in the previous survey.
This reprieve in pricing comes amidst a gradual decline in grocery price inflation, providing both manufacturers and retailers some much-needed breathing space. However, despite these positive trends, the price will continue to play a critical role in manufacturers’ marketing efforts, with off-shelf merchandising (55%) and digital couponing (45%) cited as the primary promotional tools to maintain competitiveness.
Grocery retailers, on the other hand, are doubling down on their private-label strategies to tackle rising costs. A significant 73% of retailers plan to expand private-brand availability, while 57% intend to require higher margins on promotions. Also, a solid 60% of retailers are leveraging their digital platforms and data assets to monetize their operations more effectively.
With 97% of retailers planning line extensions and 94% new categories for their private labels, independent retailers must consider their own strategies. To counter the growth of private labels, 65% of manufacturers surveyed aim to highlight brand quality, while 55% plan to introduce new and innovative products.
For independent retailers, these market shifts represent both challenges and opportunities. The declining focus on price hikes could make branded CPGs more competitive, potentially drawing customers away from private-label products. On the other hand, the increased emphasis on product quality and innovation from manufacturers offers an opportunity to diversify product offerings and attract different customer segments.
The key for independent retailers lies in balancing their own private-label offerings with a selection of innovative and high-quality branded products. Retailers can enhance their marketing efforts by promoting the value proposition of both types of products, potentially leveraging digital platforms to reach a broader audience.
Ultimately, the CPG landscape is evolving, with manufacturers focusing less on price increases and more on quality and innovation. As independent retailers navigate this new environment, the ability to adapt and innovate will be crucial.
TL;DR
In response to a surge in private-label activity from grocery retailers, CPG manufacturers are scaling back on price increases and emphasizing product quality and innovation. Independent retailers can seize this as an opportunity to diversify their offerings and appeal to various customer segments. Adapting to these shifts in the CPG landscape will be key to the continued success of independent retailers.
