Members talk inflation, private label, and tracking innovation

October 12, 2022
By Jackie Lewis, VP of Content for CMA | SIMA

Inflation continues to rock the retail industry (CPG inflation hovering over 10%), with fresh meat prices finally coming down a bit vs. earlier in the year, while other categories like pet care, dairy, and frozen hover at peak levels. Consumer confidence remains down vs. last year, but finally ticked above 100 in August for the first time in over 4 months, suggesting consumer willingness to spend money. Unemployment is historically low, and most retailers and consumer goods companies are cautiously optimistic on holiday spending.

The CMA and SIMA strive to stay on top of these trends and specifically how they impact the category management and shopper insights functions. One of the ways we do this is through our quarterly private networking groups (PNGs) made up of suppliers and retailers to discuss industry pain points and best practices.

While the full notes remain available to participants only, we wanted to share some of the key takeaways from meetings held in 3Q (July-September). These are meant to both inform on real-time industry topics and make members and non-members aware of the networking opportunities available through ARC (The Association for Retail and Consumer Professionals).

Key Takeaways on Private Label

  1. Private label unit growth has been outpacing branded since March/April in a variety of grocery categories, and some large retailers continue to price key private label items aggressively, despite cost increases, to gain households.
  2. Price gaps between PL and brand are coming down, as private label price increases are starting to catch up (delayed vs. branded).
  3. Participants agree inflation seems to be stabilizing, not getting worse but not entirely abating in the near future. Shoppers surprisingly have been largely absorbing increases as high as 15%+.
  4. Purchase behavior varies widely between high and low income consumer groups, with the former holding units flat and spending more, while the latter is holding baskets flat but buying fewer units.

Key Takeaways on Automotive Aftermarket

  1. Overall order intake/units are trending down vs. 2021 across auto aftermarket categories, while dollars are up due to inflation. Units/dollars are both tracking strong vs. 2020 suggesting tough 2021 comparisons but underlying demand strength.
  2. Miles driven is also trending down slightly vs. prior years in May, June, and July due to higher gas prices, perhaps not as dramatic as expected. Participants are experimenting with a new tool called MS2 traffic dashboard for more recent daily mileage data.
  3. Like other industries, finding and retaining talent is a key concern. As technology and tools advance in the space, sourcing these employees, justifying their value internally, and keeping them is getting more difficult. The CMA/SIMA network and job board can help.

Key Takeaways on Tracking Innovation

  1. The basics of tracking new innovation include monthly POS, velocity and distribution, and trial and repeat. Most large data vendors offer some version of these metrics but key watch-outs include time alignment, national vs. regional launches, and other factors impacting the category at the same time (ie. promos/events).
  2. Visualizing incrementality can be done through a simple breakdown of % share of new, additional, and shifting purchases out of total. An average 20% repeat rate is considered positive for launches across categories, but this can flex as high as 30%+ for very niche/seasonal items.
  3. Participants reflect on the fact that tracking innovation is such an art more than a science, with the proliferation of data and variables making it only more complex to determine.

Key Takeaways on Category Management in Mexico

  1. Similar to the US market, inflation is causing changes to shopper behavior, including trade down from specialized items/categories to multiuse or lower end/lower priced products.
  2. Manufacturers in Mexico are investing more in shopper insights tools and custom research. As suppliers become more knowledgeable, retailers are also becoming more open to receiving category management advice (which has historically been more biased).
  3. Retailers are hesitant to lean on suppliers for help in the execution process of the category plan, which can lead to operational challenges despite well drawn and thought-out planograms.