Inflation dominates various group discussions heading into key holiday season

March 8, 2024

By Mike Wilkening, ARC Communications Manager

As a benefit to members, The Association of Retail and Consumer Professionals (ARC) hosts a number of quarterly private networking groups (PNGs), which bring together retailers and suppliers in non-competitive fields to talk about industry pain points and best practices. It’s a way for our association to promote learning and fellowship among our member partners, and it helps us keep up with the latest industry trends and how they impact the category management and shopper insights functions.

At present, we have eight private networking groups. These are:

  • Flavor. Manufacturers across food categories discuss currently trending flavors, achieving the right mix of SKUs between experimental and core, working with retail partners to achieve success with flavors, and more.
  • Global Category Leadership. Participating Non-competitive global manufacturers discuss what category leadership means across countries, and share ways to standardize measurement, reporting, and metrics. These high-level executives also examine the value of advisorships in different regions and help each other share best practices across their various teams.
  • Independent Shopper Insights & Analytics. Category management and shopper insights teams reporting to a centralized independent insights and analytics function internally discuss the pros/cons of this unique but increasingly common structure.
  • Hispanic Shopper Insights. Participants from a variety of manufacturers share real-time shopper insights on the Hispanic shopper segment, including products that are resonating, changes in shopper behavior, and best practices for targeting.
  • LatAm. A combination of manufacturers and retailers discuss category management in the Latin American market specifically, including retail channel performance and shopper insights.
  • Private Label – Branded. Suppliers share trends and analysis on how private label is impacting their categories.
  • Retailers: Non-competitive retailers across channels including grocery, home improvement, and auto discuss challenges and opportunities facing national and regional chains today.
  • Shopper Insights. (Small and Mid-Sized Companies) – Participants from small and mid-sized manufacturers share solutions and best practices in a world with limited budgets for analytics and insights.

Throughout 2023, economic concerns were front-and-center in our PNGs. Dollars were up, but units were down, and customers were trading down, or out, in some categories.

However, as we settle into 2024, have the winds shifted in the favor of retailers, CPGs and manufacturers, particularly in the food realm? Outside-the-home food inflation remains persistent, and even the price of fast food has raised eyebrows. Can meals at home make the most of this opening?

That’s one of the topics we’ll be talking with PNG members this year, as meetings begin to ramp up here in March. As a matter of practice, we try to meet with our members toward the end of each quarter, to get a good view on what has happened and what could transpire in the quarter ahead.

To give you a sense of how PNGs work and of their value to members, we wanted to share some of the key takeaways from our 2023 meetings, including our latest finished meetings in Q4, to set the table for the year ahead. Notes are listed in reverse chronological order, with the newest first. Read along to see how viewpoints changed throughout the year, and what that might mean for 2024. And if you’re interested in joining a private networking group, email us here, or click here to learn more.

Q4 2023

Key Takeaways on Independent Insights & Analytics 

  • TikTok’s effect at shelf continues to amaze CPGs. New trends are emerging out of nowhere, then ending after a flurry of purchases. Examples include the skin care, acne patch, and razor categories. Capitalizing on these trends is a challenge, and suppliers are devoting more and more TikTok.
  • Sustainability is becoming table stakes for both consumers and retailers. It’s a balancing act for suppliers who must deal with rising costs while also ensuring they stay in the good graces of younger generations who want to purchase from companies who do well.
  • Similarly, consumers have high demands in this market. They seek products that can do a little bit of everything — solve all problems — while also not costing a whole lot. That was sentiment of numerous participants, and it’s an interesting trend to watch throughout this year.

Q3 2023:

Key Takeaways on Flavors

  • While peach still remains ‘flavor of the year’ in terms of sales trends across categories, Asian-inspired as well as floral flavors (ie. hibiscus, lavender) seem to be gaining popularity recently. Spicy extensions or items with heavy spice have not fared quite as well, outside of the traditional spices during key holiday times.
  • Participants are finding success evaluating entire categories as a whole in terms of flavor coverage, to make recommendations on the right mix and focus on complementary items vs. redundancy in flavors.
  • One emerging flavor trend to watch: the popularity of Hatch chiles, the broad name given to a variety of mild New Mexico chiles. There are red and green Hatch chiles, with the green more likely to be roasted and the red more likely to be dried. 
  • Flavors are much more difficult to change in bakery, given consumers’ connection to the tastes they’ve grown accustomed to over many years. Participants recognize experimentation with bold, bright colors is a way to innovate in bakery vs. introducing new flavors.  

Takeaways from Independent Insights & Analytics Group

  • Shoppers remain pressed to get the most out of their dollars, with mass-market channels doing well as consumers trade down. However, units are not improving, and dollars are starting to decline in various categories as well. 
  • While shoppers are cutting back in some areas, they are still willing to pay for premium brands when they can. One example cited came from a shop-along survey during back-to-school shopping. Parents turned to the dollar channel to buy supplies for their children’s classrooms but splurged on more expensive brands on supplies for their own kids.
  • Participants shared that higher-end prepared foods have somewhat benefitted despite inflation as restaurant prices continue to increase. 
  • The group agreed Path to Purchase studies are best undertaken every 2-3 years, given the investment of time and as well as cost.

Key Takeaways on Private Label  

  • Consumers are under spending pressure, which means they are trading down in select categories to private label. The bigger challenge, however, is that some are “trading out” completely of categories, and the data isn’t clear on where that spend is going.  
  • Shoppers are willing to seek out bargains where they can find them, which is leading to some sales moving to different channels, for example, from specialty to club.
  • Bigger pack sizes fared well during COVID, and subsequently smaller sizes performed better during the recent inflationary period. Participants are unsure where shopper preferences will ultimately ‘net-out’ as potentially the market for middle-range sizes will be eliminated.
  • As long as inflation remains a factor, members anticipate private label brands will benefit. CPGs will be particularly challenged if retailers begin to decrease prices on their private label items. 

Q2 2023:

Key Takeaways from Global Category Leadership Group

  1. Global leaders generally agree bucketing retail customers across countries/regions into 3 classifications helps to standardize expectations and set global category leadership goals. These consist of some variation of Partner, Validator, and Transactional.
  2. The eCommerce environment has added complexity, as the relationship with one retail customer and its corresponding classification could vary between brick & mortar and digital, especially when the buying teams are separate.
  3. As different markets define things differently, some metrics should not be mandatory but more measurements of success (example: support for promo activities).

Takeaways from Independent Insights & Analytics Group

  1. For the majority of participants the move to an independent insights department has been recent, and many are working through the challenges being siloed from sales, RGM, etc in a new structure.
  2. Some best practices to combat that include committing to producing a bi-annual report and hosting a meeting with other departments to stay connected. Good content can provide a seat at the table.
  3. As with other private networking groups, participants are looking to the second half of the year with great interest on the continued effects of inflation (dollars are growing, what happens to units), and the permanence of COVID/post-COVID behavior shifts, ie. work-from-home.

Key Takeaways on Shopper Behavior

  • Up-to-date shopper segmentation research was shared among participants. Price-driven segments remain a challenge for suppliers to win given persistent inflation, and there’s a sense these shoppers can’t be won back until prices cool.
  • Even with elevated prices, shoppers are devoting some funds to treat themselves, but in budget-minded ways, leading to changes in purchasing behavior. In the alcohol category, shoppers have traded down to smaller package sizes, but also traded up to larger bottled spirits to make dollars go farther.
  • Participants agreed that getting real shopper insights fast and inexpensively is a major goal for their teams. To that end, TikTok has become indispensable for monitoring consumer trends in real-time.

Q1 2023:

Key Takeaways for Retailers

  • Retailers weighed in on the moving forecast for a potential recession in the US, now likely 3Q23. This is making it tougher to plan, but many are focusing on flexibility, efficiency, and pushing unit growth in the meantime. Many expect the promotional lever to be used heavily in 2023 as shoppers look to stretch their dollars.
  • With all the data available on demographics, historical sales, and other attributes, store clustering can become logistically very complex. Participants advised to strive for the best model knowing you may need to scale it back eventually if too difficult to execute.
  • Retailers are focusing on speed and quality of content with their eCommerce efforts, optimizing what products to offer and where to warehouse them to maximize delivery time and profitability.

Key Takeaways on Shopper Behavior

  • Food inflation is finally slowing from peak at 14% in Sept. 2022, but perceived inflation by consumers is still hovering around 25%, weighing heavily on grocery industry unit sales.
  • Flu season has been bumpy at best, as sales spiked early in Nov./Dec. 2022 but have now come down as we comp the Omicron variant surge in early 2022.
  • Flavors corresponding to health and wellness (ie. lemon, elderberry) as well as peach and blackberry continue to see success in a number of categories.