Make no mistake: consumer packaged goods companies utilize plenty of data, and there are amazing cutting-edge data practices throughout the industry. Sales optimization is happening with sales data, product optimization is happening with product data, and marketing optimization is happening with marketing data.
CPGs spend massive amounts of money on marketing, but right now there are new market forces that are pushing CPGs to completely rethink the silos in which they evaluate information and realign the way they utilize data to be more holistic in their approach—with all groups (Sales, Product, R&D, Operations, Marketing) pooling data together into one powerful, unified dataset to meet the new market challenges facing their businesses. They will also have to supplement their current data assets with new data types they’ve never needed to fill the gaps to handle these new challenges.
And CPGs are rising to the challenge.
“Over the last three years, we set up some great data lakes, infrastructures, hired data scientists, created a vendor ecosystem now that has hundreds of petabytes of data,” says Mar’s Chief Digital Officer, Sandeep Dadlani “Now, we are in a position move forward in the data and analytics journey meaningfully.”
CPG Data Gap #1: The rapid rise of consumer buying behavior to online
A recent study from Cleveland Research found that manufacturers expect ecommerce to reach 21% of their US retail sales in 2021. Ecommerce is worth $4.5 billion in sales to the world’s biggest CPG advertiser—Procter & Gamble—which is 6% of its sales today, but expects that figure to jump to $10 billion in 2021 and account for around 30% of its sales.
U.S. online grocery sales grew by 22% in 2019 and the shift to online grocery is happening quickly. Although grocery in general in North America is still 95% bought in stores, CPGs know that their future growth will be won or lost online. Online grocery sales are forecasted to represent 20% of total grocery retail by 2025 to reach $100 billion in consumer sales.
Although CPGs knew years ago that the shift to online grocery was inevitable, the pandemic has fast-forwarded the trend by years. Nearly four out of five (78.7%) consumers reported in a recent survey that they have shopped online for groceries since the COVID-19 outbreak, up 39% from before the pandemic. 56.7% also said that they shop for groceries online more often now than before the pandemic.
More evidence of this acceleration was that Target’s digital sales increased by 275% in April, with some weeks topping seven times the typical volume. And Walmart’s grocery app was the top download among all retail apps downloads in April up 460% vs. its daily average in January 2020.
To navigate through this rapid evolution, CPG marketers need more data and insight into what’s happening within the digital shelf.
CPG Data Gap #2: The CPG media mix moving from traditional to digital
CPGs now spend more on digital than all forms of traditional advertising combined. In 2012, manufacturers spent 25.4% of their marketing budgets on traditional advertising and 7.1% on digital advertising. But now, just a handful of years later, traditional advertising has dropped by almost half to 12.6% while their digital investment has tripled to 21.9%. Some forward-thinking brands, like Clorox, spend about 60% of their media budget on digital.
According to Nielsen’s CMO 2018 Report, 82% of CPG marketers surveyed said they would increase their digital media spend as a percentage of their total advertising budget in the next 12 months. Based on the survey data, this translates to an average of a 49% increase in digital media budgets across the board.
Digital advertising requires more data—and more types of data—to run successful campaigns than traditional advertising. Audience targeting, real-time personalization, cutting-edge measurement, and performance optimization are data-heavy disciplines.
CPG Data Gap #3: The rising Direct-to-Consumer (DTC) channel
According to a May 2020 Mintel Report, 43% of consumers say they are shopping direct-to-consumer more than last year, but CPGs have been a bit late to the Direct-to-Consumer opportunity. Large CPGs are lagging behind and not capturing their share of growth. On average, large CPG companies have shares in physical stores that are 5%-10% higher than online market shares which translates into hundreds of millions of dollars in lost sales. Hershey’s, for example, is the top chocolate company in the offline world, with a 12.6% market share. But on Amazon in November 2018, the top chocolatier was ChocZero, which held less than 0.5% market share in brick-and-mortar retail stores.
While DTC represents a marked opportunity for the future, it is also a double-edged sword for legacy CPG companies trying to defend their market share. Native digital, DTC startups are media savvy and—more importantly—because they transact directly with the customer, they have much of the valuable data they need to make effective decisions. “Performance marketing is something that all of the digital direct-to-consumer brands can do because they have top-of-funnel and bottom-of-funnel data,” said P&G’s Tom Pickford.
Larger brands are anxious to make these programs work. In a PA Consulting survey of 150 CPGs, 84% are seeing increased DTC sales in the last 18–36 months, and 88% have their direct sales to increase further. Aggressive goals require a strong data practice to reach and influence consumers to purchase.
CPG Data Gap #4: Retail private label brands as a true threat
While “generic” and private label brands have been around for a long time, today, one out of every four products sold in the United States is now a private label or store brand according to the Private Label Manufacturers Association and brick & mortar store brands account for 17% of CPG sales. A good example of this is Costco’s Kirkland Signature private label valued at $75 billion.
“For the retailer, it’s a very opportunistic move—good from a financial standpoint to be able to drive volume through an owned brand,” says one industry expert. “Certain commoditized categories across segments with high price sensitivity, that’s where the vulnerability is going to exist.”
Online, the private label gulf may even be larger. Amazon, for example, has launched over 23,000 products under more than 400 different brands. It is estimated that Amazon’s products business generated $7.5 billion in 2018 and could hit $25 billion by 2022 (this includes their Echo line of devices as well as their Whole Foods’ private brands.)
If you’re interested in learning more, download our free report, Mind the Data Gap: What CPGs need for retail-intelligent advertising and ecommerce success.
In the report you will learn:
- The new market shifts creating the challenges facing today’s consumer packaged goods marketers
- Why data is the key to overcoming ecommerce obstacles
- The types of CPG analytics marketers lack and why they need it
- How to access and activate critical datasets
- Recommendations for building a marketing practice based on data
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