Reading the CCPG (Consumable Consumer Packaged Goods) Crystal Ball

Those of us around Harlan Foods have been paying a fair amount of attention recently to some recent trends and discussing the impact these numbers will likely have on consumer consumption of CCPG items such as food (Consumable Consumer Packaged Goods).

Crystal Ball

Advance estimates of U.S. retail and food services sales for February 2022, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $658.1 billion, an increase of 0.3 percent from the previous month, and 17.6 percent above February 2021. Total sales for the December 2021 through February 2022 period were up 16.0 percent from the same period a year ago.

Is this good news for the food industry?  Or not?  Depending on how food manufacturers, retailers and food brands approach the situation, it can be a mixed bag.

While as of February, we are at a year over year double digit increase from 2021, we have a few extenuating factors to consider:



Further, US Index of Consumer Sentiment is at a current level of 59.70, down from 62.80 last month and down from 84.90 one year ago.  This drop is the hangover after the party around the hope that things were getting better and all the uncertainty and stress was behind us..

So, will increased freedom from COVID restrictions outweigh the squeeze on the consumer’s wallet?  Probably not in the short term.  Look for recent dining out trends to retreat from the recent upward trends.  With this said, will all on-premise retailers be penalized by the current state of affairs?  Probably not.  QSR’s will likely outperform fast casual, casual and upscale retailers but it isn’t likely going to be gangbusters.  Grocers and even digital home delivery services will see the scales for share of wallet tip to their favor.

Food manufacturers need to be thinking about supply chain commodity cost management and with the consumer, four key things:

All these things play an important, really a critical role, in maintaining share of wallet as market dynamics shift.  As food suppliers, we want to avoid any form of a whipsaw in consumer consumption patterns.  For those involved in the supply chain of food manufacture and especially towards the last mile, make it easy for consumers to buy your products.

Simple stuff, however, remember providing ‘High Utility’ (make it valuable in chaotic/busy lives where people are more stressed and pre-occupied than in the past) at the same time it is ‘Low Friction’ (make it easy) wins the day.

Given the fact that the market headwinds currently outweigh the market tailwinds, and we don’t expect this to change until perhaps H2 of this year, simple, consistent, high utility, low friction focused on Unit Cost Value, Product Differentiation, Convenience of the product in terms of consumption and access and finally Balancing Nutrition and Taste will give you an advantage.


The New Consumer's Impact on Grocery

In the past year, the consumer shopping process has seen a change like no other.  Economic factors coupled with the realities of how consumers shop, socialize and engage with brands during a global pandemic have compressed behavioral changes.

Technology innovations have significantly amplified the changes over the last 18 months.  The net result is a newly emerging consumer mindset and muscle memory.  This change drives expectation.  The experience that a consumer receives determines where and how the consumer spends discretionary food dollars.

Some interesting data points illustrate this newly emerging reality:

Private Brands Growth Opportunities

According to the FMI’s 2020 Private Brands Report, COVID has markedly increased the demand for private brands in grocery.

The report compiled with sales data and shopper insights gleaned from industry data sources and survey responses found that 83% of food retailers expect to boost private brand strategies promoted as part of their e-commerce and digital service offerings.  Further, 97% are rethinking assortment and supplier strategies to focus on bundled products supporting home cooking and meal preparation.  Of the retailers surveyed by the FMI, 83% indicated their desire to focus on baked goods and deli as their areas for growth.

The Impact of Frozen on In-Store Traffic

While fresh foods can drive larger market baskets in e-commerce, where does this leave frozen products such as baked goods?  Do frozen goods play a role in a retailer’s private label growth strategy given these items are not optimally suited for e-commerce?  Can private label frozen items such as baked goods play a role in driving customer retention in-store and increase market basket values?  Yes.  However, it requires rethinking how frozen, fresh and packaged foods can be merchandised and positioned in the store to better take advantage what the new shopper is seeking.

The key is understanding that consumers are shifting and allocating part of their spend to e-commerce driven home delivery.  However, a part of their spend will remain in-store, augmented with curbside and BOPIS.  The store experience isn’t dead, it is simply evolving.

So, what does this survey data tell us?  It implies that nearly half of consumers will never go back to shopping physical retail establishments in the same way they did three years ago.  Thus, the physical shopping experience and how products are developed, merchandised and delivered to the consumer’s market basket needs to evolve to align with the newly emerging behaviors and expectations.

Merchandising’s New Model

Let’s focus on in-store.  No food category is an island any longer.  With the advent of more sophisticated and energy efficient specialty and end-cap coolers available for frozen products, cross promoting frozen products that have bundle value to certain consumers will drive improved market basket values.

Leveraging some of the new endcap and specialty frozen display technology which can occur in specialty departments and along the perimeter of the store, is an important strategy to attract shoppers, particularly younger consumers. Mixing frozen products in with fresh foods allows for effective promotional prompts to assist with meal and occasion planning as well as leverage greater discretionary spend opportunities.

Specialty endcaps can accommodate multiple categories of products from fresh to frozen and which are customized to remove friction for the consumer by providing curated product mixes. Leveraging these emerging strategies which include frozen foods into the curated product mix help to ensure sustained volumes of in-store traffic.

Terry Roberts, President of Merchandising by Design Inc., in his interview with Progressive Grocer, emphasizes that when cross-merchandising frozen packaged foods within specialty departments, seasonality is the most impactful way to deliver results. For example, if you have bushels of peaches, you can place a bushel next to ice cream, with recipes for peach cobbler a la mode.

That care extends to other aspects of physically co-merchandising fresh and frozen items, Roberts adds. “It requires planning and management,” she advises. “You need to sit down with a seasonal calendar, planning what comes in and out — and that includes meat and seafood — and how to do promotional activity accordingly.”

Other approaches lead to a greater linkage between the fresh and frozen. Burt Flickinger, Managing Director of New York-based Strategic Resource Group, points to work that Cornell University is doing in this area. Consumer behavior and competitive pressure are actively driving new product development in both fresh and frozen and retailers are innovating more aggressively in merchandising approaches in order to keep up with how the consumer’s mindset and behaviors are evolving.  Flickinger points out, “We are seeing from analyses of Lidl in the U.K. that they are aggressively and progressively working in this area” “And … the talent that Amazon is hiring, along with Whole Foods, will make it a bigger player in that, too.”

Today, products and categories that five years ago would never have been co-mingled are considered viable merchandising strategies. Shoppers are looking for solutions to meal planning and snacking dilemmas.  Providing the proper mix and merchandising makes it easy for consumers to act.  The result is greater satisfaction, loyalty and basket values.

Consider a few simple in-store strategies to improve performance and outcomes.  Specifically,

Effective Ways to Meet Emerging Customer Demands

What works on grocer's central aisle shelves may not perform the same on specialty end-caps, or visa versa.  Today, consumers are shopping very differently than in the past.  Generation Z and Millennials approach shopping and meal planning very differently than their older Gen-X and Boomer counterparts.

Analyzing retail transaction log, loyalty card and panel data to better understand how certain market baskets were evolving across the U.S., we were able to identify a hidden product opportunity.  Harlan's innovation team, which includes product development, manufacturing specialists as well as retail marketplace and data analysts, collaborated with a global retailer in order to ensure that our intelligence and approach aligned with their information and product goals.

This collaboration uncovered that younger consumers as well as value shoppers were often by-passing certain deserts.  The data informed us that consumers were looking for greater variation in a smaller overall SKU size, without premium pricing.  Moreover, the flavor combinations included in the offering had to be optimal in order to stand out on a specialty end-cap.

Making it easy to for younger consumers to select a range of fresh, packaged and even frozen items merchandised as a bundle in-store ensures that meal preparation is a snap.  It's this removal of friction for the consumer that helps to drives larger market basket value and return visits.

Knowing where opportunities for conversion lie helps suppliers work with retailers to improve end-cap bundles.  Without the proper actionable intelligence, developing the exact product to fill these gaps becomes guesswork.

Knowing the category isn't enough though.  Understanding purchase patterns is critical and then aligning these patterns with variety of complimentary flavor combinations, which are often aligned with seasonality or occasions.

Pairing an Asiago Cheese bagel with lime, crushed red pepper guac and fresh tomato makes for a quick, flavorful and refreshing mid-day meal.

The result can often be an unexpected and highly valued merchandising option for consumers and deliver new uses for existing product categories driven by simple groupings or recipes that consumers can easily replicate.

We recognize that consumers never think about all the work that goes into delivering innovation and excellence, nor should they.  That's our job as Food Professionals.