What does the Crystal Ball tell us about the future of CCPG (Consumable Consumer Packaged Goods) performance?

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).

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.

Chrystal Ball

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.

As of February 2022, we are at a year over year double digit increase from 2021, we have extenuating factors to consider:

Tailwinds:

  1. Continued downward shifts in COVID numbers
  2. A lessening of restrictions and mandates backed by the CDC

Headwinds:

  1. A significant uptick in gas prices
  2. A continued growth of inflation
  3. Instability in eastern Europe that is news 24/7
  4. A quarter point increase in the prime interest rate

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 hope that things were getting better and all the uncertainty is behind us party...

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 and sadly, look for fast casual and casual dining to be driven in part by a continued growth in alcohol sales.  On balance, grocers and even digital home delivery services will see the scales for share of wallet tip to their favor.

Back to dining at home, this time to save money and save gas.

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

  1. Unit cost value
  2. Product differentiation
  3. Convenience of the product in terms of consumption and access
  4. Balancing nutrition and taste

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.

  • QR codes with recipes and recommendations on packaging
  • Bundling
  • Frictionless redemptions (this is Millennial code for ‘Digital Coupons’)
  • Oddly, fewer but healthier SKU options.
  • Link products to day parts and health-oriented activities. For instance, sell a high carb bagel thin that is usually a breakfast food?    Late afternoon snack with peanut butter and bananas before you go to the gym or in your child’s backpack before they go to basketball practice.

Simple stuff, however, make it valuable in chaotic/busy lives where people are more stressed and pre-occupied than in the past. At the same time make it easy for the consumer to put it in the cart 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 this year.

Simple, consistent tactics focused on Unit Cost Value, Product Differentiation, Convenience as well as Balancing Nutrition and Taste will give you an advantage.

 

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© 2021-2024 Harlan Bakeries, LLC
Harlan Foods is a leader in the development and manufacture of innovative, high quality foods.  

Harlan proudly serves mass and specialty grocers, quick-serve and other types of specialty retailers across North America, as well as America's Military, Disaster Relief Services, Schools and Insitutions.
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