Consumable purchases are down due partly to “self-inflicted wounds,” TABS Group says

By Elizabeth Crawford contact

- Last updated on GMT

Consumable purchases are down due to “self-inflicted wounds” TABS says
Consumer purchases of packaged food and beverages in key major categories are down substantially from a year ago due partly to demographic shifts, but mostly because of “self-inflicted wounds” by retailers and manufacturers, according to the third annual consumer value study from CPG analytics firm TABS Group.

The only category with increased purchases in 2015 is water, which was up 4% from the previous year, compared to all other major categories, including carbonated beverage, cereal, fruit juice and other staples, which dropped on average 4% from last year, the survey revealed.

“We are talking about a very lethargic sector,”​ which is “something we should be concerned about”​ and which could drag down tangential category purchases, explained Dr Kurt Jetta, CEO of TABS Group, Inc.

He blamed the drop off on some uncontrollable factors, such as shifts in demographics and lingering difficult economic conditions for millennials, but also on several missteps taken by industry, including a failure to target core consumers, making promotions too irregular and complicated, focusing on the wrong channels and overemphasizing fast-growing but small niche opportunities.

Elements out of industry’s control

The Great Recession may be over, but its long-term effects continue push down shoppers, especially younger generations who are struggling to find jobs, live on their own and start families.

Dr Jetta noted that many millennials are delaying house ownership and families, opting instead to “boomerang”​ to their parents’ homes. As a result, they are not buying as much as previous generations that started families at a younger age.

The increase in adults who are putting off or opting out of having children spells trouble for consumables sales because the presence of children is the demographic variable that most predicts heavy sector purchasing, Dr Jetta said.

Specifically, he noted, 38% of households that are considered heavy buyers have children compared to only 20% of those that do not. In addition, the percentage of heavy buying households with children dropped nine percentage points, or 20%, in 2015 compared to 2013 – suggesting a downward trend that is unlikely to change soon.

Another uncontrollable factor negatively impacting sales of consumables is shifting consumer interest and dollars to other categories. Jetta noted purchase are shifting from consumables and apparel to more electronics and durables.

While manufacturers and retailers may not be able to change these factors, there are plenty of “self-inflicted wounds”​ that they can change, DR Jetta said.

Millennials should not be the target

In recent years, manufacturers and retailers erroneously have fixated on millennials as a generation that is coming into its prime spending years and therefore, must be the logical target consumer. But, Dr Jetta said, noting the aforementioned spending trends, this is a misconception and “millennials are not the target for consumables.”

 Rather, “households with kids are the lifeblood of the industry,”​ and the current “obsession with millennials … is a misallocation of marketing dollars. It is not appealing to our core target.”

Deals matter

The survey also revealed that almost everyone – 89% of respondents – use deals when buying food and beverage, but not all deals are equally effective and industry is overusing the ineffective options.

The most effective deals are passive, such as everyday low prices which 59% of survey respondents said they use when making purchase decisions, but most other tactics are dropping off with the most demanding or complicated ones having the lowest redemption and influence, according to the study.

The key takeaway from this finding, DR Jetta said, is that the “huge shift on retail focus to loyalty cards and the focus on digital coupons”​ are not compelling consumers and are virtually “worthless.”​  Specifically, he noted that participation in digital coupons fell 10% from a year ago to a new low of only 31% of respondent participation.

He encouraged retailers and manufacturers to return to old-fashioned, easy to understand promotions, such as clip and save coupons. He also noted that these deals must be offered regularly because without them consumers simply will stop purchasing the products.

Jetta also pointed to evidence that manufactures who quit promotions “cold turkey”​ see a corresponding drop in sales and eventually fall off consumers’ radars almost totally.

“Deals do matter to consumers. It is a human need to want to find a better deal. There is a utility from the thrill of the deal and deals drive sales,”​ he said.

Quit chasing niches to exclusion of mainstream

Dr Jetta argues industry currently is too focused on niches, which media portray as growing fast, but which have such small bases that they cannot justify being the primary focus.

Among the niches Dr Jetta notes is organic, which only 13% of respondents said they try to buy when they purchase drinks and snacks.

“We do a lot of different better for you concepts and organic and gluten free are almost always at the bottom of all the different types of better-for-you concepts … and this is no different,”​ he added.

Another niche group on which industry is overly focused is the online shopper, Dr Jetta said. He explained the survey reveals only 11% of respondents consider themselves heavy online shoppers, but manufacturers and retailers are investing a disproportionate amount on this group.

A more impactful plan to focus would be discount grocery stores, which he says are a growing focus of Americans.

Overall, DR Jetta concluded, “niches can be a nice source of growth,”​ but “industry should not focus on them to the exclusion of innovation and marketing to the mainstream.”

Discover more about how shopper insights are impacting sales of food and beverage from DR Jetta when he speaks at Food Vision USA in Chicago Oct.27-29. Register HERE​.

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