The current economic environment is impacting the entire grocery ecosystem in real and significant ways. Two of the prominent discussion points in conversations I’m having with CPG manufacturers surround the cost and risk of innovation and the consumer shift towards consumption of Private Label.
Innovation is the lifeblood of the industry. New items drive basket sizes and consumer sentiment—a win for retailers. And it is those innovation items that help manufacturers drive additional brand/category purchases and loyalty. But in this inflationary environment where price pressures, coupled with supply chain constraints, have driven up the cost of launching new items, capturing consumers’ share of discretionary dollars is challenging. And retailers are a bit more hesitant to give valuable shelf space to an innovation item when increased consumption necessitates facings for core items.
Additionally, we’re seeing more consumers address their pocketbook pinch by channel shifting and trading to private label. Each dollar that the consumer has to spend on groceries is even more closely scrutinized. Looking back on 2022, a majority of CPG categories experienced significant movement between private label and branded products. Of the categories studied, 71.5% gained in private label share, according to Ibotta first-party SKU-level purchases data in the U.S., including in-store and online sales across all major retail channels.
Brands and retailers are seeking solutions. At a high level, sales and offers are significantly more important than advertisements for shoppers when deciding what to buy. Ibotta conducted a study that showed sales and offers are more important across every major category, carrying up to 4X the importance vs. advertisements.
At Ibotta, we believe the answer to the industry-wide uneasiness is to double down on Performance Marketing, investing in market research and marketing tactics that guarantee a return on investment. Grocers and brands can efficiently reach shoppers using ‘Pay for performance’ networks and drive incremental purchases with cash back offers. Leveraging best-in-class ROI-driven solutions, grocers and brands are seeing campaign performance that reduces the risk of investing and truly drives incremental purchases.
While innovation in terms of new product rollouts may be riskier during inflationary periods, brands and retailers can win new shoppers, loyalty, and drive market share regardless. And because shoppers develop affinity to the retailers and product lines they frequent, the ways in which industry leaders execute their rewards and promotional strategies now and in the near term can be critical determinants of their growth and shopper loyalty going forward.
As the conversation continues and an industry directly tied to consumer well-being evolves amidst a rapidly changing economic landscape, novel approaches must be considered. Performance marketing via promotional cash back offers at 100% pay-per-sale is a proven, win-win-win approach to benefit shoppers, retailers, and brands altogether.
Anna Rabaut Schroeder is Senior Vice President of Client Partnerships at Ibotta, Inc., the largest and fastest growing mobile shopping application in CPG and Retail. Anna’s extensive experience in sales leadership began when she joined General Mills after graduating from Hillsdale College. Later, she would rise to Director of National Sales at Valassis (now Vericast) leading teams responsible for global accounts and exceeding annual revenue goals year over year. With expertise leveraging data, research and analytics, Anna encourages teams to partner with clients on their challenges to deliver highly targeted needs-based solutions.
