For Consumers and CG Brands, It Will Be A Summer Like No Other
Anthony Wintheiser is SVP-AI Marketing and Merchandising for antuit.ai.
The summer season has officially kicked off and has already dialed up pool parties, backyard barbecues, and weekend road trips across the nation in what is expected to be a barn burner.
After a nearly 18-month slog through the pandemic and now post-covid with the US back to business summer, 2021 is going to be the summer of “revenge travel” where everyone is “vaxxed, waxed and ready to relax.” This will be a summer like no other… and therein lies a unique opportunity for agile CPG brands.
The COVID-19 pandemic was a black swan event that detonated the best-laid plans of every brand marketer. The tsunami of change resulting from that detonation ramped up CPG e-commerce sales 91% year-on-year. It drove higher switching within categories, with 30% of consumers trying new brands within the same categories they were already shopping. It also drove trial into new categories with 17% of consumers shifting their shopping patterns and buying new brands in new categories.
While some industries were decimated by COVID-19, CPG overall had a banner year as sales surged 19%. If we look under the hood however we see that not everyone came out a winner. While some categories such as meat (+27%), alcohol (+22%), and frozen foods (+21%) experienced unprecedented growth, others such as beauty care (-13%), health care (-9%), and personal care (-8%) saw demand evaporate.
Will this summer see a continuation of these trends or a boomerang reversion to the mean? Will new and unexpected shopping patterns emerge that exacerbate the overall trend of volatile demand in a supply constrained environment? Yes, yes… and yes.
What should CPG leaders do to win Summer 2021? Strategically prepare, and tactically improvise.
Bobby Knight, the Hall of Fame basketball coach, is quoted as saying, “I don’t believe in luck. I believe in preparation.” Preparation for Knight was all about the fundamentals, focusing on things like defensive positioning drills, player roles and discipline. His goal was to put his team in the best possible position to win before the game even started.
Instead of defensive positioning drills and player roles, the strategic preparation that CPG brands need to have in place to win the Summer 2021 game revolves around having the right amount of the right assortment in the right stores with the right price and trade/promo investment to shape demand that delivers on business goals.
Consider these questions:
Has your brand adapted its assortment to address unique demand across new need states, different flavors and emerging usage occasions resulting from changes in consumer preferences and shopping patterns?
Is your brand priced in a way that captures the strength of each SKU within its competitive set to deliver on business goals? Does your price consider the price index, market sensitivity, share position and sales trend that impact the effect of price on demand?
Does your base forecast reflect assortment updates, changes in consumer shopping patterns and the evolving price point that your SKUs will sell at? Is this forecast informing the promotion/trade investment that will be required to hit business goals?
Brands with the right amount of the right assortment, distributed to the right stores and priced with the right promotion/trade investment to deliver on business goals have the foundational building blocks in place for a strong summer season.
With all due respect to Bobby Knight, Mike Tyson, one of the greatest heavyweight boxers of all time, may have put it best when he said, “Everybody has a plan until they get punched in the mouth.” All the preparation in the world won’t change the fact that at some point, you’ll have to adapt in real-time to the situation on the ground to win the fight.
This is where a real-time pulse of demand is critical. Strategic demand planning gives way to tactical weekly demand sensing and operational daily intelligent order promising to maximize on shelf availability and reduce on-time, in-full fines to fulfill as much demand as possible during key consumption windows.
The trade/promo plan that was built to fill the gap between the base forecast and the business goals gives way to real-time monitoring of event performance at the account/Promoted Product Group level, which in turn informs scenario planning and optimization of future in-season events to drive results for the remainder of the season.
With complete cross-functional visibility and collaboration powered by consistent workflows, brand teams can be agile as they efficiently take advantage of pockets of unexpected demand and effectively respond to any unexpected weakness.
Consumer preferences and shopping patterns seem to be changing at a faster pace than they did just a few years ago. Barriers to entry that were previously impenetrable are crumbling. Size no longer matters (large CPG manufacturers lost $12BN in sales to small CPG manufacturers in 2020) and future success is not guaranteed.
To survive in the long run, and grow sales, margin and volume, brands need agility to predict, shape, and execute on demand. This agility will help brands take full advantage of all the unique opportunities for growth presented by Summer 2021, which will then have flywheel effects heading into the back-to-school and the fall/winter seasons.
Strategic preparation, tactical improvisation and agility. The largest CPG companies in the world are building these into their operations by leveraging AI-driven and integrated data strategies. By connecting decisions from a single demand signal and leveraging Revenue Growth Management solutions for ongoing assortment, pricing and promotion decisioning, companies can beat their competition and exceed their business goals.