CatMan: Understanding the impact of High-Order Attributes on the CPG Industry
Transparency is here to stay. Recently the FMI & Label Insight Transparency Imperative report stated that over 86% of shoppers are more likely to trust a brand or retailer who provides complete and easy-to-understand definitions for all ingredients. And the same study demonstrated that 74% of shoppers would be willing to switch to another brand that provided more information – a 90% increase from 39% in 2016.
The recently launched white paper, CatMan + Transparency by Director Emeritus of the CMA, Gordon Wade, in partnership with Label Insight, paints a picture of how transparency is impacting the CPG industry, and how Category Management could be at the heart of benefiting from this change.
“The ideas in this white paper present a bold new direction for our industry, to innovate towards transparency and to capture growth at the same time.” Tom McDonald Team Leader of Best Practices and Chairman of the Advisory Board for CMA
A transparent growth problem
The report overviews the dramatic changes taking place in the industry in relation to the demand for transparency, and explores the fact that the CPG market has a serious growth problem by stating that “virtually all leading brands and retailers are losing either share, volume, or margin and sometimes all three.” Additionally, it states that “Nielsen forecasts that grocery, drug, and mass merchandise CPG retailers will decline 1% overall in the next two years.”
A lot of this decline in growth is linked to dramatic changes in consumer behavior, and the underlying challenge of a lack of trust between consumers, retailers, and manufacturers.This problem is exacerbated by the confusion created around product label information and the difficulty in finding the exact information they need.
Mr. Wade is also clear to point out that there are several areas where growth exists, and those tend to be driven by niche attributes that are clear to see, to understand, and to act upon with the right data.
Growth is in High-Order Attributes
One such example is the growth associated with “clean label” products, which is driving substantial growth across 7 key grocery categories that are otherwise in decline or flatlining. For instance, “clean label” products (as defined by Nielsen & Label Insight in Nielsen Product Insider) in the Candy, Gum, & Mint category has grown by 10.8% over the 52 weeks ending 6/09/2018.
Increasingly, the consumer behavior of making purchase decisions based on attributes is evident in the sales data and across all categories of products. At one point, Mr. Wade leverages Nielsen Product Insider powered by Label Insight to point out that between 2015 and 2017, there has been a 6.7% shift in the cosmetics category towards Paraben Free products, where now only 35% of products contain Parabens, and similar size shifts can be seen across many other categories as well.
High-Order Attributes are expanding choice
Often the growth focused on specific attributes can be associated with the rise of specific diets. As the “number of consumers watching what they eat is on the rise, with nearly half of shoppers following a diet or health-related eating program”, the number of different types of diets is increasing, and taking on an ethical perspective. This is clearly visible in the sales performance, which shows for instance, a 24% increase in grass-fed beef sales, a 4% increase in dolphin-safe seafood, and an 11% increase in sustainable farming, among others (Nielsen Product Insider powered by Label insight, 52 weeks ending 12/30/2017).
The demand for transparency is driving the need for more information which is, in turn, driving the availability of more information. The cycle repeats, driving increased fragmentation of needs, a long tail of demands for granular information that is insatiable and always growing. Where will this take us?
Rise of the individual diet
Mr. Wade touches on one potential response to this question by exploring the fact that people can no longer be defined as being associated with a single dietary profile, but that their profile changes depending on the category they are shopping. This time leveraging data from the FMI & Label Insight Transparency ROI study of 2016, Mr. Wade points out that the demand for transparency varies dramatically across categories. In meat there appears to be a significant demand for transparent information, whereas in snacks the demand is significantly less.
“CatMan has always been about process and data-driven decisions, in this new age of data, attributes are unlocking new growth.” Tom McDonald, Team Leader of Best Practices and Chairman of the Advisory Board for CMA
CatMan sourcing growth
The significance of the dramatic changes associated with the demand for transparency aligns perfectly with the Category Manager’s role and responsibilities. The CatMan + Transparency white paper makes the argument that with the right data, Category Managers can take the lead in moving their companies towards areas of growth and opportunity. The white paper represents a balance between a bold vision for an optimistic future and a tactical guide for practitioners to combine the CatMan 2.0(c) Process with high-order Attributes.
Other posts in this series:
2 - How CatMan Enables growth in a Transparency Market (Coming soon)
3 - Transparency’s Opportunity & Challenge (Coming soon)
4 - Inverted Category Decision Tree meets Endless Aisles (Coming soon)
About Anton Xavier
Anton Xavier is a Co-Founder of Label Insight. With experience in management, operations and marketing, Anton has led the Label Insight team from its inception in Australia and subsequent move to the US, to its current position as a market leading, cloud-based product data engine. Completing postgraduate degrees in Australia, Anton gained invaluable management and marketing experience working with a variety of firms in Asia.