CPG Companies Look to Boost Trade Promotion Funds

amg-cpg-increased-spending-priorities-march-2012.jpg22% of CPG companies cite trade promotion funds as their highest priority for increased spending in the next 1-3 years, while a further 34% say this area is a high priority, according to a report released in March 2012 by AMG Strategic Advisors. A significant proportion also identify product innovation as their highest priority (19%), with an additional 47% citing it a high priority. And assortment optimization also rates highly, with 17% saying it is their highest priority and another 51% claiming it to be a high priority for increased spend.

Shopper Marketing, Slotting Less Important

Although shopper marketing was indicated by a majority of respondents to be of some priority level, just 5% said it was their highest priority, behind other areas such as customer-specific marketing (8%), promotion optimization/analysis (11%), and price optimization (16%). Also of less importance is slotting, with a majority of companies either unlikely to change (48%) or reducing (13%) their future spending in this area.

Companies Able to Negotiate Slotting Fees

One reason why companies are not forecasting additional funds for slotting may be related to their ability to negotiate these fees. According to the report, about 7 in 10 CPG companies say they are able to negotiate slotting, although less than 30% do so regularly. Among those who say slotting is negotiable at their customer, trade reinvestment (76%) and swapping out lower performing SKUs (67%) are reported to be the most commonly successful tactics, followed by bundling products (49%). One-third also said they used a shopper marketing program instead, a tactic most often used by top performers.

Overall, 20% of companies expect increased slotting fees, with dairy and frozen food manufacturers most at risk.

Majority to Increase Shopper Marketing Usage

Data from “The Trend Behind the Spend” indicates that more than half of companies expect to increase their use of shopper marketing programs this year. More than half of current users predict an increase in activity levels for meat (76%), health and beauty care (57%), general merchandise (56%), and dairy (55%), while among non-users half plan to implement a program for meat and natural/organic.

According to a February 2012 report from SymphonyIRI, merchandising support increased across 47% of CPG categories in 2011, although that was a decrease from 2010, when 58% of categories enjoyed increased merchandising support, and an even more marked decline from 2009, when merchandising support increased across 78% of CPG categories.

Other Findings:

  • According to the AMG Strategic Insights report, 80% of larger CPG companies (more than $1 billion in total annual revenue) employed account-specific marketing in the past year.
  • CPG companies spend on average 13.7% of gross sales on trade funds.
  • Less than two-thirds of companies analyze most or all of their promotional spending. Less than 1 in 5 have a trade promotion optimization system in place.
  • Nearly 80% of CPG companies took a price increase on at least some of their products last year.

About the Data: The AMG Strategic Advisors report is based on findings from 235 CPG company clients, across 110 store categories at 55 retailers. 40% of the responses were from companies with more than $1 billion in total annual revenue.