Overall CPG Retail Assortments Shrink 1%

June 16, 2010

In 2009, the average food channel store decreased SKU variety by 1%, according to a recent survey from The Nielsen Company.

4 in 10 Food Retailers Trim Assortment
Results of the March 2010 “Nielsen Retailer Assortment Survey” indicate that in 2009, 40% of food retailers surveyed claimed to have decreased assortment roughly 5% on average. One-third of retailers claimed to have maintained the assortment status quo, while 22% claimed to increase assortment options an average of 3%.

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Sixty percent of retailers indicated they downsized to alleviate shopper confusion. The other reasons cited were mostly internally-driven operating decisions including: gives better facings/merchandising (75%), provides better inventory control (71%), high profitability/cost savings (52%), makes more room for store brand products (48%), shrinks shelf space so other areas of the store can be larger (33%) and keeps up with other retailers who are doing it (4%).

More than half of food retailers say they have reduced or plan reductions of up to 10% of all SKUs on the shelf.

Store Brand Assortments Grow
Store brands experienced a 2% expansion between 2008 and 2009, while premium national brands held their own, avoiding cutbacks. Assortment reductions largely came at the expense of new items (2% reduction) and economy national brands (5%).

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Cookies, H2O Get Downsized
Of the 32 categories analyzed by the study, 23 experienced an average decrease of 2% in the number of items offered. The biggest losers were the cookie (-8%), water (-6%) and shampoo (-4%) categories, which saw the highest number of items removed from the shelf. Concurrently, the biggest winner categories expanding SKU count included shower gel and yogurt (up 6% each), as well as carbonated soft drinks (up 3%).

Retailers Cut Variety, Low-Tier Brands
More than 90% of retailers who claimed to have reduced assortment made their decisions through simple reductions in variety, such as flavors and pack sizes within brands, while almost 70% targeted third- and fourth-tier brands. While retailers cite cleaner shelves and easier assortment management activities as the stated reasons for such downsizing tactics, the often unstated objective of many retailers is the desire to increase store brand sales and profit margins. However, Nielsen analyses show that not all categories actually benefit from store brand expansion. Nielsen advises it is essential to trim SKU counts by eliminating non-incremental items.

Incrementality is the concept that no single product action (addition or elimination) occurs in a vacuum. Taking products off a shelf might impact category or aisle sales positively or negatively, and the interaction of products on the shelf must be taken into account when choosing where to delist, and where to add.

Consumer Loyalty Varies by Category
Consumers show more loyalty toward certain product categories. Seven percent of consumers will leave the store without purchasing anything if they can’t find their preferred brands of personal care products. Almost 6% will walk out if they can’t find their favorite household/paper goods brands, and close to 5% will leave if they can’t find the dry goods brands they came to purchase.

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In contrast, only a little more than 3% of consumers show the same loyalty toward snack brands, with loyalty to dairy brands approaching and beverage brands equaling 4%. To illustrate the importance of avoiding walk-outs in any category, achieving a one-half percent improvement in shopper closure across the grocery channel translates into an additional $1.5 billion in sales.

Nielsen also advises that more than half of consumers are less likely to shop a particular retailer if they perceive a reduction in assortment.

Private Label CPG Dollar Sales End Growth Pattern
Despite generally increased assortments, year-over-year dollar and unit sales of private label CPG goods both fell during the four-week period ended May 15, 2010, according to other Nielsen data.

Private label CPG dollar sales fell 1.4% during the period, while private label CPG unit sales declined 1.5%. Unit sales fell for the second straight four-week period, but dollar sales reversed a trend of four straight four-week periods where they rose.

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