All indications point to continued frugality and conservatism among both optimistic and pessimistic U.S. shoppers, according to new research from SymphonyIRI Group’s Times & Trends. The report, “CPG 2011 Year in Review: The Search for Footing in an Evolving Marketplace,” says consumer packaged goods (CPG) marketers — and retailers — need to respond with products and strategies that really emphasize their understanding of shoppers’ most pressing wants and needs to drive purchase behavior and loyalty.

In 2012, shoppers will continue to define value largely on price, the Chicago-based market research firm predicts. More than half of respondents to a SymphonyIRI MarketPlus survey said they still choose a store based on lowest prices, while three-quarters said price weighs heavily in brand decisions. However, some shoppers will start to open their wallets wider if positive economic reports continue, SymphonyIRI anticipates.

Among the other trend predictions for the remainder of 2012 is a steadying of private label performance. Store brands will continue to account for unit sales in the 22 to 23 percent range, SymphonyIRI said, and dollar sales in the 18 to 20 percent range. Retailers are expected to increase assortments and retain successful tiered product strategies.

SymphonyIRI also said it expects retailers in the drug channel to accelerate their “format evolution” process. Moreover, it anticipates that both manufacturers and retailers will pass manufacturing price increases on to shoppers, but noted that reaction to potential commodity price deflation is unclear.

To mitigate private label’s threat, SymphonyIRI said it expects CPG manufacturers to expand their focus on innovation. The market research firm points to product development within the single-cup coffee arena as an example.

To compete effectively in 2012, SymphonyIRI said, retailers should consider:

• Identifying opportunities and risks. Retailers should track the evolving competitive set closely at the channel and retailer levels to ensure appropriate product mix and inventory management strategies are maintained.
•  Evaluating pricing and promotional strategies. Retailers should work with key manufacturer partners to develop cross-promotional opportunities with high-growth categories/brands and/or with key staple products.
• Exploring opportunities to enhance product assortment. Retailers should align assortment strategies with changing trip mission and product usage trends.

On the store brand side, marketers also must take a number of variables into account when developing pricing strategies, including the category, the market and the particular location, Susan Viamari, editor of Times & Trends, told Progressive Grocer’s Store Brands. She noted that SymphonyIRI research shows that private label prices increased an average of 5.3 percent in 2011, while the industry-average increase was 1.9 percent.

“”Then, as the rate of inflation and commodity costs fluctuate during 2012 and beyond, private label marketers must constantly reevaluate their pricing strategies,” she said. “Everyday pricing must be strategic, addressing specific long-term growth and margin goals. Meanwhile, tactical pricing can be used to address more immediate short-term opportunities.”

When it comes to store brand product development opportunities, Viamari believes they exist across the value spectrum.

“Capitalizing on opportunities will require retailers and store brand manufacturers to be in tune with and aligned against key day-to-day rituals,” she stressed. “For instance, at-home and from-home food and beverage rituals open the door to development of products that are quick and easy to prepare and address health, wellness and/or indulgence goals.”

Viamari pointed to 2012 SymphonyIRI consumer-snacking research showing that 87 percent of consumers said they are trying to eat more healthfully — and that 57 percent of snack consumers said they switched to store brands when their budgets are tight.

In addition, late-2011 research performed by the company revealed that 23 percent of consumers are having difficulty affording weekly groceries, Viamari stated, and almost three-quarters of consumers believe their financial situation will stay the same or worsen during 2012. Moreover, 39 percent of consumers admitted to self-treating for simple ailments to save money on doctor visits, while 36 percent of consumers said they are using more at-home beauty treatments.

“Across all of these rituals, the key to success is understanding how your key shoppers define value,” she said, “and then offer[ing] product attributes that address key wants and needs at a price point that underscores the value of the product.”

To download the report, visit http://www.symphonyiri.com/Insights/ArticleDetail/tabid/117/ItemID/1432/View/Details/Default.aspx