CPG INDUSTRY YEAR IN REVIEW
EXECUTIVE SUMMARY
FEBRUARY 2006

IRI's Times & Trends highlights new developments and critical events across all major CPG categories and channels, providing powerful benchmarking data to help guide your strategic decisions. This issue provides an in-depth analysis of CPG industry performance and consumer shopping behavior in 2005.

 This free summary is also accessible via the GMA Web site  at http://www.gmabrands.com/publications/gmairi.cfm

Introduction
2005 was a remarkable year for the CPG industry.
A devastating hurricane season displaced consumers, closed retailers’ doors, drove huge demand swings across categories and resulted in sizable price increases across key ingredients, such as sugar. The hurricanes further increased high fuel costs, which strained budgets among low income consumers and pushed packaging and distribution costs sky high.

Adding to this mix, the new trans fat labeling requirements went into effect January 2006 and stimulated massive product reformulations across food categories in preparation. Additionally, all categories experienced pricing pressure associated with value channel expansion.

Growth within this environment was indeed challenging, and total CPG industry sales increased only 1.6 percent across food and drug mass channels including Wal-Mart.

But, what was perhaps most remarkable about this past year is that many categories, brands and retailers grew within this environment – largely through innovation.

 

KEY FINDINGS

The CPG industry posted slow growth in 2005. Total CPG dollar sales grew only 1.6 percent across food, drug, mass channels (including Wal-Mart) in 2005. The industry faced an extraordinarily challenging year marked by natural disasters and a difficult economy. This increase fell short of last year’s 2.4 percent dollar sales growth. Among top-10 CPG categories, sales across the largest two, carbonated soft drinks and milk, were flat, but frozen foods enjoyed strong growth with a 7.2 percent increase.

Channel migration showed signs of slowing. For the first time in several years, the grocery channel maintained share versus value retailers, as innovative new formats and focus on natural/organic and fresh foods appeared to pay off. Long-term, the grocery channel will be further challenged by the influx of new Echo Boom primary shoppers, who allocate a much higher proportion of spending to supercenters than the average household (21 percent versus 13 percent).
 


 

Drug store CPG growth significantly surpassed the industry. Drug store front-end sales rose nearly 5 percent in 2005. Drug stores advanced their role as a convenient food and beverage outlet with share gains across all major food and beverage segments, while also enjoying gains in core health and beauty care categories.

Wal-Mart CPG share gains were minor relative to prior years. Wal-Mart total CPG share across IRI InfoScan® Reviews categories increased 0.3 points in 2005 versus 1.1 points in 2004. This increase came at the expense of the club and mass merchandise channels. While the retailer continues to make strides in food and beverage share, share across several major non-food categories declined.

Beverages were the growth leaders in 2005. With dollar sales increasing at more than double the total CPG industry growth rate, the beverage segment led the way in 2005. Sports drinks, bottled water and coffee all experienced double-digit growth. Key beverage categories delivered against consumer health and wellness demands, and several benefited from increased pricing.


 

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Source: IRI's Times & Trends Reports
Information Resources, Inc. (IRI) is the world’s leading provider of enterprise market information solutions and services to the consumer packaged goods (CPG), retail, and healthcare industries.