IRI report shows 2007 price increases and wellness benefits were driving force for CPG performance

CHICAGO The elevated price of retail consumer packaged goods was the industry’s most significant story in 2007, according to a report released today by Information Resources Inc.

Skyrocketing ingredient costs and energy prices pushed CPG prices up by 4.2 percent, with double-digit increases occurring across a variety of categories, including such mainstays as milk, eggs and refrigerated juices. According to the study, the largest price increases in recent memory prompted changed spending patterns, with U.S. consumers turning to supercenters, such as Wal-Mart, and private label products in search of lower prices.

Based on information gathered through IRI’s shopper insights and retail market intelligence platform, supercenters regained momentum after a sluggish 2006, advancing their overall household penetration by 3.5 points and gaining more than a full point in market share—the largest increase in three years.

Manufacturer and retailer innovations in beverages, health and wellness products and frozen food product categories also contributed to a stronger CPG showing in 2007, according to IRI. “With the acceleration of prices across the board, consumers responded by refocusing on supercenters and seeking out lower-cost private label alternatives to name brand items, said Thom Blischok, IRI president of retail solutions. “At the same time, product innovation in several CPG categories played a healthy role in spurring growth that we predict will be a key factor in 2008.”

According to the report, health benefits were winners in 2007, as beverages appealing to personal wellness—from energy-boosting ingredients to antioxidant supplements in ready-to-drink teas, sports drinks and bottled water—tapped into consumer calls for “better-for-you” product innovations. Several categories of snack items, frozen food products and non-food healthcare items also bolstered the strong showing by health-focused products.

The IRI report also identified emerging product trends expected to play significant roles in 2008. Among them were the following:

• Food as a health solution: An extension of the healthy ingredients trend will continue to attract consumers with the delivery of specific wellness benefits. 
• Sustainability as a differentiator: Growing consumer awareness of the environmental and social impact of their purchases will drive product innovation and assortment options. 
• Experiential consumption: Continued creation of products targeted to the consumer’s call for unique ingredients, flavors and aromas. 
• Natural beauty: Cosmetic and skincare innovations will expand further into natural ingredients, offering non-synthetic alternatives across multiple product lines.

“Last year was a great example of the principle that when one door closes, another one opens,” Blischok said. “Manufacturers and retailers experienced changed purchase behavior in several categories, yet maintained the path of innovation to keep consumers first and sales figures strong.”

Information Resources Inc. is the world’s leading global provider of consumer, shopper and retail market intelligence and insights.