IRI: Year off to rough start for CPG industry

In its latest Consumer Connect survey, Chicago-based IRI reports that U.S. consumers began 2017 with a lot of change and uncertainty, thanks to a mixed economy, the unknown of a new kind of presidency and a complex retail marketplace. But while IRI says these factors contributed to “2017 getting off to a shaky start with consumers,” projections for the remainder of the year are positive.

“January and February are generally softer months for the consumer packaged goods industry but showed sharper-than-normal declines this year,” said Susan Viamari, vice president of Thought Leadership for IRI. “Forty-five percent of consumers say their household finances are strained, with lower-income and younger shoppers being hit the hardest. Consumers across the board have been avidly seeking deals and, while deal-seeking will remain pervasive, the good news is that economic expectations for the remainder of the year are positive. With products that offer in-demand bells and whistles and marketing stories that really connect with their target markets, CPG marketers will entice shoppers to spend and win a fair share of that spending.”

Results from the latest survey reveal that some consumers are struggling, especially millennials, who have student loans and have experienced economic instability for most of their professional careers. For instance, 33 percent of millennial households are having difficulty affording needed groceries, compared to 26 percent of Generation X, 33 percent of baby boomers and 21 percent of seniors.

IRI reports that in addition to the uncertainty, consumers have faced delayed tax refunds, wild weather patterns and significant food price shifts. The combination made a negative impact on CPG sales for 2017’s first quarter. Retail unit sales dropped by 2.6 percent in January and dollar sales dipped by 1.5 percent in January, compared to the same period the prior year.

But IRI reports that the U.S. economic outlook is healthy for 2017. Key indicators point to GDP growing by 4.3 percent, retail sales increasing by 5.5 percent and unemployment falling. Seventy percent of consumers feel their household financial position will improve in the next six months. In addition, 84 percent of consumers say they will make additional or unplanned purchases if in-store deals are appealing, IRI states. This sentiment is consistent across generations, yet slightly lower among baby boomers (82 percent), compared to seniors (87 percent).

“This year got off to a rocky start for the CPG industry, but things are starting to look brighter,” Viamari said. “Our same message for marketers is ringing true yet again. Know your customers inside and out and tailor your offerings to meet their needs. By personalizing your products and messaging, you will hit the right note with consumers, encouraging them to open their wallets in support of your brands.”

For a related story, check out Store Brands' recent State of the Industry Report.