2023 is expected to be another volatile year for CPG companies and trade promotion professionals due to various macro trends, such as war, inflation, labor issues, and recession worries. In this blog on Trade Promotion Management and Optimization (TPx) we assess the past, present, and future to provide insights into where this industry has been, where it is going, and how companies can set themselves up for success.
The past – from spreadsheets to powerful software
In the past, trade promotion management relied heavily on static spreadsheets and simple analytics, viewed merely as table stakes for doing business with retailers and drive short-term, yet expensive, sales spikes.
The present – automation, personalization, and advanced analytics
With the rise of big data and advanced analytics, it became possible to make trade promotions more targeted and cost-efficient. This allowed companies to use trade promotions to fuel sales growth and win consumers. Powerful TPx software tools appeared to enable professionals to harness that potential and maximize the ROI for their trade spend.
Current events impacting the CPG industry in 2023
In addition, many macro trends are influencing the CPG industry, several current events affect businesses globally. Here is what you can expect for 2023.
Recession worries and continued inflation
Consumers are already acting as though it is a recession, checking their pantries before heading to the store and tightening their wallets once they get there. Continued inflation, although less pronounced than in 2022, aggravates that trend. As a result, consumer behavior continues to change:
- Consumers are turning to shelf-stable, frozen, and canned goods as budget-friendly options to feed their families
- Private label growth is once again accelerating
- Consumers are deal-oriented, searching for the best deals at discount stores and online
- Trends are not straight-forward, market conditions have different impacts across consumer segments
Continued global market volatility due to the war in Ukraine
The war in Ukraine continues to affect global supply chains, especially the markets for grain and fertilizer. Russia alone produces 25% of the world’s supply of nitrogen fertilizer and is a significant supplier of natural gas, a key ingredient in fertilizer. Ukraine and Russia together produce 13% of the world’s grain supplies. Due to the war, many of these supplies were disrupted across the global marketplace.
In 2022, we saw a worldwide spike in food prices. In 2023, those price increases are likely to persist as there is no immediate end to the conflict in sight.
Prolonged labor issues
Labor availability issues have been widespread in the CPG industry since the pandemic, unemployment continues to remain well below 5%. We will continue to see strikes and absenteeism as well as high turnover and job vacancies. Even as the worst of the pandemic recedes, economists predict those issues will persist in 2023 and beyond. Supply and demand challenges in the labor market will continue to drive wages up, adding to inflation.
In response, companies are amending their traditional job offerings, offering employees more flexibility and better benefits to attract and retain talent.
Today, suppliers across the CPG industry are quickly adopting high-level TPx practices as technology advances and evolves and there is a greater need to make smarter, faster decisions in the face of uncertainty. At present, several trends are at the forefront of that evolution, including:
- Real-time data analytics: Rapid improvements in deep data capabilities, enabling retailers and suppliers to make highly accurate and in many cases real-time, decisions and create on-the-spot personalized engagement with individual consumers.
- Artificial intelligence/machine learning: TPx software increasingly utilizes AI/ML to automate processes, deliver superior forecasts, inform trade promotion planning decisions, and suggest promotions that help meet the planning goals
- Centralized, real-time collaboration: More manufacturers are adopting an end-to-end, “holistic” model for AOP and trade promotion planning that breaks down the silo walls between departments and maximizes cross-functional insights.
- Omnichannel strategy: Online is not just another way for consumers to get product, it is where consumers experience, research, and engage with your brand (and consumer expectations are rising). Ensuring that you are tying in, as much as possible, your in-store marketing with the consumer omnichannel experience will enhance value.
The future – increased competition, e-commerce
In the future, trade promotions will become even more data-driven and automated. More companies will adopt holistic planning approaches and integrate real-time analytics and AI/ML models into their trade promotion processes. As a result, competition will increase, and it will be the tech and data-savvy who lead the pack.
E-commerce is expected to continue growing as a share of total sales and the omnichannel experience will continue to increase in importance. TPx processes will need to adapt to handle the unique challenges of that channel, like the need for personalized pricing and promotions based on individual consumer data. And make no mistake, TPO models that rely solely on syndicated POS data will become less adequate over time. Incorporating data about your online marketing presence will drive a more holistic view of ROI.
Companies that invest in these technologies, data, and practices now will be better positioned to succeed.
Long-term business strategies to maximize future success
With all the challenges facing the CPG industry, companies that adapt are most likely to thrive, while those that do not will fall by the wayside. To ensure you are setting your business up for future success, here are some strategies to maximize your long-term success.
Holistic TPx - creating an agile business process
In a more competitive environment, CPG companies that adopt a holistic view of Trade Promotion Management and Optimization will have the upper hand.
Holistic TPx is an approach to trade planning that centers on de-siloing your organization. It focuses on boosting transparency and teamwork between departments, creating consistent SOPs, and increasing the accuracy of information.
Ultimately, it allows you to take maximum advantage of the cross-functional value within your business. The result is a more agile company, enabling faster decisions that better meet the needs of consumers.
Investing in TPx data and technology
TPx software has advanced fast in recent years and is expected to continue doing so as the potential of advanced AI/ML increases. Integrating this technology into your business will pay dividends in time saved, more accurate forecasts, and maximized ROI. AI allows for significant productivity savings and the ability to synthesize ever-growing quantities of data.
Data sources utilized in TPx will continue to expand. Traditional POS data from syndicated suppliers is still a great starting point. Additional data sources from consumer insights, custom research, omnichannel casuals, and retailer and distributor data are just some of the sources that can enhance your AI model significantly
Attracting and retaining the right skill sets
The smartest, fastest, most powerful AI-driven tool needs smart humans to use and apply. Attracting and retaining top talent is vital to thriving in a future with a more competitive labor market. As a result, you will need to rethink what you offer job candidates and, in some cases, change your business model to fit those offerings.
Job candidates are increasingly looking for:
- The ability to do work that is impactful
- More work flexibility (i.e., with hours and remote work options)
- Higher pay and better benefits, including support for health and wellness
- Corporate responsibility and people-centric cultures
- Education and learning opportunities
Meet CPGvision
At CPGvision, we take immense pride in providing you with a devoted customer success team consisting of experienced CPG industry experts. Whether you're embarking on your RGM journey or have already made significant strides, we're committed to helping you prepare for 2023 and achieve profitable revenue growth. Contact us today to learn more.