A Look Inside the Crystal Ball for CPGs

IRI’s CPG market review and outlook reveals notable shifts and avenues for growth

12/7/2021

In its CPG review and outlook, market research firm IRI reports that CPG consumption was strong in 2021, but cautioned that inflation will impact real growth.

It’s the traditional time of year to look back at the ups and downs of the past 12 months and to look ahead to what might be coming next. A key takeaway from the recently-released CPG market review and outlook from Chicago-based market research firm Information Resources, Inc. (IRI) is just how many ups and downs there were in 2021 and may be in store for the short-term future.

Many of those ups and downs are related to purchases and prices, as behaviors continued to shift during the ongoing pandemic and as costs surged across the marketplace.

With inflation a headline-making trend driving shoppers’ concerns and CPG decisions, IRI’s report confirms that price/mix rose continually throughout 2021, starting with an increasing mix and moving to larger shelf price increases during the latter half of the year. As many large CPGs announced price increases for the fourth quarter and into early ’22, IRI projects that greater price sensitivities will emerge for everyday items like breakfast meats, frozen poultry and pet food.

Consumers who spent more in 2021, thanks to stimulus payments and an improved economy compared to the lower points of 2020, helped prop up several categories this past year. Despite rising wages and the availability of jobs, IRI notes that high inflation has and likely will continue to counter real growth in many areas. For example, as the calendar year turns, there has been a slowdown in the trend of premiumization that took off during the pandemic and a bounce in store brand products in high-inflation categories.

Still, given the economic situation, IRI predicts that price will drive CPG growth in 2022 at a rate of 1 to 5%, with inflation and consumers’ return to mobility putting downward pressure on volume.

Meanwhile, there are some notable ups and downs in shopper behavior reflected in 2021 trends and anticipated for 2022. According to IRI's CPG review and outlook, younger consumers and low-income shoppers drove more growth this past year but will likely be pulling back as prices escalate. To retain these shoppers, IRI recommends that CPGs and retailers offer attractive price points with a broad assortment.

As the needle moved for mobility amid easing restrictions in 2021, IRI found that convenience was an important purchase driver for Gen X and Millennial-age consumers and those in middle- and low-income households. Older and wealthier buyers are and will continue to spend on indulgence and self-care. Accordingly, many innovations in the CPG sector have focused on easy meals for at-home consumption and items for indulgence and proactive self-care expected to remain on these shoppers’ radar in the coming year.

Taking a look at the impact of past and future trends on the retail industry, IRI reports that grocery channel CPG trips moved back to the mass channel in 2021, while club stores built on gains from 2020. In the digital space, e-grocery scored increases this past year, fueled by strong performances among large national brands. For 2022, the research firm projects that larger food and beverage brands can capture market share by investing in assortment, speed of delivery and operational efficiencies.