TABS Analytics Blog

2012 Consumer Packaged Goods Year In Review: Tier One Manufacturers

In 2012 Consumer Package Goods, according to Nielsen, generated annual retail sales of $630B sales, up a modest +2% vs. the prior year1. Interestingly, of the more than 15,000 manufacturers, the Top 15 CPG Manufacturers, who each did in excess of $5.5B in sales and accounted for 30% of CPG retail revenue1, were flat vs. prior year. In fact only one, Mondelez (+6%), had growth that was equal to or greater than the industry overall.

I could devote pages on end to a review of all of the interesting dynamics in those statistics as well as the results from the smaller manufacturers, but I will focus on what I conclude from just looking at the Top 15. I will also add a few bits of commentary on the Tier 2 winners ($500MM+). Here are just a few of my observations:

  1. It is the norm vs. the exception that the Tier I manufacturers underperform the market. We have seen this pattern of Tier I underperformance for the majority of the past five years. These companies tend to be so diversified (e.g. Pepsico, Nestle, P&G, and Unilever are in dozens of categories) that any positive trends in one area are often neutralized by declines in another. Nestle is a particularly notable example of this dynamic: growth in every sector but one (Frozen) achieved +2% growth or more. Declines in Frozen, however, leveled the Vendor growth to just +1%. This fragmentation and neutralization dynamic is the reason for Kraft splitting into high-growth, snack manufacturer Mondelez vs. large, stable and diversified Kraft Foods.
  2. Given that these firms are not drivers of growth, retailers hurt themselves by reductions in non-Tier I vendors and brands. In 2012 the growth was driven by companies less than $2B in sales (+4%). The major growth companies (e.g. Green Mountain, Roll Global, Chobani, Starbucks and Driscoll’s) tended to be focused on one or two product categories. On a smaller scale, a company such as Kind Snacks posted +137% growth from a single minded focus on Nutrition Bars. It wasn’t until some major retailers loosened up their vendor reduction policies that Kind had a chance to shine.
  3. The Top 15 have low hanging fruit that they typically choose not pick. Stronger and more frequent promotions on their power brands would certainly add 2-3 points to their topline, and could be profitable if they structured their promotional deals correctly (see my theory on retailer price promotion that proves the incrementality of retail promotions). Another area of opportunity is larger sizes. Top 15 companies are susceptible to buy into the notion that larger sizes (i.e. Bonus, Value, or Family Sizes) of their power brands are not incremental to the brand or category. TABS Group analytics haven proven repeatedly that a large size (not a Club Size, mind you, that’s a different issue) of a power brand (e.g. Hellman’s Mayo, Kellogg’s Pop Tarts) at only 20% incremental will deliver more incremental sales to the category than a low-selling, niche item that is 100% incremental.
  4. All of the work with respect to Decision Trees, Loyalty Marketing and similar “fad” analytics (Big Data anyone?) are alchemy, at best, and outright lies at worst. If we read the industry literature on all of the efforts and investment and insights derived from loyalty card data or market structure analysis, it most often comes from sources at the Top 15. These companies are investing disproportionately in these areas, yet there is no obvious ROI being derived: their growth rates are well below the industry total (0% vs. +2%). The resistance to larger sizes in Point #3 is one by-product of the Decision Tree pseudo-science that almost always places Size as a very low importance attribute to consumers. So in the case of Value Sizes (and Trial Sizes, for that matter), in empirical results – Value Sizes incremental at the brand and category level - contradict the decision tree models. This, by definition, means the models are invalid.

So in summary when we have Top 15 results such as these there are only two paths for the underperforming companies to take: get smarter with their analytics investment or reduce the investment and bank that money. What these companies are doing now isn’t working. Our philosophy and our entire business model at TABS Group is that you can do both: you can generate incremental sales and profits by using innovative metrics and software that simplify and improve your analyses, while at the same time reducing your data and analytics investment. At some point this realization will seep into the collective mindset of the industry. TABS Group is poised to respond to this megatrend when it happens.

About The TABS Group

The TABS Group is a privately owned company headquartered in Shelton, CT, with offices in Chicago, IL, Boston, MA, Los Angeles, CA, Dallas, TX, Boca Raton, FL, and San Luis Obispo, CA.

Kurt Jetta founded the TABS Group in 1998 as a service with a better way to conduct Sales and Marketing analytics in the Consumer Products Industry. TABS has developed unique and affordable processes to strip out time and cost from the analytical process. Their methodologies are robust, proven, and put to work daily for dozens of clients across a variety of food, personal care, household, drug, and general merchandise categories. Additional information is available on the company’s Web site,

1. Nielsen US AOC (All Outlet Channel) Data 52 weeks ending December 22, 2012