Greg Dolan, CEO, Keen Decision Systems.
As we head into 2025, persistent economic pressures, evolving consumer behavior and a rapidly diversifying marketing ecosystem continue to present both challenges and opportunities for brands and retailers.
According to recent insights from Cadent, CPG brands face four key forces this year: consumer cost sensitivity, aggressive retailer efforts, private label growth and increased spending across marketing mediums.
Below, we’ll explore these factors, how they can impact CPG brands and, finally, how you can prepare yourself for another year of uncertainty.
Cost Sensitivity Continues
While costs for goods are down from their pandemic peak, consumers are still feeling a strain on their wallets when it comes to shopping for goods and services. At the beginning of this year, the Consumer Confidence Index declined by 5.4 points, which continues an overarching downward trajectory as consumers grow concerned about future business conditions.
With tariffs looming, prices of goods and services might increase as manufacturers look to pass off costs to consumers. This change could impact consumer spending, leading to losses for CPG brands and causing them to reevaluate marketing efforts.
Aggressive Retailers
To keep cost-conscious consumers within their ecosystems, retailers started rolling out price cuts and deals in 2024. During the summer, Walmart, Target and Aldi were among the brands that reduced prices as they sought to differentiate themselves from their competitors.
This continued into the holiday season, as grocers introduced holiday meal deals to entice price-weary shoppers. These cuts paid dividends for retailers as they reported better-than-expected earnings. As a result, I expect retailers to continue offering discounted items through 2025 as they look to continue sales growth and build loyalty among consumers.
Private-Label Grows
Consumers have also turned to private-label products as a way to save money, shifting away from more expensive brands to store-brand products. According to research from Placer.ai, discount and dollar stores and superstores saw the highest increase in foot traffic in 2024.
The research cited consumer desire to find products that have a strong value and help weather the effects of inflation. Retailers reacted accordingly, as data from Numerator shows the grocery sector with a 0.4% year-over-year increase in the availability of private label products, with that category now accounting for 24.2% of all grocery products sold.
This trend will likely continue as more retailers look to reach value-conscious consumers. Already, Kroger and Target have announced new private-label lines, so look to more items becoming available to consumers as the year continues.
Marketing Investment Increases
As CPG brands look to market themselves to consumers, I expect an increase in marketing investments, similar to what we observed last year. In 2024, our company data (download required) shows that marketing investments were up 14%, while achieving an ROI of 4%. Media channels saw a 16% increase in spending, with an 8% ROI increase. Consumer promotion saw an increase in spending of 23%, but ROI was flat.
These results show that marketers shifted toward higher-performing media channels and strategies. As a result, channels like TV streaming, social media and retail media will likely see more investment, while traditional media takes a back seat for marketers. In an increasingly competitive landscape, these marketing investments will be key for CPG brands looking to stand out and differentiate themselves.
Developing A Winning 2025 Strategy
So, how can CPG brands ensure their marketing investments are positioning them to deal with the 2025 landscape?
It’s important for marketers to quantify the impact of all variables—from marketing budget to environmental factors like pricing, distribution and competition. This ensures that you can make data-driven decisions that respond to real-world challenges in real time. For instance, if a competitor lowers prices, a marketer can adjust their promotion strategy to highlight a different feature of their product or lean into their own pricing strategy.
Beyond that, you need to be able to connect marketing to financial outcomes. With economic pressures continuing, it’s more important than ever for marketers to prove the ROI of their efforts. As such, they need to be able to link marketing investments across every channel, including emerging ones with short- and long-term financial results.
By leveraging tools that can easily link the two together, they can optimize their marketing investments to maximize value and maintain a foothold in the competitive retail environment.
This year will require a balanced approach. Pricing tactics alone won’t suffice; innovation, brand equity and trade promotions must work in concert to drive sales and build lasting consumer loyalty.
With marketing spending expected to reach historic highs, it’s important for marketers to ensure that every dollar invested delivers measurable impact.
Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?
Read the full article here
