It's officially the New Year. What now? Well, the economy might be brightening, but we're not in the clear yet. Ad Age took the pulse of top executives in the major industry sectors to compile this preview. See sidebar for more predictions.
Personal careThis year, it's all about volume growth while holding or raising pricing. Last year saw a major step up in marketing support as many players attempted to build growth that lagged behind the modest economic recovery. But consumers kept a tight hold on their wallets.
Volume across the industry was largely flat as sales rose an anemic 1% through the first 11 months of the year, according to SymphonyIRI data from Deutsche Bank.
Ad Age has rubbed its crystal ball and predicted industry moves in:
But it's going to be harder for everyone to maintain promotional- and ad-support levels in 2011, because commodity costs, which had been down to neutral last year, are on the rise again this year. Another factor draining the top line this year are demands from Walmart and other big retailers to take over product shipping at the supplier's dock, which, while largely neutral from an earnings standpoint, can shave as much as 2% off the reported top line of U.S. operations, like that of Clorox (CPG players actually spend more on transporting their products than making them).
Another potential positive is a changing of the guard at Walmart to U.S. CEO Bill Simon, who appears to have shifted the emphasis from margin improvement through assortment streamlining to top-line growth through wider assortment, new products and less restrictive in-store marketing. The caveat: Mr. Simon's shift hasn't ended Walmart's string of six consecutive quarterly declines in same-store sales yet.
To Sanford C. Bernstein analyst Ali Dibadj, it increasingly looks like such factors as high long-term unemployment and the end of middle-class consumers' ability to use their homes like ATMs is creating permanent, more frugal behavior among most consumers.
It all ads up in his mind to the sort of lower-growth expectations for CPG that drove waves of consolidation among pharmaceutical players over the last decade. So he, like other industry analysts, is on the lookout for merger activity.
Among major factors to watch on the marketing front, said former P&G Global Marketing Officer and now consultant/professor Jim Stengel, is the explosive growth of tablet computers and how they'll change media strategy, consumption and advertising "more than any new technology yet."
Tablets are already helping drive a fundamental shift in how marketers think about digital marketing, said Kelly Mooney, CEO of Resource Interactive, Columbus, Ohio. Mobile used to be the last thing considered in digital campaigns, often tacked on after all else was complete, she said. Now, it's usually the first thing.
Packaged foodPackaged-food companies experimented with heavy discounting in 2010, which often hurt their bottom line. In many cases marketers failed to lure enough business to boost profits, so now executives are trying to figure out how to raise prices.
Consumers are "still being very cautious with their dollars," said Sandra Williams, a brand director for ConAgra Foods. "You've got to really show what value you are giving consumers with your products."
Brands this year will continue to reduce unhealthy ingredients, such as sodium, but they might not make a big a deal out of it, for fear of turning off consumers who associate it with bad taste, according to Mintel. The market researcher also expects brands to keep experimenting with retro packaging and ad campaigns, noting that "retro means something different to each age group, providing significant opportunities for many brands."
BeveragesIn the beverage space, John Sicher, editor and publisher of Beverage Digest, said: "Probably the biggest challenge continues to be concerns around soft-drink taxes and the health advocates' concerns about sweetened beverages. But there is huge potential opportunity if and when the beverage companies can make progress on new sweetener technologies."
New sweeteners such as Coca-Cola's Truvia and PepsiCo's PureVia represent potential for the beverage giants as they look to cut calories but maintain taste to appeal to increasingly health-conscious consumers. At a conference hosted by Beverage Digest in December, Indra Nooyi, PepsiCo's CEO, said the company is "very close" to launching new products that use a mix of sweeteners.
"We see incredible opportunity in the beverage sector -- mostly tied to innovation," said Lauren Hobart, chief marketing officer-sparkling beverages at PepsiCo Beverages Americas. "By that, we mean everything from product innovation to breakthrough packaging innovation to marketing innovation that uniquely engages consumers."
Ms. Hobart added that the beverage giant would be paying attention to how consumers play, watch, enjoy and manage their lives in a multi-screen environment, as well as how its brands can play a role in that space.
Bill Pecoriello, CEO-Consumer Edge Research, cites potential taxes on beverages, particularly at the state and local level, given continued budget deficits, as a key concern.
BeerA year ago in this space we wrote that the biggest challenge for brewers in 2010 was to restore luster to their flagship brands. Not much has changed. Beer shipments are expected to be down 1% to 2% when the final numbers are tallied, according to Beer Marketer's Insights. The only megabrand expected to end 2010 in positive territory is Coors Light.
Bright spots heading into 2011 are imports, which had better sales after a terrible 2009, as well as craft brews, which had a great year and show no signs of slowing down.
A big change will come next fall when Anheuser-Busch replaces MillerCoors as the official beer sponsor of the National Football League. The brewer paid an estimated $50 million a year for the privilege, which could turn out to be a bad bet if there's an NFL lockout and no season. Meantime, brewers are expected to continue to invest in digital media, with an emphasis on social-planning tools -- because the more people get together, the greater the chance they will drink more.
Fast foodAmong some of the biggest challenges the fast-food industry has to face, the largest is government regulation. President Barack Obama in March 2010 signed the health-care reform legislation into law which will require restaurants with 20 or more locations to list calorie counts on menus by March. On the state and municipal level, locales like San Francisco are limiting restaurants in how they market to children.
Another issue the industry faces is the rising prices of commodities. Costs of ingredients keep increasing, yet many chains are reluctant to raise prices, especially for value offerings. The perpetual promotion of dollar-menu and value-meal items may prove to be a bad move in the long run. Bonnie Riggs, restaurant-industry analyst at NPD Group, said, "Restaurants should wean people off the steep discounting and divert their attention -- introduce new products, new promotions, limited-time offers and premium products. The value menu isn't going away, but it may be better to promote it less."
Retail"Curb your enthusiasm" will be the mantra for retail in 2011. Mike Gatti, executive director of the Retail Advertising and Marketing Association, said expectations are likely to go up after a fairly successful holiday season, even as pricing pressure and promotions remain. "Everyone is still competing for fewer dollars."
Marshal Cohen, chief industry analyst at NPD Group, expects this year will be challenging, if retailers and manufacturers don't put out new, exciting merchandise. "Those new products stimulate spending growth," he said. Retailers will also have plenty of new technology to wrap themselves around. Tablets and mobile phones, in particular, will have an impact on how consumers shop. The onslaught of new devices is also likely to boost online shopping. "It's going to become a much more competitive environment between online and brick and mortar," predicted Mr. Gatti.