Fighting the Good Fight: When CPG Brands Cut Corners, Retailers Feel It Too

April 10, 2019

Consumer Packaged Goods (CPG) manufacturers and their retail partners have a mutually beneficial relationship. CPG companies provide products that consumers want, and retailers provide the in-store experience to showcase and sell those products.

It’s a match made in heaven. Most of the time.

The relationship is unique: CPG brands have to trust retailers to provide a point-of-purchase experience that will show their products in the best light. Retailers have to trust CPG companies to provide products that are not only high-quality but are also packaged in a way that reflects well on the store’s brand.

Most of the time this works well. But there are times when one or the other party doesn’t hold up their end of the bargain.

Today, I want to talk about the pitfalls of poor product packaging from the retailer’s perspective — and explain why it’s so important to work with CPG manufacturers and their design agencies to make sure your store doesn’t fall prey to it.

A Changing Landscape for Everyone

The world of commerce has changed for everyone — for consumers, retailers, and CPG manufacturers alike. Consumers have more choice, both in the products available to them and in how they buy them. Brick-and-mortar retailers are now competing with online stores for consumers’ dollars, and continue to evolve to keep up with their customers’ increasing demands and expectations.

As retail channels have multiplied, CPG companies have increasingly had to support multiple retail formats. They don’t just compete to win in a grocery store anymore, they now also service warehouse clubs like Costco and big-box stores like Walmart. And many of those larger retailers have developed their own private-label product lines — so CPG brands end up competing with their own retail partners!

And the rise of Direct-to-Consumer (DTC) brands has eroded the traditional market share for both retailers and CPG brands.

These tectonic shifts have forced CPG manufacturers to take a hard look at their business — to find new channels for growth and opportunities to cut costs. But as noted in a recent PwC industry report, CPG firms that see cost-cutting as the only choice for profit growth may be mistaken. Many CPG brands look to their supply chain for ways to drive efficiencies and cut costs — and unfortunately, product packaging is often one of the first casualties.

Judging a Book by Its Cover: All Packaging Tells a Story

We’ve written before on the importance that packaging plays in a product’s marketing and consumer appeal.

CPG manufacturers pour a lot of investment into making sure their products stand out. After all, they don’t have a lot of control over their customer’s point-of-sale experience, so their packaging and Point-of-Purchase (POP) displays really need to speak for them. Not only do they need to stand out from the competition (usually right next to them on the shelf), they need to convey a variety of messages to the consumer — about quality, value, and product fit.

Most CPG manufacturers take this aspect very seriously — they know that their product packaging reflects directly on their brand. Beyond that, they have to rely on their retail partner to display their products properly, set up their POP displays as agreed, and support their promotion campaigns.

But it cuts both ways. Retailers aren’t merely the “middle men” managing a transaction and taking a cut. They have their own reputation and image to manage, and depend on CPG manufacturers for the quality of the products they’re asked to sell. While inferior packaging and flimsy floor displays may well reflect poorly on the company selling the product, the retailer also bears some of the brunt of a poor customer experience.

Packaging Matters — for CPG Brands and for Retailers

Let’s be clear: No CPG manufacturer intentionally tries to sabotage their marketing efforts or the consumer shopping experience. According to a 2018 Brand Owner Packaging Survey, 80% of CPG brand managers agreed that packaging plays an important role in a product’s success, and said that they would be investing in new packaging initiatives in the next five years.

Every brand wants what the retailer wants: happy, satisfied customers. But CPG companies aren’t involved at the point where money crucially changes hands. They may not be aware, for example, that the products they’re shipping to retailers aren’t meeting expectations or are arriving in a less-than-perfect state.

In my experience as a contract packaging partner, I’ve seen the damage that poor packaging can do to both CPG brands and retailers, first-hand. I believe it’s critically important that retailers communicate and work with their CPG brands to ensure Packaging Optimization so that these types of problems don’t happen on the regular — if at all.

Packaging Pitfall: Packaging That Falls Apart

While many CPG manufacturers understandably consider the bottom line when purchasing packaging materials, a lower cost in the short term can end up being higher cost in the long term. Packaging materials that aren’t robust enough to weather transportation and handling can mean that products arrive at retail stores in a damaged condition.

Damaged Packaging
Source: Zipline Logistics

That has a direct impact on sales. According to a recent survey from Smithers Pira, 58% of respondents said that damaged packaging would put them off buying a product in-store.

When a shipment of product leaves a co-packer’s facility, it’s usually intact. But depending on how far that inventory has to travel, and how many times it’s handled or transferred along the way, and the conditions in which it’s stored, it might look a little worse for wear by the time it gets to store shelves.

If you’re a retailer, you have a vested interest in the products you stock, and in how they’re presented. If you’re finding that the packaging of certain CPG products isn’t holding up, you should let the CPG manufacturer know. You’ll be doing them a favour.

Packaging Pitfall: POP Displays That Don’t Stand Up

I published an article a little while back about a personal experience I had while shopping for vitamins: I watched as a woman with a small child went to grab a bottle of vitamins, and the whole POP display came toppling down.

Display Collapse

That fiasco didn’t just reflect on the product manufacturer, it created a poor shopping experience for the customer — in that particular store. Never forget that the consumer’s shopping experience is formed in an ecosystem. From the store lighting, to floor layout, to the products on the shelves, and — yes — the POP displays that showcase particular products, a shopper forms an impression based on the whole, not necessarily the different parts.

It’s important to remember that POP displays are there to drive sales — so they need to be more than merely “sturdy” and easy to assemble. They’re taking up valuable floor space (and by extension, shopper attention), so they should be compelling too.

If you’re a retailer and you find that a POP display isn’t performing well, the sooner you communicate that to the CPG manufacturer, the better. You have a unique advantage in that you can see how shoppers are (or aren’t) interacting with the display, and can provide valuable insight to your CPG partner on how they can improve it.

Good Partners Make for Good Business

When it comes to serving customers, retailers and CPG brands are in it together. They rely on each other to provide consumers with the products they love, in a manner that keeps them happy and satisfied.

But here’s the thing: Each party operates at a different point of the customer’s journey, and they don’t always have visibility to what the other is doing.

CPG manufacturers and their retail partners both have a strong role to play in creating a positive shopping experience for their customers — and they have a responsibility to each other to ensure that all the bases are covered properly. When product packaging or POP displays aren’t up to snuff, everyone — the CPG brand manufacturer and the retailer — gets painted with the same brush.

By working together, retailers and CPG companies can make sure they’re making the right investments in the right places — and most importantly, keeping their customers happy.


If you’d like to discuss innovative packaging solutions further, I’d love to chat — get in touch with Ravenshoe Group today.

 

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