CPG Brands Rethink Advertising Strategy Amid Rising Food Costs, Inflation

Tens of millions of low-income Americans saw a decrease in their food stamp benefits last week as a federal assistance program aimed at getting families through the pandemic came to a close. While the change will clearly have the most profound impact on those families receiving benefits, it also marks a shift for supermarkets, retailers, and CPG brands, many of which are now looking to revamp their advertising strategies to account for a greater pool of shoppers searching for discounted items.

“Advertising in this environment needs to be intentional, meaning that it has to drive an action such as clipping a coupon or adding the item to a basket or shopping list,” says Henri Lellouche, vice president of retail and partnerships for Quotient, a digital promotions firm.

While inflation is falling in most categories, prices for food continue to rise. Grocery inflation increased 11.3% in January, even as overall U.S. prices fell slightly from the month before. 

Concerns over food prices are becoming so prevalent, that it’s not just low-income Americans searching for bargains. Forty-one percent of shoppers say they’re buying more private label items, and an incredible nine-in-10 shoppers say they’re looking for bargains when they go grocery shopping. 

Lellouche believes brands should rethink how they advertise to consumers amid rising costs and inflation, and says advertising all along the shopper journey, right up to the shelf, is more important now than ever before given the current economic concerns.

Although big food companies like PepsiCo and Kraft Heinz will reportedly stop raising prices in an effort to spur demand, that may not be enough to bring back customers who’ve already made the switch to lower-priced alternatives.

“The cost of losing a customer is high and is often permanent, especially as retailers’ own labels are often at parity with the branded equivalent,” Lellouche says. “Making consumers aware of all savings opportunities and brand value is critical to customer retention. If consumers are priced out of a brand or category, it’s going to take a lot of money and effort in order to win them back.”

One solution to the problem is for retailers to use their data to personalize savings opportunities and amplify the messaging to shoppers that savings are available in the form of temporary price reductions, digital coupons, or even rebates. At the same time, Lellouche also suggests that retailers work closely with their merchant partners to maximize the effectiveness of brand, shopper, and trade budgets to eliminate waste or excessive discounting.

“Personalization of offers will help drive loyalty and maximize the efficiency of the brand’s spend to give the correct incentive to the right target segment of consumers,” he says.

While it’s still early days, and food prices may begin to come down in the coming months, Lellouche says all these changes in the marketplace are providing an opportunity for grocery brands to explore new avenues for marketing and reaching customers in their target demographics. Specifically, he anticipates seeing more CPG brands operating with first-party data, rather than relying on the cookies and third-party data they’ve used in the past. As more companies activate campaigns within networks that leverage this data, CPG brands could begin to connect with consumers through campaigns that span across multiple stores or retailers. 

“CPG brands and advertisers have the ability to get very close to the point of purchase, where consumers are making decisions in-store,” Lellouche says. “In practice, brands achieve this by leveraging digital out-of-home platforms to take advantage of retailer relationships and can tap into our retail media networks to execute scaled media campaigns across retailers.”