Have specialty and ethnic CPG brands reached a peak in their growth across America’s grocery stores? In my view, they are approaching maturity — for several reasons. 

For one, evolving shopping trends, technological innovation and the consolidation of traditional brick-and-mortar channels are changing the way grocers prioritize their merchandising practices. 

Let’s look at give key issues specialty or ethnic brands and retailers alike will need to further address over the next decade:

Category management, a compass to measure brand performance: Up until the 2008 recession, leading specialty or ethnic food brands relied heavily on intermediaries as the links to land into grocery shelves. Since the early 2000’s, the distribution process forced most independent retailers to address higher operating costs and diminished profitability becoming more efficient and selective.

Larger chains have redirected their selling process by mapping their core shoppers needs and preferences, monitoring competitors and by grouping sales data. This trend has transformed grocery chains into sophisticated playing fields where individualized categories are on average staging three main brands plus one private label brand to compete per category. 

Specialty/ethnic grocers adopting category management practices:  As brick-and-mortar operations consolidate, the merchandising priorities of ethnic and specialty chains have changed because they rely on time-sensitive information measuring sales velocity, distribution and promotional activities in local markets where they compete against larger regional or national chains.

Likewise, specialty or ethnic CPG brands are adjusting their selling focus in an era where comprehensive modular shelf space planning is limiting product assortment.  

Grocers are prioritizing merchandising practices: Changes in shopper demographics, product preferences and their usage are mandating that CPG brands and grocery chains both evaluate how consumer perception will impact future retail sales and profitability. This said, center store category merchandising is changing as manufacturers need to focus on making their product offerings visible, maintaining enough stock inventory and access for shoppers. 

At the store unit level, ignoring this practice results in lower sales and less frequent store trips for shoppers who will also shop at competing chains or alternate retail channels. This is especially true among Hispanic shoppers, who are very deliberate in shopping for value and assortment, true to their omnichannel inclination.

Shopper marketing tactics support category management:  Ethnic and specialty retailers have relied on shelf advertising, secondary merchandising, sampling events, circulars and in-store coupons as basic shopper pull tactics that complement the trade push.  As shopper marketing became digitally driven, it opened the gates for grocery retailers to engage with CRM, social media, and search platforms connecting with shoppers.

However, technology is still being perfected and has not yet generated viable shopper marketing vehicles contributing to the definite success of brands in category contexts and. There is a long road to travel before digital vehicles are perfected, and even then, the older vehicles will remain in place because of their widespread use.

Brands and retailers charting the future of category management: The biggest challenge brands and retailers will jointly face over the next decade is how to reconcile brand-driven strategy supporting category growth+ category share versus the retailer’s focus on shopper retention + store visit frequency. 

In the arena of the independent specialty and ethnic chains, this may mean redefining category roles and the need for center store food categories to expand their touchpoints with shoppers often in cross-merchandising scenarios within store perimeter categories like produce, dairy and meat.  In any case, data sharing and interpretation among retailers and brands will continue to be the cornerstone linking category management to customer experience among suppliers and retailers.