#174 - Licensing’s Growth Opportunity

For the past six years, Circana has collaborated with NYU's Stern Center for Sustainable Business to produce a report on sustainability in the consumer packaged goods (CPG) marketplace. While sustainability-marked products in the U.S. continue to gain share, their research shows that shares of sustainability-marked products are much larger in the UK and Germany. This episode dives into the comparison between the U.S., UK, and Germany, offering insights and inspiration for CPG manufacturers and retailers. Highlights: Many categories with low shares of sustainability-marked products in the U.S. have high shares in EMEA. U.S. manufacturers should revisit claims that matter to shoppers. A market leader moving to sustainability drives the trend for the category. Failing to do so opens the door for challenger brands, which could erode loyalty and share. In Europe, much of the increase in sales of sustainable products is driven by retailers. European retailers are incentivized to adopt sustainable practices, with regulations providing both incentives and penalties. European consumers consider the lack of sustainability to be a barrier to trial.

There are more than 150,000 convenience stores across the U.S., and while multiple chains make up the majority, these typically small-format stores can vary widely from urban to suburban to rural. To some consumers, it might be the store where they purchase auto fuel. For others, it serves as their local grocer or a place to grab morning coffee. Circana’s Anthony Dostal, director of retail insights for the convenience channel, talks about the state of the convenience channel, including consumer behavior, competition, and strategies for growth. Highlights: While location and price remain the primary influencers of convenience store selection, the quality of products and services is becoming an increasingly significant factor. Inflation and economic headwinds are affecting discretionary purchases and driving consumers to look for better value. The competitive arena for c-stores is vast, and includes other convenience stores, grocery, dollar, club, and quick service restaurants. Foodservice is a top opportunity for regaining traffic and sales in c-stores, but other opportunities include expanding private label offerings and leveraging loyalty programs. Some retailers are leaning into digital engagement, including ordering and home delivery.

Household spending has shifted due to high inflation and economic uncertainty. Consumers are prioritizing essential items like groceries while often forgoing discretionary purchases, including games, apparel, and prestige beauty. Circana’s Sally Lyons Wyatt, global EVP and chief advisor for consumer goods and foodservice insights, and Adam Mellott, vice president of consumer and shopper insights, provide valuable insights into the current state of household spending, the role of retailers, and the resilience of consumers during challenging times. Highlights: Consumers are carefully weighing their options at the shelf, which doesn’t necessarily mean the end of indulgent and premium purchases. Many retailers, notably within the dollar channel, are putting value – including convenience and affordability – front and center, which is proving attractive to a wider audience of shoppers. Urban and rural consumers are reacting to economic uncertainty in different ways, which will impact product assortments, oftentimes within the same retail chain.   While tariffs haven’t impacted CPG prices yet, consumers will be tracking prices carefully. Innovation – from product development to assortment – can be critical to locking in consumer loyalty during challenging times.

While they differ in size of revenue, U.S. CPG Growth Leaders all found innovative ways to connect with fragmented consumer communities using a range of growth levers. Sally Lyons Wyatt and Cara Loeys dive into the strategies that leading CPG companies deployed to achieve healthy growth in 2024, including the Five Cs of Success: community connections, comprehensive value, catering to multi-pronged wellness, collaborative growth, and company culture.   Key takeaways: Community connections: King Arthur Baking leaned on the experiences of consumers during COVID-19 to build a thriving baking community. This approach highlights the importance of engaging with consumers across different touchpoints and supporting them through innovative products and resources. Comprehensive value: Companies like Lifeway and Bausch & Lomb offer multi-functional products that provide a wide range of benefits. This strategy emphasizes the importance of delivering value that goes beyond price, enhancing convenience, experience, and well-being. Collaborative growth: Good Culture and Daisy Brand are reimagining their products and partnering with influencers to engage younger consumers. Innovative use of AI: The Coca-Cola Co. and e.l.f. Beauty are at the forefront of experimenting with AI to enhance productivity, efficiency, and consumer engagement. From AI-generated commercials to social media bots, these innovative approaches are revolutionizing how companies connect with their audience. Direct-to-consumer engagement: Company collaborations are resulting in successful, out-of-the-box solutions, many of which leverage digital sales and online promotional events to create buzz and engage loyal consumers.

Globally, licensing is a $365 billion business. The U.S. comprises about 60% of the market. Kristen McLean, senior executive director, The Circana Entertainment Knowledge Group, takes listeners into the world of licensing. Hear insight into the elements of successful licensing deals and what to consider when partnering with another brand. Highlights: There are four main types of licensing: character, personality or lifestyle, co-branded, and limited-time offer (LTO). 11% of licensing involves food, both CPG and foodservice. Successful licensing should include brands that overlap in appeal, but also work to expand the audience for both brands. Before diving into licensing, validation is critical. Consumer research can help ensure a licensing idea resonates with the target audience.

As a share of the total CPG/FMCG market, private brands vary across major global regions. In the EU, private labels account for nearly 39% of total market value and 47% of unit sales, while in the U.S., they represent 22% of dollar sales and 24% of unit sales. Sally Lyons Wyatt and Ananda Roy talk about retailer investments for private brands, including being category-focused, consumer-obsessed, innovative and of high quality.  Highlights include:  Successful retailers treat private labels like brands, cross-promoting them with name brand products and partnering with notable chefs on product development.  In EMEA, private brands have pulled back price promotional efforts and instead are focusing on promoting premium quality at a competitive price to name brands. While the U.S. lags other global regions in overall private label share, some categories, notably in the fresh perimeter departments, have a high share of total CPG sales.  The rise of the term “zero consumer” in Europe describes consumers who seek better value but show zero loyalty to any retailer or established brand. 

Inspired by their recent Top Trends in Fresh webinar, Jonna Parker, team lead, Circana’s Fresh Foods group, and Kelly Krumholz, perimeter client insights consultant, provide a “refresh” on trends and opportunities impacting fresh grocery departments. While opportunities for growth continue to take root (GLP-1s, we’re talking about you!), headwinds – including being out-marketed by center store – temper growth. Tune in to learn more.  Highlights: Well over half – 56% – of all trips to retail stores for food and beverage are quick trips, which usually involve only one or two departments.  Health-minded consumers account for about one-third of overall food and beverage spending. Fresh departments, especially produce and deli, are crucial for consumers who prioritize healthier eating and transparency in food sourcing. Fresh foods could benefit from suggestive selling and marketing – especially via social channels – based on consumer motivations and occasions. Fresh departments should capitalize on weekend dinners, which tend to include more scratch cooking.

Dive into the cutting-edge innovations and trends from CES 2025 with Circana’s tech analysts Paul Gagnon, Ben Arnold, and Mike Crosby. This episode explores the transformative impact of artificial intelligence and more on consumer and B2B electronics, the evolution of smart home technology, and the future of wearable devices. Technology is reshaping not just consumer experiences, but also manufacturing, go-to-market strategies, and retail.  Key Highlights: AI is being incorporated into everyday products like smartphones, PCs, and TVs, enhancing the user experience through features like picture and sound quality optimization. But one watchout is that innovation needs to remain focused on tangible benefits for the end-user. Another pain point is managing consumer concerns with privacy.  Smart home devices, including smart doorbells and security cameras with AI capabilities, appliances and robotic vacuums are seeing enhanced functionality.  The next generation of smart glasses will drive new use cases and applications in personal health and augmented reality.  Retailers have a significant influence on the development and go-to-market strategies of tech products, particularly in the TV industry.

The impact of GLP-1 (glucagon-like peptide 1) usage for weight loss on the CPG food and beverage, nonfood, and other industries is just beginning. It’s going to influence product innovation, store assortments, consumer engagement, and more. Sally Lyons Wyatt discusses groundbreaking research on GLP-1 use for weight loss, including how users shift their purchase habits while using the medication and after they stop taking it.  GLP-1 users generally purchase more than nonusers, with notable shifts in purchases among weight loss users. For example, categories like gum and breath mints help with a side effect of bad breath, while an uptick in tea purchases is tied to soothing an upset stomach. Categories such as frozen foods decreased in sales during usage of GLP-1s. Sales of recommended foods, including vegetables, eggs, and nuts, increased. The ripple effects of GLP-1 usage go far beyond CPG to include wearable technologies such as fitness trackers, apparel, beauty products, beverageware, and more.

Carbonated soft drinks and bottled water are the universally preferred beverages across generations. From there, nuances emerge that shed light on the life stage priorities of different cohorts. Similarly, differences in product choices are seen by household income level and even ethnicity. Tatiana Lopez Aranzazu, consumer and shopper insights consultant at Circana, discusses differences across demographic cohorts and uncovers opportunities for manufacturers and retailers.  Highlights:  Energy drinks are popular among most generations. But they are less relevant for boomers, who prioritize probiotic and low-sugar dairy drinks.  Functional beverages, particularly those delivering energy, weight control, and better-for-you attributes, are growing in popularity.  High-income households prefer beverages with protein and probiotic claims. Low-income households lean toward energy drinks.  Consumers are most likely to shop the grocery channel for most of the top beverage attributes. But mass and supercenters lead for immune defense claims, and club stores are the top channel for protein claims.