It may seem self-evident for industry observers that during COVID-19 (and in the nearly five years from when the pandemic began) brands had to be agile to meet grocery retailers’ need for adjustments in product offerings. For a historical context, the grocery market was disrupted in 2020 due to COVID-19 and related lockdowns. In 2021, we had to face supply-chain issues. In 2022, inflationary pressures beset the industry and since 2023, Canadians have been struggling with high costs of living. Through all these challenges, food brands, as a standard, are expected to provide their retail partners products in formats and configurations that will sell on grocery shelves.

Many Canadians have a recessionary mindset, which is influencing their purchase decisions. In 2024, according to NielsenIQ, ‘increasing food prices’ was the number one concern for Canadians. Further, fluctuations in many agricultural commodities have fuelled the need for brands to think critically about product portfolios. Specifically in 2024, frozen seafood, snacking fruits and nuts, crackers, apples and frozen vegetables retained strong consumer demand, while ingredients such as cocoa beans (up 122 per cent in 2024), coffee, beef, wheat, soybeans, and sugar increased in cost.

Product formats

A major tool to help navigate the current market is price pack architecture (PPA), but further context is useful. Strategic PPA thinking is fuelled by the realities facing grocery retailers, and in turn, CPG brands. In an inflationary time, retailers are under pressure to ‘rationalize’ their stocked items, and the number of SKUs on offer to consumers. Obviously, products need to have traction and sell. Brands need to be attuned to what formats, sizes, and products motivate consumers. If a brand is not able to configure their offerings, for example, to a larger volume, more convenient package, or a healthier ingredient list, retailers may remove those SKUs or discontinue a brand. Hence the importance of nimble, responsive product formats for a variety of consumer channels. NielsenIQ data from August 2024 also found that Canadians are placing less food item units in their grocery baskets, driven in their desire for lower prices, promotions, convenience and discounts.

Grocery retail is also investing in private labels. Additionally, they’re under greater scrutiny for profitability, enhanced shopper experience and maintaining their own supply chains. Retailer SKU rationalization allows merchants to assess the profitability of their stocked and displayed items, using metrics such as inventory and storage costs, supplier fees, and sales data to further assess which items are (dis)continued or retained with adjustments. Further SKU analysis for retailers can include:

are there any additional storage demands of certain products (i.e. refrigeration, handling safety); is there volatility in consumer demand for these products; and are there any unique stocking-picking-display requirements?

These factors allow grocery retailers to be adaptive in their inventory management to offer customers products that are most in demand, and to create shelf space for products that their unique clientele will purchase.

Constant adjustments

These realities underline the urgency for food brands to continually reconsider their PPA, which as a strategy, helps adjust portfolios in terms of packaging sizes, formats, features, or internal characteristics. PPA is a method to help ensure products are meeting consumer needs and preferences and inducing purchase, especially important for fast-moving consumer goods such as perishable foods and beverages. PPA also helps brands to react to macro changes such as inflation or the evolving costs of food commodities.

Additionally, market research and retailer feedback help ease the guess work of PPA by knowing how consumer budgets, occasions, and preferences impact purchase decisions for different segments of buyers.

Decisions are made differently whether a family is stocking up on an item, buying for immediate consumption, or making a purchase while on vacation. Food brands need to ask:

how willing will consumers be to pay for existing product features (e.g. pure cocoa powder); will consumers pay a higher premium for those same ingredients in an individual pack; what quantity of items or format should be in our discount offering; and how does our portfolio compete with competitors, private label, and is there any risk of cannibalizing existing offerings?

Retailer feedback is essential in this regard. NielsenIQ noted in 2024 that nearly half of Canadians are planning ahead before they go shopping to manage spending. This makes it much more imperative to offer products that meet consumer needs.

Many Canadians are trying new brands based on more competitive price points compared to familiar brands and switching retailers to further reduce shopping expenses. An effective PPA strategy requires a good understanding of customer willingness to pay for products, what the attributes of those products entail, and how it relates to package size, format, and price per unit.

PPA gives brands increased confidence in which SKUs to (dis)continue, and whether there might be an opportunity for new product development or alterations to existing offerings that improve margins. For example, cleaning company Clorox’s Pine-Sol brand created a smaller container with a more concentrated solution to get the same number of uses out of a unit but with less plastic. The result translated into a better consumer experience.

Food brands can utilize PPA to help on a variety of merchandising fronts: for price consistency related to those of their competitors and the private label offerings of retailers; and for product offering that meets consumer needs in different channels, and for different occasions.

Now more than ever, food brands should be carefully considering their PPA strategy as a discipline in product-market-retailer fit, and co-ordinating with their partners, both internal to the organization, and externally. For retailers’ part, they will arguably prefer to carry products that sell well, with consistent turnover. Food brands that offer well performing SKUs and adjust to market signals will strengthen their relationships with retailers and have better shelf ‘security’. As the cost of living remains high, the offer of fit-for-demand, well-designed products that also work with company margins will make business sense.

This article was originally published in the Feb./Mar. 2025 issue of Food in Canada.