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- [00:02]
A
Hello and welcome to the CPG Guys Podcast. Set at the intersection of Commerce and tech. Your hosts, Sree Rajagopelan and Peter V S Vaughn explore how brands and retailers engage consumers in a digitally driven world. And now, here are the CPG Guys.
- [00:21]
B
Hello and welcome to this special episode of the CPG Guys Podcast. I'm of course Sri, your co host and also CRO and co founder Think Blue Consulting, your trusted partner in your Omnichannel development journey. Get in touch with me at shreenblueconsulting Co. Please do listen to my older daughter's music at www.sriaraj.com follow Lalaraj. My younger daughter is a member of the world's fastest growing global girls group, Cat Sci, and now a proud winner of an MTV VMA and two Grammy nominations. We're in the middle of attending several pre Grammy events and look forward to the ceremony later this weekend, February 1st to be telecast live on CBS at 8:00pm EST. Joining me today is my co host and co founder pvsp, who also moonlights as head of Industry and client engagement at Flywheel, the Commerce acceleration division of Omnicom. You said a whipper snap of a snowstorm hit you guys. Have you dug out yet what's going on?
- [01:07]
A
Yeah Sree, we accumulated over 13 inches of snow in Guilford, Connecticut. Made the decision two days ago to park my car in the covered garage at the train station in New Haven. Had another tarp for our second car and positioned it all for the storm. Managed to get plowed out this morning early around 7am Pulled the snow right off the top with the tarp. All's good, a little cold. The snow is pretty light dry, so not really good for making snowmen or snowballs, but still a little debilitating in terms of what the roads are looking like outside, but survived nonetheless.
- [01:46]
B
Survived but sounded like quite a bit of planning there just to get through the day and hopefully you know, it gets warmer and all the snow melts and life just moves on for everybody. Make sure you're of course subscribing to our podcast on your preferred listening platform where you can get our latest episodes. Go back to consume some of the 570plus episodes we've already published. So now let's get to our topic and our guest.
- [02:06]
A
Yeah, today actually Shree, we're delivering the director's cut of our FMI Midwinter 2026 recap from San Diego because honestly, I don't think 30 minutes is going to be enough to unpack all that actually happened in Chula Vista.
- [02:20]
B
Yeah, Peter, and that alone tells you something. This midwinter wasn't about a bunch of headlines and announcement. It was about a lot of subtext, which we're going to try back here as we go through the discussion. Sure.
- [02:29]
A
I'd say that this was one of those conferences where what wasn't said mattered more than actually what was on the stage.
- [02:36]
B
And in some of these meeting rooms, very introspective conference. You know, you and I had a chance to connect with a lot of chief customer officers from the sales side of CPG brands, brokers. Then we had a chance to connect with retail, whether it be true, brick and mortar format, Omnichannel, all of the above, or even wholesale for that matter. And I'd say it was a more introspective conference. Quieter, slower people realizing volume challenge is a serious issue and needs to be addressed head on.
- [03:03]
A
Yeah, I would say Sree, when we were at Cagny last year, there was a lot of hoping going on and I think the industry has stopped hoping for those volume gains to come roaring back and they're starting to cope with the reality, hopefully in a healthy way that positions them for sustainable growth.
- [03:21]
B
You know, last couple years there was a lot of panic in the industry with volume challenges. And prior to that, of course, Covid supply chain, Omnichannel, retail media. The one big change this year in conversations was acceptance without that panic. A true quest to figure out how to get back on the volume growth track that the industry has been defined by for decades. I would call that. Peter, at the end of the day, realism without resignation. And no better place than a conference of this sort where you can get together. You know, the senior most people from the industry trade, which is retail brokers, wholesalers, as well as cpg. Brads, what do you think?
- [04:02]
A
Well, and of course, all of this happened somewhere rather warm and sunny. The brand new Gaylord in Chula Vista, California, just south of San Diego. Because, you know, grocery executives, they tend to prefer existential reflection with a. With a warm venue at hand, would you say?
- [04:18]
B
SRI Yeah, I think the universe was kind to everybody because at the end of the conference, everybody had to return to extreme snowfall. So I'm glad they all got to enjoy 506, 456, whatever. It was like nice, warm, sunny days in San Diego. Although San Diego wasn't that warm. I mean, there were. It was cold, it did rain, it was like 50 degrees, but better than the 7 and 8 degrees and snowfall in the rest of the country is what I would say. But to help us decode what Midwinter actually signaled beyond Speech Talk, we're joined by someone who lives in the gap between strategy techs and operational reality, and ex retailer merchant himself.
- [04:55]
A
Please join us in welcoming our friend.
- [04:56]
C
Prag.
- [04:57]
A
Shiv is founder and CEO of some company called ThinkBlue Consulting. Have you heard of that one, Sri? I don't know too much about it. You'll have to look at find out about all. Kidding. Sree's alter ego is the CRO of Think Blue Consulting. Parag, welcome back to the CPT Guys podcast.
- [05:12]
B
How you doing?
- [05:12]
C
Thank you, Peter. Thank you, Sree. It's great to be back. You know, it's been a while that I've been on the platform, so thanks for having me. And it was great to spend time with both of you at Midwinter last week. Indigo is actually the official emotional support city for our industry. Right. You know, seeing all the leaders within the industry, old friends within the industry, and also talking about what the future is not only for 2026, but even beyond that.
- [05:36]
B
Yeah. Welcome to the show, Parag. It's a pleasure to have you on the show. Now, of course, next year's Midwinter will also be in San Diego, so emotional support city indeed at this point. May the joy and warmth of sunshine have the best outcomes for the industry. So in the digital liner notes of this episode will include links to Parag's LinkedIn profile and his company's LinkedIn for listeners to access while we go on with our conversation. So let me jump right into our conversation, Sree.
- [06:02]
A
You know what we should do? Maybe we'll have to put in the notes links to all the great restaurants we found in San Diego so people going to the show next year can partake in some of that. I thought our little Mafiosa restaurant in Little Italy was a. Was a great find. And we did pretty well, didn't we, culturally?
- [06:17]
B
I didn't know there's a Little Italy in San Diego. Guess what? The little battleboard that they have up top looks just like the one in New York City. So next time, I think it requires further visits.
- [06:28]
C
Yeah, Peter, the next time I and Sri are together, you're choosing all the restaurants. I'm not letting Shree choose it.
- [06:36]
A
There you go.
- [06:36]
B
All right, so obviously, if you haven't been able to guess by now, if you haven't understood the theme yet, Parag, Peter and I are going to discuss the recently concluded FMI Midwinter Conference down in San Diego, January 20th through 26th. All three of us were there. As we've mentioned several times, we got to meet with the trade and industry and our discussion today will be all the different sentiments we picked up with the big AHAs. This is the industries, food and beverage industries and now soon to become non foods as well, industry's premier meeting of the minds, senior most leaders, commercial leaders, whether they be from the CPG side or the trade and retail side. So I'm going to start with the first theme that I thought was pretty strong, which is the vibe was about acceptance of where the industry is. We've had these volume challenges now since early 2023 at the end of Q1. Two years have passed by. You know, initially there's a lot of panic, a lot of demand. We need to find our way, we need to juice trade, we need to do frequency a trade. Then CPG companies push back, said we can't do depth. Then we started seeing more rollbacks, we started seeing more frequency and depth, some pricing clawbacks, but volume hasn't budged a lick. So I think this year a lot of acceptance, let's do it together, let's leverage brand equity and a clear, clear, clear acceptance that in very few areas growth exists. And we're going to talk about it in a second. So Parag, you've lived through multiple cycles in this industry as a retail merchant. Inflation, deflation, E commerce hype, retail media, omnichannel, reinvention. How did this midwinter feel different?
- [08:08]
C
Sree, you know, you said it perfectly. I've been in the industry for 25 years and I've seen a lot of cycles come and go and we have been in this one long cycle since COVID started where nothing was normal again. Right. So but visiting the last year's mid where there was a lot of hope that things will improve, this midwinter was very different. It felt like industry has stopped waiting for change coming, waiting for cost to normalize, waiting for consumers to really come back, waiting for technology to simplify everything. People are realizing this environment is durable and let's focus on what today is rather than waiting for what tomorrow could bring.
- [08:47]
A
So I guess what you're saying is the cavalry of unicorns isn't coming to save the day. Everybody's kind of dealing with where they are, not where they imagine they are.
- [08:56]
C
Exactly, Peter. You know, actually a lot of people were waiting and hoping that can we go back to the normal days pre Covid where things would be the way we were able to manage it, control it. But we are in a very different environment, consumer behavior has shifted. And as an industry, when you realize that, when you stop waiting for what you're hoping for and you start talking about what really is with us today, then you start focusing on what's important, imperatives, you know, for the shopper, who's the MVP for all of us. And that's where the industry acknowledged. Right. We need to go back. Focusing on the shopper.
- [09:30]
B
Yeah. Parag and Peter, thanks for that opening right there. So no cavalry. Indeed. And I think the sentiment showed up in our dialogues, individual dialogues as well as collective dialogues everywhere. We even got to do a few interviews, and that's what we heard. We heard more leaders talk about initiatives they had to pull back on and, you know, paragrapher, to go back to the old days, shut down stuff, rather than what they launched in 2025 as an experiment. So, Peter, when you. Sorry, Parag, when you refer to the old days, what. What do you mean by that?
- [10:01]
C
You know, Sri old days was all about driving value through promotions and volume through promotions. Right. It was focusing on pricing as a lever. It was focusing on how many new items you are able to introduce during the course of the year. Right. That's how the growth engine for the industry was driven in the past. Now there's a massive shift happening. Innovations are not landing the way the industry would expect it to. Consumers are expecting a lot more different behaviors from the industry, which is a massive shift, like killing initiatives within our industry is very, very hard, especially it's emotionally hard based on the brands that you are running or the categories that you are servicing. It's politically hard, it's culturally hard. But strategically, it's so important right now that you got to apply your investment dollars in a place where, once again, I talked about the MVP in the room. Right. The shop is the mvp. What does the shopper want? What. What are they looking for? Not only from your product, but also how that product is delivered and service for them. Right. How is it satisfying their emotional need beyond the functional need? So we saw a significant shift where people started talking about that, you know, less is more.
- [11:12]
A
So Paragu saying that subtraction is the new innovation.
- [11:16]
B
Hold on. The. You had a chance to meet with many, many CCOs, like many. I saw the pictures on LinkedIn. You certainly met with them. What did they talk to you about? Subtraction versus new innovation?
- [11:27]
A
I don't know that it's necessarily there. I mean, I saw a lot of innovation coming out of Mondelez, out of the formerly Kellanova, now Mars snacking. I mean, I'm a little concerned over this because I think Sri, you and I have talked about this, that the road to growth is not going to be simply cutting headcount, cutting trips and travel, and cutting marketing dollars and innovation. Like, I don't know how sustainable that is. That gets you a quarter out. It doesn't get you a decade out, as our friend Carrie Sander would say. So I'm not sure that they're entirely all there, but I think that I can understand why, why we need, why they need to focus on not just innovating by taking one brand and mixing it with another brand and calling that innovation. Innovation has to be very strategic. It has to actually deliver a customer benefit that can justify why a consumer would go with them versus going with a private label brand which is qualifiably less expensive. Right, that's, that's what I'm thinking. Yeah.
- [12:37]
B
Go ahead.
- [12:38]
C
Yeah, yeah. Peter, you're so, so right. Right. You know, sometimes our industry gets confused between what is through innovation versus an incremental line extension. Right. And that became very evident in the conversations in the hallways at Midwinter. But also I read in a Costa report this morning that over 80% of innovations that are landing are not performing and those items are not surviving more than two years on the shelf, which is a huge statistic. So think about, you know, all the effort that's put in launching a new item to deliver growth. It's not happening. So you got to be very, very focused. You have to be slow. You have to be really understanding your mvp, your consumer, and be very conditional with how you're driving growth.
- [13:21]
A
Yeah, I would actually say, Parag, that some companies are kind of embracing that reality. So think about the candy companies. They're all about limited time offers now. Right. They understand they're going to bring in a mix up flavor. It's going to be in the market for four months and then they're going to swap it out because they're trying to create a measure of new freshness to the category. But that means you have to have a constant pipeline of that kind of work. That's a, that's a lot of effort for questionably incremental, you know, moderately incremental revenue growth. I don't know if that's sustainable. How many times can I mix create another flavor of KitKat or what else can I mix into a Reese's Peanut Butter cup to make it, to make it appealing to consumers? There's a lot of, a lot of challenge up.
- [14:08]
B
So I want to ask both of you putting that as a backdrop. This was about acceptance. It's narrower, slower and more conditional growth. Where are the channels? Growth where, where should a CPG brand look for growth? What channels at retail? What sort of consumer? Peter, you go first and then parag.
- [14:25]
A
So if I'm looking at the grocery channel, it's clearly going to be online. E commerce is where there's an enormous amount of growth potential. If I'm looking at Omni Channel, this is still an enormous amount of growth opportunity in convenience. So introducing new products, you can realize high margins. Those are, those are areas that food and beverage manufacturers can do well in. But it's, but it's challenging. Like if you're trying to grow your business in brick and mortar retail, it's a lot. It's a long slogan. We'll just say that because private label right now is owning the day. In the last five years they've picked up five sharepoints in center stores. In center store and I don't see them right now. I don't see the course trajectory changing where when we come back in five years it's not another five points. It's gone to private label. There's. I saw some great research that just came out from FMI by some people I know around private label and what the implications are. I think it, I think both brands and retailers would do well to look at some of that groundbreaking research to talk about where do brands need to be in the future if they want to even hold the position they have, let alone no.
- [15:37]
B
I went grocery shopping last night. It was a full stock up trip. I went to my local Trader Joe's which is next door to my house. But I have several choices ranging from Whole Foods, Safeway, there's a separate Safeway, Anna Vons, there's a Ralph's. I have a lot of choice. Fiesta Supermarkets. I found my Trader Joe's purchases similar items to a stock up trip to be less than 60% of what it would have cost me anywhere else. And the quality of the private label at Trader Joe's is not too shabby. Thoughts guys?
- [16:04]
A
No better place to buy. No better place to buy cheese than Trader Joe's. The prices are half what you get in national retailers.
- [16:11]
C
Yeah, no great points guys. And you know one thing that became very clear on this midwinter is that you cannot buy your way to growth. The consumer is looking for very specific outcomes as we talked about. Right. Value is the name of the game right now. We have heard the word affordability in a lot of media conversations. Already and we are seeing the consumers. Right. Shifting their behavior. According to several data points that we have read through is consumers are making more trips than ever. They're spending fewer dollars than in the past and they're looking for substitution to private brands. Peter, as you talked about at length.
- [16:48]
B
Right.
- [16:48]
C
So that is really happening. Consumers are really looking for innovation and innovation is not only from, you know, how are you servicing them for specific functional outcomes that they are looking for, but also how you deliver. Omnichannel has become the name of the game. Right. You know, if you are not embracing it, you're going to have a real hard time finding long term sustainable growth within our industry. You know, Omnichannel e commerce channels have become very important activation points for both brands and retailers. The other area that I'll talk a lot about is what's happening with, you know, health and wellness. We, we saw a lot of conversation around health and wellness at Midwinter Sree. You and I also presented at the FFLC where they were talking a lot about, you know, the Maha movement and talking about the inverted food pyramid and how the consumer behavior is going to shift. There were a lot of conversations around GLP1.
- [17:42]
B
Right.
- [17:42]
C
And the shifts in consumer behavior driven by that. So if you're a brand who's not adapting to those trends, then you're going to have a hard time keeping up with growth. And if you are a retailer, these are times to make tactical shifts within your four walls but also make sure that you have a very sound digital strategy in place.
- [18:02]
A
Yeah, Shree, I'll double down on what Parag said.
- [18:04]
C
Right.
- [18:05]
A
When you and I were at Cagny last year, There were maybe two notable manufacturers that talked about the impact of GLP1s. The rest of them just kind of dismissed it. Well, I don't think back to that. Hoping versus coping. This is where we are. If we don't see the food manufacturers next month at Cagny taking on the GLP1 question head on, then we know that they're not serious about about saving their brands.
- [18:30]
B
That one is pretty clear at this point, but it's in the dialogue. The one that I think is still wishy washy but it was pretty obvious at this point if you look for growth, that's where you're going to have to take. The food and beverage one is very clear to me. Parag has talked about health and wellness and Parag, you didn't mention what FFLC here on the CPG guys, we don't allow acronyms. So there's a Fresh Foods Leadership Council at fmi. That's what FFLC is. So anyone dealing in fresh and frozen, you know, front of store, basically. That said, that said, there's one other one which I want us to go get into deeply. And that's a word some are going to love, some are not going to love because of what they will claim is a profitability issue. And that is head on. Omnichannel. All aspects of Omnichannel, from content to customer service to customer experience, use of the app, participation with third party intermediaries, fulfillment substitutions, pricing, discounting, offers, very few are ready. Walmart is ready. Walmart is growing. Is anyone else an Omnichannel king or Queen other than Amazon and Walmart? And let's talk about it. Avoiding Omnichannel. It was clear as night and day, that's where the numbers exist. If you want 100 basis points of growth, true or false, gentlemen?
- [19:40]
C
100%. And that became very clear. Right. You know, from a consumer perspective, they are looking for two clear things. They want value, which is delivered in pricing and promotion. Another they are looking for is convenience. Convenience in terms of how much time we can save them, you know, how can we make it easier for them to provide for their meals and the family. And as this comes to life, the role of Omnichannel is not only getting bigger and greater, it is becoming the real important foundational tier for anyone who wants to grow. Right. So it's not a choice if you are not embracing it. It's going to be your. It's going to continue to drive growth. No leader I talked to at Midwinter said their growth is coming outside of digital channels. Right. Everybody banked on it. Right. That's where the growth is coming from. And we are seeing a shift within the industries also happening. The providers of digital channels are growing at a much faster rate than the retailers who are not providing it. Right. And that is a huge shift that's happening. That it's not only something retailers need to talk about and care about, it's also the brands who are building partnership with retailers need to talk about and encourage them to go on this path. Because as this shift happens, the supermarket industry could lose its footprint to the mass channel. Like Peter, you talked about 500 basis points of loss because of private brands. When you layer in Omnichannel, it will just become greater.
- [21:05]
A
Yeah. So I thought our friend Nick Modi in his presentation to FMI was great in terms of what they need to do to fix things. He talked about expanding the promotional schedule. And that doesn't mean coming up with new holidays. What it means is finding new ways to inspire consumers. And I love that Coca Cola for many years has referred to in store displays as not points of interruption, but points of inspiration. And he gave a really great example. It doesn't mean that someone in brand marketing needs to follow the new trend of combining Coca Cola with Core Power energy drink to create protein Coke. What it means is you merchandise the two products next to each other. That doesn't require any measure of innovation investment. It requires that you just simply recognize what consumers want and merchandise the store to get them to do exactly what they're inclined to do, which is buy those two products together and make themselves a protein Coke drink. Those are the kind of things that we need to get back to that will actually drive growth in physical stores. In the absence of having an expensive and long lined innovation pipeline, that will questionably drive growth.
- [22:20]
B
Yeah. So essentially what I'm hearing from both of you pretty clear and what we heard from the conference is it's coming back to the consumer sentiment. Right. Every session eventually came back to the consumer. And that's the truth. That's the future. That's what everyone needs to focus on because the consumer doesn't care about the industry's excuses. Guys, what do you think?
- [22:40]
C
No. Very well said. Right. For long we have been the purveyor of information, product and service to the consumer. With technology and the digital and AI revolution, the power shift is moving from the industry to the consumers. Consumers are ahead of the industry in terms of what they're demanding, not only from a value perspective, but also from a health and wellness perspective. And that shift will continue to drive. Right. So once again, I said it earlier, Sri and Peter, in our conversation, everybody needs to focus on only one person. The mvp, the shopper. Right, mvp, the shopper.
- [23:15]
B
Yeah. So one word that kind of came out was cognitive load, which is not just about price sensitivity. What do you both think about that word that overwhelmed consumers?
- [23:25]
C
Yeah, consumers are overwhelmed right now. Right. It's not only about price sensitivity. You know, there are too many choices, too many promotions, too many decisions. And I continue to see certain old habits being repeated. Right. When volume is down. Let's run more promotion. And as I said earlier, you're not going to be able to buy your way out to growth. You know, there's so much shifts that's happening and we cannot confuse complexity with value. And that's what we have done to.
- [23:49]
A
The industry, which runs counter to the overall strategy of most brand managers these days, which is keep adding more skews because the more SKUs I have, the more relevant each SKU is to a little niche group. That's not personalization, right? That is just filling out the shelf. And I will say, sree, you and I have talked about this at length. During the pandemic, brands had one of two choices in the scarcity of resources, right? They could either decide to allocate the their full assortment and give preference to their most valuable customer. So Walmart would get 100% fill, Kroger would get 90. And then my local big Y retailer, well, we'd have 35% out of stocks because they're at the bottom of the food chain. Or they would just focus on a set of core items and manufacture those and fulfill everybody's order, running the risk of having blank spaces on the shelf, which at the time was not a problem because no one could fill them. Now everybody can fill them. There's a whole lot of confusion as what's going on here. Sree.
- [24:51]
B
Yeah, the cognitive load comes back to me in the word personalization. The industry kept adding more and more and more SKUs and called it personalization. That just created more complexity, confused us Value, you know, now consumers asking why before every single trip, why should I go to this store? Why today? Why should I deal with friction if omnichannel and convenience and click and collect is not available? Or the simplicity of shopping from an app or a website just doesn't exist? Or while I'm on the go waiting for a car wash, perhaps. And I think finally retailers are starting to get the plot that traffic is earned. It's a privilege and an honor. It's not an entitlement. Parag, you're a merchant. Peter, you're a shopper. Talk to us. Peter, you first. Traffic, entitlement or privilege for a retailer.
- [25:40]
A
It'S a privilege, you know, and price alone is not going to solve the problem. Sheree. Right? You don't just get traffic because you have the lowest price. In some retailers you do. But generally speaking, value is in the eye of the beholder. So if you're not delivering value to the audience you're trying to attract, you don't own that traffic. You're not entitled to it. You have to earn it.
- [26:03]
C
Peter, I completely agree. And to me, being in retail for such a long time, traffic and transactions, they are never given. They are always earned. Always earned. Every trip, every transaction, you have to earn it. You just cannot force, you know, relevance, overreach. You have to make sure that your product is fresh, your pricing is fair, your promotions are good, your shopping experience is amazing. You know, you just cannot force more assortment, breadth to drive success in growth. Right. You have to make sure your digital footprint is clear. Customers can navigate your digital assets smoothly without friction when they come to the stores. The pickup experience is easy or delivery experience is easy. Substitutions are well communicated ahead of time to the consumer. There's so much shift happening, but at the end of the day, I'll end with saying loyalty has to be earned for every trip, every basket, and every one item that the shopper chooses to put in the basket, no matter whether it is physical or digital.
- [27:06]
B
All right, let's move into private label. We started skimming the surface of it. We need to get into it because it's one of the loudest, silent topics of the entire conference. It was everywhere and it was nowhere. It's crossed a credibility threshold. Consumers don't see it as a compromise anywhere. Gentlemen, is private label here to grow?
- [27:23]
C
So, first of all, Sri, you know, I believe we should not call private label as private label. We should be calling it as private brands. And there's that cognitive shift. Right. Private label meant that you were just delivering opening price point items to the consumers.
- [27:39]
B
Right.
- [27:40]
C
Private brand is something that the retailer owns the brand overall for the customer. Right. And really activates the whole full funnel in order to deliver the shopper needs. So there's a huge shift that's happened in the industry over the last 10 years, largely driven as a defensive strategy based on some of the discounters who came to the market and how the supermarket retail were forced to adapt to it. But now what we are seeing is some amazing work on private brands that's being delivered not only from a pricing perspective, but from a packaging perspective, functional perspective, nutritional perspective, health and wellness perspective. Right. There's so much work that's happening. The one area I believe that we all need to talk about as an industry is the role of the two growth engines, private brands and digital. Nobody's disputing private brands and digital channels are growing. Right? But what happens at the intersection of those two growth engines for the industry? And I was fortunate to be working alongside with FMI and Cornell University students and Nielsen IQ to really take a look at what the data is saying. To our surprise, when we started looking at the research, our hypothesis was private brands was underdeveloped in the digital channel because retailers have not really focused on the shelf taxonomy, or whether it is the retail media aspects of it or advertising dollars because that's what the industry told us. Private brands in a digital is not a media focus, right? It's been a quality and pricing focus. But what we uncovered is that the consumers were choosing private brands at a much higher rate than any effort that was being put in. So that's a big signal to the industry, and I will call upon the leaders to take notice of it, that the consumers are shifting behavior on the two engines of the industry that's driving growth. So no longer we can sit back and say, okay, this is not important. So if you're a retailer, you got to invest more on your digital channels with private brands. And if you are a brand, you need to partner up with complementary private brand categories and give more solutions to the consumer.
- [29:45]
A
So let's bring these two things together in a very clear example that should get the attention of national brands, okay? Even though private brands are not getting the level of investment that national brands are, they are benefiting from digital in this specific way. And I've talked about this on a previous episode of the podcast in several instances, actually. Some research done by a Dallas based organization called Magid in 2018 showed that in a survey of 2,000 private label shoppers that the single biggest driver of conversion from national brands to private label is actually positive customer reviews, user generated content. It can be in the form of what you see on a PDP. It can also be what you see on TikTok and Instagram, right? That is consumers saying, I tried this product, I like it. Right? The biggest obstacle to adoption of private brands. You talked about it, Prague. It's the quality issue, right? And for years people wouldn't try it because they didn't know. Is that paper towel going to disintegrate the minute it touches water? If it is, it has no value to me. Well now guess what? I can go on to any retailer that has UGC and I can see that a thousand people have tried out that product and guess what? They all like it. You know what? If, if now I'm able to address the quality issue head on from a digital perspective, because if they're available to me on my phone, guess what, I'll start buying that product. And once I, once I've actually tried the product and I find the quality is as good or better, then guess what? I'm not going back to the national brand. Because now the price component kicks in. Once quality has been overcome, the price component takes in national brands. If you don't create products that are better than private label, the digital age is going to show that out and you are going to get replaced. And that 5% slip in the last five years, center store growth or center of store share, that's just going to continue. National brands pay attention. Consumers like private brands and they're able to share this information with each other in very easy ways.
- [31:49]
B
Here's what's pretty clear, guys. Private label is here to stay. Parag is already kind of sad and we kind of alluded to it many times on our show, let's call it private brands. It's not just a price issue, it's a credibility threshold and private label has already crossed that. Consumers don't see it as a compromise anymore. It's in baskets. It's just life. Private label brands or private brands are now barter shopping trips and baskets and households and forces brands, national brands of scale, ones that we've had on the show, to answer a much more uncomfortable question. Why should I pay more for you? And because you recognize the logo, as I mentioned, no longer works. So with that, we know private label is here to stay. Brands need to learn to work with private label. Now let's go to a topic of the day and a niche of the CPG guys. Retail media, very different energy this year. What do you think, Peter?
- [32:38]
A
You know, Sri, a couple weeks before FMI, I posted on LinkedIn that if you were a retailer and you were not bringing your RMN with you to fmi, you were doing disservice. Because recent research that our dear friend Sarah Marzano, an emarketer revealed is that most of the decisions being made on retail media investment, certainly beyond Amazon and Walmart, are being made by the customer team. So it was a big deal. And if you there were a couple of retailers that showed up without their RMNs and I was like, why are you walking away from this opportunity? This is what this is exactly who you need at this just bring in the old merchants and trotting them out to have the same old conversation without recognizing the value that retail media delivers to the omnichannel experience, not just the digital online experience. Missing the boat Sree.
- [33:30]
C
That's my thought and great points, Peter, and I'll jump in as a former merchant now and I've learned so much from both of you over the years about retail media and its trajectory. And even this past week alone I learned like, you know, retail media has not been here forever, right? It's like just 14 years old. It's still nascent in its growth, but when you look at the amount of dollars that are flowing through the network 74 billion, projected to be 100 billion and I believe couple of years. That's a lot of money in a $1.4 trillion industry that we are talking about. So how do we use that to the advantage of our shopper? Right. Yes, it's great gross profit for the retailers. Yes. It's a great opportunity for the brands in terms of leveraging the traffic in the retail worlds, which is an audience in the retail media world. Right. And to unlock not only top of the funnel but also bottom of the funnel activation. Right. So there's a lot of opportunity. But I believe collaboration is required. Joint view on measurement is required. Manish, who's our partner, she and my partner in Think Blue along with niq presented a new measurement model at FMI Midwinter which was extremely well received, I believe. But those are the new standards I believe that will move the industry forward, but it will not happen without evangelists like you and Sri Lanka who are really talking about the role of retail media and what it's required. But it has to be done with a very clear laser focus in collaborating between two partners in the service of the mvp, which I've been talking about all day. Service of the mvp, the shopper.
- [35:10]
B
You know what, let's get to the measurement challenge of the day. Right. So the great reckoning of retail media today is value ROI, those old school measurement models or CPM, et cetera, ROAs, et cetera, outdated. They built for different media channels and they've come into retail media in a profound way. The most important thing right now is incrementality. So let's not use the word incrementality for fun or just throw that word out there because it's a fun word to use. Let's be very specific. What are brands looking for? They've lapsed households over the last two years with the SNAP, EBT, GLP1 the many forces, economic forces in the country. What they're looking for is somebody who hasn't shopped at your store before for my brand. Are they shopping for that store because of the retail media ad? That's incrementality in the simple English language form. Or somebody in the category who's shopping, you not shopping, you may be through an off site campaign is now buying it, who wasn't buying my product. The bottom line is wasn't buying my product incrementally. Therefore, I think is one of the most important words right now in retail media. Do you guys think the industry is providing incrementality to the extent needed and do retail media networks truly understand embrace incrementality because that means giving up attributed data.
- [36:25]
A
I don't think they're going to get the dollars from the brands anymore unless they give them the transparency and the incrementality is measured according to their needs. Example, okay, when I think about running a campaign on soda, right. My look back window, right. Is substantially different than someone who is selling an HDTV because I'm buying milk every week, right? So my look back window might be a week, two weeks. If I'm buying an hdtv I want a five year look back window, right? Because that's going to tell me, right. In the realistic understanding of what is the buying cycle for a product in a category. So I need a lot of things and frankly as a brand I've gotten accustomed to to the transparency of measurement in lower funnel product search ads. Very quick, very precise, right? And I'm expecting that level of or something closer to that level of measurement when I'm talking full funnel advertising, right? And so guess what? Retail media networks, you kind of, kind of spoiled them. You gave them something really valuable and now they expect that across the full funnel. And while you can't do that for some of the more upper funnel awareness things, you gotta get closer to the performance marketing measurement across the entire funnel.
- [37:49]
C
Peter. Very well.
- [37:51]
B
I would love for you to jump in with now you're a retailer and you're a merchant and you reach this delivery of no more free dollars, no more easy dollars with high margin. What do you do? What do you challenge your RMN team to do?
- [38:02]
C
Yeah, Sri I as a merchant, right. You know, there was one day of recognizing that it was going to come at some point of time, right. And I still believe the industry needs to work on this. I still believe that retail media and merchant activ separated like a church and state. I don't think so. There's a lot of collaboration that's happening between two areas to the degree that is required. And at some point of time the cost to serve the retail media ads will be so expensive that brands will pull back unless they see through incrementality across the board. And I'll give you an example. If your cost to serve an ad is 65 cents for an item that retails for 199 it's going to be hard to justify in the long run to continue those investments, right? Retail media is just one piece of the bucket. You have trade dollars, you have marketing dollars, you have shopper marketing loyalty dollars, supply chain dollars. There's so many activation points going into retail that it's going to be hard to justify. So I've always believed when it is a fragment, a small fraction of your total business, it gets away with it. But when it becomes large, like $100 billion, a lot of eyeballs will be on it. CFOs and CEOs will start demanding performance and ROIs. And we are at that stage already, I believe, but the industry will start demanding going forward in 2026 onwards.
- [39:26]
B
But we've acknowledged here on the CPG guys, in this very conversation, omnichannel is the biggest area for growth for any CPG or retail go forward. It's probably the area of growth. Can you do that without retail media guys?
- [39:38]
A
I don't know how you're going to address the ability to target upper funnel activities like awareness and discovery when you don't have linear television as a primary driver with reach. So I think retail media, particularly in store retail media, is going to be a critical driver for physical store growth. That's going to be a mechanism that brands are going to increasingly have to turn to because they don't have Sunday newspapers and they don't have have cable television anymore to drive their message.
- [40:12]
C
Yeah, I agree with Peter, but I also see it a little bit differently, right, and let me give you a very basic example. When it comes to a physical store, right, the retailers are trying to get traffic to the store footfall, right? That's a measure that's being used. Once the customer is in the store. Look at the activation points. You have signages, you have billboards, you have displays, you have shippers, you have end caps, you have coolers, you have so many activation points, there's a cost involved. I consider that part of media that's part of overall application to the consumer. Now you take that and put it in the digital and realm, right? That traffic is audience. And when that customer comes to the website or app for shopping, there's a media opportunity. How can you do it without that, right? You know, when you make it analogous, it becomes very simple to understand. And that's why retail media is an important lever in driving the omnichannel growth. And because when we say omnichannel, it's not only digital. While that channel continues to grow, the halo effect of omnichannel from a loyalty perspective is huge to the physical store environment. So I will ask our audience to not only look at channels, start looking at your customer loyalty segments, your primary customer, your secondary customer, your tertiary customer, and you'll find omnichannel is very pervasive in the loyalty building activities.
- [41:36]
B
Peter, you're next with technology and operating model strain.
- [41:41]
A
All right, Sri Parag, I think we had a very good discussion there around retail media. Let's talk more broadly about technology, artificial intelligence and the strain it's putting on retail operating models. Right. AI was present at fmi, but I don't know about you guys, it was a bit of a yawner. What do you think, Sree?
- [42:02]
B
Yeah, so by. But first I want to acknowledge having the conversations and being present in so many conversations and across the conference itself is progress in the first place. The hype days are over, right? No longer can someone walk into a room and say AI is going to change everything. I think the conversations were much more on the ground. What is AI? An acknowledgement that this industry is long ways to go to play catch up, but an acknowledgement that AI is going to impact us in many ways. In fact, I think the three of us are the opportunities to sit through a closing keynote panel which featured Mark Baum from FMI as well as Dan o', Connor, along with a person from Walmart and Kimberly Clark, cio. If I remember where they said it's more of a 2728 impact, I don't think it's more of a 2728 impact. AI is in action today. You know, when guys like you, me and Parag are starting to use it in our everyday life just for productivity. It's already here. Now, productivity is one thing. Shopper journeys are a different thing. But AI is already here, I'd argue.
- [43:00]
A
Well, sri, here's what I would say. What was clear is that there's still a lot of data fragmentation. If you don't have data, what good is your AI? You have nothing to point it to, to take a task and actually achieve something important. You know, our friend Shias Ahmed published some research saying that, listen, the most important thing that brands and retailers should be doing right now is having a very clear and very capable clean room strategy. What does clean room have to do with this? Well, clean room has to do with the ability to go beyond just the data, the publicly available data that most large language models like ChatGPT and Gemini have to use to help you make decisions. You need to go beyond that and access proprietary data that your competitors don't have access to. That will allow you to differentiate and get a better app outcome than someone who has exactly the same data assets as you do. And if so, if you're not right now working on you Certainly should be heavily involved in Amazon marketing Cloud, the most famous clean room there is in the CPT space. But I know that Instacart just announced one. Everybody's coming out with their data clean room. You have got to start thinking about how you take all of the retailer data sets, your own proprietary research data sets, and really inform you, and that will make the work that you do around AI, from the most mundane stuff to the most creative stuff, that much more powerful because you have ingredients that your competitors don't have. You're going to be able to bake a better cake.
- [44:39]
B
So one thing I do want to mention about clean rooms for data sharing, data attribution, and the previous retail media conversation we have, Clean rooms have to be here in a meaningful way.
- [44:49]
C
But who.
- [44:49]
B
Who is genuinely offering clean rooms and sharing data in ways that is moving the industry forward? I don't know of anybody. Very limited for given campaigns only.
- [44:59]
A
Well, I would say, Walt, I would say that Amazon clearly is. And in fact Amazon's clean room, as our friend Kira Sharma said to us a couple of years ago when he was on the podcast, the only limitation that Amazon puts on its clean room from the user perspective, is you cannot actually produce an identifiable household. Short of that, anything you can dream up, you can find. Now, if you want to create an audience that includes so many filters on it that you get back five households and it's aggregated, fine, but guess what? You can't activate on five households. So you just need a clean room that allows you to segment this data, use the information, the proprietary information, mixed with, with the other assets, the, the first and third party, even the zero party that you have, and build audiences that are still sizable enough that you can address them and actually get a measurement and see the needle move. That is the most important thing about the clean room.
- [45:56]
C
Now, guys, this is a fascinating conversation on AI and clean rooms. And clearly I'm learning so much on the clean room from a retail media perspective from you both. But I want to take a step back and talk a little more about technology before I talk about AI and data. I think Sree and I were fortunate to be in a couple of rooms at Midwinter where the board, members of the board were present and there were some conversations around the strategic imperative issues of the future. And I was delighted to see that as an industry, the board has picked technology transformation as the number one imperative issue. Right. That means a lot in terms of where the industry is headed. So, number one, there's clear recognition and acceptance that technology is here to stay and it's going to transform us in meaningful ways like we have not seen before. Number two, there was recognition and acceptance around we need to do something about it. And third, it was beautiful to see the vision of leaders at FMI like Mark Baum and Doug Baker come to life when they officially launched and announced Grocery Lab 2026. I would like to talk about that as Sree, you and I are part of the founding committee advisors of Grocery Lab. So we are passionately involved in it. But the ethos and the mission of Grocery Lab is designed to remove friction for the shopper at the speed of technology. That's a powerful statement that has been created by FMI and giving leadership to the industry on where we are headed. And Grocery Lab is not just another tech show or a tech event. It's an experience. Experience in the service of the shopper where the goal is to bring commercial teams, merchants, marketeers, sales leaders, supply chain leaders, operating leaders right together and use technology to solve real time problems like intelligent merchandising and assortment, omnichannel profitability and use AI in the service of the shopper. Right. So I'm very excited about it and I believe the industry is going to benefit largely because of Grocery Lab and I'm looking forward to see Sree. Would you like anything to add on Grocery Lab app?
- [48:06]
B
Pretty straightforward Parag. If you're a brand or a retailer you probably want to get more news. Just go to the website, check it out, get curious, be there influence change in the industry. The hub and hub and spoke model system that was quite discussed is a big deal. Get to understand the 7 experiential lab. But I'm going to come back to the role technology will play in our industry go forward. A complete acceptance that it'll be everything from productivity all the way to optimization all the way to forward looking advertising which is a big deal. Shopper marketing which is a big deal. Merchandising like full 360 or the shopper and retail operations as well. Technology is here to stay. Don't be that Luddite that actually is out of touch with technology. It is the future of our industry and it's well on its way. So let's start wrapping up this episode here and I'll jump into the quiet reset between the retailer and CPG relationships. One of my biggest takeaways was a reset in those retailer brand dynamics. What do you guys think?
- [49:05]
C
Completely. You know sri and this goes back to our memories from about four or five years ago when we met at Midwinter and looked at the joint business planning process right. Within the industry and how it which at one point of time was an enabler in moving forward the conversation and creating partnership frameworks has now not evolved with the speed of technology. Right. Today we have retail media, we have omnichannel, we have AI and data harmonization. There's so many concurrent activities happening in the service of the shopper who also engages with us very differently. Right. And we have talked a lot about it through the episode today. So the framework that we put forward at FMI Midwinter this year about evolution from JVP to JVC joint value creation. I am particularly excited about what it will entail in bringing trading partners together, service providers together, have transparent dialogue. Like everything that we have talked about in today's episode comes together with joint value creation. Because the focus will be on activities performing in the service of the shopper, not only talking about trade rates, market share and lagging indicators like profitability and top line sales and shipment. Right. So very excited. Enjoyed presenting that in a couple of rooms with you. I'm looking forward how this bears in the industry.
- [50:27]
B
Mr. Ban, what did you hear?
- [50:28]
A
All right, so two things to a lesser extent, the shift from total retailer dominance of the relationship has been around for about 75 years. But two things have happened that have changed that dynamic and move things back in the direction of the brand. Not entirely on the side of the brand, but in the direction of the brand. Number one, marketplaces. Marketplaces crave assortment. The one thing the manufacturer controls is the assortment. Price pack architecture is at the discretion of the brand, right? So as marketplaces launch, you're looking for the entirety of the assortment so that you can offer your consumers everything, right? You want them, if they want to get Neutrogena, they want, they want, you know, they want to have the, the retailer wants to have the entire assortment, whether it's coming to them 1p or 3p. So that's one thing. The other thing is retail media, right? For the better part of 75 years, that one person had a checkbook with the retailer, they bought the product. Guess what, they're now selling something and the brand doesn't have to buy that. That means that they have to get to a point where not just the retailer is winning, right? Because let's be honest, for a long, long time the retailer basically dictated how the trade funds were used. And brands just had to accept the fact that this was the cost of getting their product into distribution. You know, now they have control over the checkbook and they have control over their marketplace, fundamentally changing the equation so that we can get from JBP to jbc. Because now both sides have a vested interest and the way that they both succeed is to the point Prague make you focus on the consumer.
- [52:05]
B
Awesome, guys. So I'm going to help close this episode with a quick synthesis. This Midwinter wasn't about innovation, not about disruption, wasn't about transformation theaters of any sort. It was about the discipline. The discipline in the learning that growth is harder to come by, costs are higher in costs, loyalties become much more harder to gain from the consumer and complexity is getting more expensive. So the industry is shifting from expansion to execution, from ambition to focus, and from storytelling to actual proof of roi. The grocery industry isn't and it was never broken. But the assumptions, many of those that it was built on over the course of time are getting deeply challenged now. What do you think, Peter?
- [52:45]
A
I think that was concise and I think it was spot on. Sri.
- [52:48]
C
Yeah. And sri it is point on accurate.
- [52:51]
B
Right?
- [52:52]
C
It's not a retreat, it's a recalibration. In the service of the shopper.
- [52:56]
B
All right, Final word episode goes out Wednesday. Today it's out. What should someone do Monday morning next week?
- [53:03]
C
My first take would be simplify your operating model skill initiatives that have low roi. Invest in relationships. Very important. You know, that's, that's what drives our industry. And at the end of the day, execute, execute, execute in service of mvp. A shopper.
- [53:22]
B
Peter.
- [53:22]
A
Yeah. Don't do things for show, for ego, for ambition. Focus on doing it right every single time. Stay on target, get the job done.
- [53:33]
B
So Midwinter 26 FMI. Less flash, more fundamentals, more focus on growing together.
- [53:39]
C
All right.
- [53:39]
A
Parag Shah, Think Blue Consulting. Thank you for joining us. And you and I need to have an off camera discussion about how we cut out this middleman. You know what I'm talking about.
- [53:49]
C
Always a pleasure, Peter. Looking forward to meeting you next time.
- [53:52]
B
Yeah, and to our listeners if you are there, we'd love to hear what resonated do chime in as always. You can always direct message us like you already do today. And feel free to comment on our LinkedIn post as well. And let me remind our listeners, you can find all of our content by simply going to a web Browser and typing cpguys.com as the URL. If you or someone you know has something to contribute to this ongoing discussion on the CPG guys, drop us a line at contact@cppg guys.com to our audience. Thank you for the clicks, likes, comments, direct messages, meeting us at trade shows, coming to our events, recording episodes with us and our sponsors. We're always grateful for you. The show doesn't exist with all of you. You work with us all year and we're grateful to have you as our audience of partners and which keeps growing by the hour, by the day. Thank you. Parag and Peter, thank you for joining me today. And that's a wrap of this episode of the CPG Guys. Foreign.
- [54:50]
D
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