Like many of you, my holiday season is full of traditions. My favorite is making pizzelles, an Italian cookie made with a special griddle (one of the few remaining traditions from my Italian-American roots). But only slightly less enjoyable is planning for the upcoming year (I like the sense of order even if it only lasts a month or two). This time, I'm trying to beat the New Year's resolution rush by signing up for a personal trainer in December. Most of us have some type of New Year planning at work, too. With this in mind, Forrester has compiled our list of the top consumer packaged goods trends of 2005. Here's what we'll be paying attention to next year:

1. Product innovation tops the CEO's agenda. After years of focus on supply chain efficiencies, brand extensions, and acquisitions, innovation is back in the CPG boardroom. Witness Kraft's $500 million commitment to a "Sustainable Growth Path." Under this plan, new product development and marketing will fuel Kraft's projected 3% annual growth. Those are big stakes for those who will implement the plan, but help is on the way. Integrated platforms that tie product development and sourcing will provide critical support for getting these new products to market on time. As part of this trend, we expect to see some interesting pair-ups between PLM vendors like Formation Systems and strategic sourcing tools like Frictionless Commerce.

2. New RFID solutions bring down the total cost of ownership. I just hosted an RFID breakfast with nearly 30 clients, and deployment costs were on everyone's mind. As it turns out, RFID adopters aren't necessarily big technology spenders: Companies increasing their RFID efforts only spend 2.6% of overall revenues on IT, compared with the benchmark of 4.8%. Vendors, take heed. The time is right to differentiate with creative solutions that address total cost of ownership (TCO). Which vendors will offer these solutions? We saw a few potential candidates at the recent EPCglobal conference, and we're keeping our eye out on IBM's $250 million strategic investment. For insight on how vendors and users solved thorny TCO challenges for a related technology, check out our new research, "What Does The Bar-Code's Past Reveal About RFID's Future?" (featuring interviews with Alan Haberman and Tom Wilson, two men who were instrumental in commercializing the bar code in the '70s).

3. Track-and-trace apps goad global data sync and RFID spending. Global data synchronization has been a top technology priority for three years running -- and RFID pilots are adding new demands to B2B data initiatives. How can you avoid collapsing under the weight of these multiyear projects? By tying these initiatives to key opportunities for processes like track-and-trace, inventory control, distribution, and demand management.

4. Integrated marketing campaigns improve the shopping experience. In 2004, we saw some truly innovative marketing campaigns that buck the growing consumer advertising backlash. My favorite is "Unilever's Slim-Fast Challenge," which combined digital marketing, radio advertising, and instore sampling. (Who wouldn't want a free pedometer?) With these campaigns often offering a 2-to-1 rate of return, expect to see more during the next 12 months.

5. Strong analytics drive trade promotions choices. Did you know that 27% of consumer goods manufacturers saw an increase in deductions in 2004? That's one trend that CPG manufacturers can live without. We expect deduction-scrutiny to drive more investments in trade promotion analytics. There's a bright side: Brand manufacturers will have better data to fuel analytics as a result of multichannel campaigns. Why? The number of channels involved -- from point-of-sale to Web site and email -- will improve the quality and depth of redemption data.

We're using these trends to prioritize our 2005 research plan. I'll be finalizing the plan with other analysts next week. Do you have additional ideas? I'm open to your suggestions, so please drop me a note at christineoverby@forrester.com.

Happy Holidays!

Christine Overby
Senior Analyst
Consumer Packaged Goods

Research Referenced In This Issue CPG Promotions For The Multichannel Consumer (35782) EPCglobal US Conference 2004: Buzz Without Bite (35551) GS1 Global Registry Data Pool Interoperability (35452) GXS To Grow Via Acquisition (35743) How Grocery Shoppers Change With Age (35828) How RFID Adopters Buy Technology (35438) IBM's $250 Million Bet On RFID: Bold And Right (35546) Integrated Marketing Best Practices: Unilever (35453) Manugistics Energizes Logistics Client Base (35909) Marketing To Consumers: The Changing Landscape (35841) Revealing RFID's Benefits In Consumer Goods (34574) The Consumer Advertising Backlash (33834) Trends 2005: Consumer Packaged Goods (35557) Trends 2005: SCM Market Outlook (35393) What Does The Bar-Code's Past Reveal About RFID's Future? (35553) Will Consumers Thwart Left Brain Marketing? (35484)

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