Amid the hype and hyperbole around Retail Media Networks, some fundamental issues about CPG marketing spending have barely been addressed. Brand marketers have an opportunity – perhaps an imperative – to elevate the dialog about how funds should be allocated, to maximize returns and sustain mutually profitable relationships with retail partners.
Ad standards are yet to be established across the RMN universe. The allure of first-party data is compelling, but each network presents its own interfaces and definitions. Established norms around trade marketing spending – the lion’s share of marketing investment by brands – are under pressure. Beneath the surface lurk issues around fairness and proportionality, too.
THIS ARTICLE IS PART ONE of a series, originally published on CPGmatters.com
Experts contacted for this article spoke mostly on background. The consensus is that RMNs are not easy to master and that best practices are yet to emerge. They introduce a heightened degree of intricacy for brand marketers and retailers alike. Some standards may be on the horizon, but trading partner joint planning is not getting any easier.
Concentration at the Top
A relatively small handful of retailers with very broad geographies and high customer counts are sweeping up the lion’s share of retail media spending and decision-making capacity. This presents steep challenges for CPG brands. Their “brand-width” is not unlimited, after all.
The largest RMNs – Walmart Connect, Albertsons Media Collective, Kroger Precision Marketing, Target Roundel, Instacart, and of course Amazon Advertising – have each established market positions and are growing rapidly. Each has its own interface, definitions, buying process and data-sharing methodologies. Each has a unique audience story to tell advertisers. Interacting with these media channels is vitally important, and it absorbs a significant portion of brand marketers’ attention and expertise to manage those investments.
The same CPGs also depend on hundreds of smaller retailers to attain their full product distribution goals. Those distributors include “power regional” chains like Giant Eagle, Hy-Vee, Wegman’s, H-E-B, Publix, Meijer, as well as many dozens more mid-sized and independent supermarket operators, c-store, drug and dollar stores. Collectively they account for more than half of total product distribution for CPGs. Retail media network launch activity is vigorous among these retailers. too. How well they can compete for a fair share of ad revenue is an unfolding story.
For this article, we asked some sensitive questions: How well are brands aligning new retail media spending with their overall product distribution? How important is that, really, now and in the future? How will the retail-CPG industry evolve in the emerging era of Retail Media Networks?
Where Retail Media Funds Are Coming From
In its 2024 Marketing Spending Report, Cadent Consulting Group estimates total U.S. CPG marketing spending at $230 billion. Nearly three fourths of that tally, 73 percent, is funneled through retail partners.
That expenditure represents 19.5 percent of 2024 gross sales for CPG manufacturers, and it is forecast to top 20 percent in the year ahead. The lion’s share – 48 percent of all marketing spending – went to trade promotion this year, Cadent reports.
Another 15 percent went to digital advertising, a decline from 22 percent in 2019, while shopper marketing gained from 7 percent to 13 percent of spend in the same two-year period.
No surprise, retail media spending is the fastest-rising sector – from essentially zero in 2019 to 12 percent this year, according to the report.
Where are retail media funds coming from? Losing ground fast are traditional advertising, which declined from 14 percent of spending in 2019 to 6 percent in 2024, and consumer promotion, which lost about two percentage points in the same period to its present 6 percent of total spend. These changes are rather dramatic. As recently as 2012, traditional advertising commanded a 25 percent share of total marketing spend.
These figures reveal both an expansion of overall marketing spending through the retailer as well as an ongoing re-balancing of the marketing mix by CPG manufacturers.
Cadent estimates that CPG manufacturers will spend $31 billion on retail media in 2025, as retailers continue to launch new RMNs and demand their fair shares. The sources of funding are “diverse,” the firm says: “Approximately a third of manufacturers fund from marketing budgets, a third from sales, and a third using a blend.”
FMI’s Role in Conquering Complexity
With so much still unsettled in the world of retail media, CPG brands face significant complexity when it comes to managing the marketing mix and making sound, fact-based decisions about where and how to invest in them. Practical innovations are surely needed, especially the establishment of certain advertising standards and data-sharing best practices.
Retailers, for their part, are still learning to think about their shoppers as audiences and define their own roles as “publishers” of messages on behalf of brands. They know they need a fair share of retail media revenues to stay financially competitive with the national giants. More RMNs are being announced every week. This is an opportunity retailers cannot afford to overlook.
Brands are challenged to find sufficient decision-making resources that will enable them to make sound, empirical ad-buying decisions using retail media. To reach their entire audiences, it is important to align their campaigns with their product distribution, to the extent possible. They also need to understand the ripple effects retail media investments create across their portfolios of retail partners.
Mark Baum, SVP Industry Relations for FMI – The Food Industry Association, told CPGmatters that his organization is committed to helping its members and their trading partners establish standards and practices that will provide trading partners with the means to work together effectively on retail media.
“We are working now, in collaboration with NIQ, on a retail media point of view that will be ready for presentation at our Midwinter Executive Conference on January 30,” he said. The work will begin to define some advertising standards and methods intended to enable broader participation in retail media among the 1,000 food retailers that FMI represents.
All its members have a vested interest in shaping how the retail media phenomenon unfolds. Advertising units need to be defined and a common language established. To work with brands effectively, retailers need to be prepared to share first-party data in appropriate ways that enable both audience access and evaluation of campaign outcomes by brands, he explained.
Further details of the FMI’s retail media report are not being revealed until the Midwinter conference, Baum said. Its retail members will be watching intently. CPG manufacturers should pay close attention, too. The report’s release promises to signal a new chapter in the retail media saga.
Mind the Gaps: More analysis of retail media for brands on TensersTirades.com
This is part one of two parts. Republished here by permission from CPGmatters.
Next month: What Does ‘Fair and Proportional’ Mean in Retail Media?
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