Retailers are facing significant shifts in how they utilize shelf space and partner with brands, according to Elliot Morris, Partner with EY Canada Consulting.
Morris, who is based in Toronto, emphasized the evolving strategies retailers are deploying in a dynamic market shaped by inflation, shifting consumer values, and increasing competition from private labels and upstart brands.
“Retailers and CPGs are all trying to do the same thing, which is they are trying to create growth,” said Morris. “And the way retailers have been creating growth in particular of late over the last 18 months is to enhance both their private label or own brands where they’re going after… the cost conscious consumer.”
He explained that the value proposition has shifted, especially in the past four to five years, and innovation on the shelf is increasingly being driven by smaller niche consumer packaged goods (CPG) providers.
“That’s really focused on consumers who are looking for something novel, something different, and frankly are able to innovate at a rate that we aren’t seeing right now from many of the major consumer products players,” Morris noted.
The recent EY State of Consumer Products 2025 report found:
- 35% of consumers no longer consider brands a significant factor in purchases;
- 42% of consumers view “innovation” as a cost-cutting effort.;
- 78% of retailers believe only one mass market brand will remain on store shelves.
“For decades, scale brought success to Consumer Products (CP) companies. They built mass-market brands that people trusted, believed in and even loved. They became part of the fabric of our daily lives. And they did it globally. But the world has changed – and many big CP companies are facing a relentless drift toward irrelevance,” said the report.
“We believe CP companies can thrive again, and this report explores what that will take. At its heart is a simple but urgent choice: continue defending what’s slipping away, or act boldly to rebuild relevance with the three audiences that matter – consumers, customers (Retailers) and capital markets. That means restoring belief in your brands, your strategy, and your ability to lead, so you can shape your future with confidence because in this environment, an optimistic belief in the continuing value of mega-brands is not a by-product of success; it’s the starting point.”
Buy Local Movement Creating Opportunities
The growing “buy local” and “buy Canadian” movement is also contributing to these shifts in shelf space allocation.
“Some of the buy local, buy Canadian movement certainly does play into this. It opens up opportunity for some of the upstarts,” said Morris. “In the Canadian retail market, I think own brands in particular are seen as being closer to local or very least Canadian.”
He added that this trend erodes market share from some of the larger consumer players. But Morris was clear that the roots of this disruption run deeper than recent policy concerns.
“This has been going on for longer… certainly the roots of this have been seeded well before the tariff threat of the last six or eight months,” he said.
Between inflation and a focus on cost, major players have scaled back on innovation. “It’s been a real combination of factors which have eroded the major players’ ability to either hit cost points to maintain shelf space and/or for innovation to keep shelf space.”
This, Morris explained, “has really opened up the opportunity for the other players we described, both in the private label side, but also the upstart brands.”
Winning Over Value-Driven Consumers
With today’s consumers more value-conscious than ever, large brands must rethink how they remain relevant.
“I think there’s a handful of things for the big players to be doing,” said Morris. “One is… there’s a view that the future is going to be more retailer dominated, and so enhancing your partnerships with the retailers is absolutely critical.”
He noted that large brands are currently better positioned in terms of these partnerships, giving them a key advantage over smaller and private label competitors.
“Finding ways to enhance those partnerships, either through digital and e-comm capabilities or improving logistics or through sharing operational data I think is a place where the bigger brands can stand and fight in a way in which they’re advantaged.”
Morris also pointed to a noticeable pullback in innovation by major brands as a key area for concern — and opportunity.
“In order to be able to beat and save a lot of their shelf space, they need to be able to innovate at a rate that they haven’t been able to over the past four or five years.”
He attributes this to a combination of reduced investment and structural limitations due to scale. “If you think about the impact of something like COVID and then inflation and then tariffs — all of those impact scale players in some ways more than maybe some of the more nimble, smaller players.”
Innovation, he said, is not an area where large brands can afford to lose ground.
Retail Media Presents New Potential
“The only other one I was going to mention was retail media,” added Morris. “Which is a flavour of the enhanced retailer partnerships.”
He explained that retail media holds promise for big brands that can offer scale and simplify the ecosystem for retailers.
“Although the retailers are going to be in a privileged position of being able to have access to and ownership over some of the customer data, some of the bigger players can simplify, frankly, the retail media environment for the retailers by being scaled and having more volume.”
Despite the potential, retail media has had a bumpier start than expected.
“To date, while retail media I think has high potential, it has been a more challenged space than I think many people from two or three years ago would’ve thought it was going to be.”
A Case for Optimism
While some may view the EY report as bearish on legacy brands, Morris sees reasons for optimism.
“To me, there’s a couple reasons to be optimistic,” he said. “One is around — we know that innovation still builds traffic and loyalty. We see that in the marketplace and it’s up to consumer product companies to be able to adapt.”
He pointed to AI as a key enabler of smarter, faster innovation, stating that “data and analytics is a place where scaled investments still make a big difference.”
Finally, those all-important relationships with retailers could be the edge big brands need to reclaim momentum.
“The closer relationships with retailers is the third place that we think can be advantageous for some of the scaled consumer players,” said Morris. “And all of them are in a strong position to be able to leverage that, to be able to grow and become more profitable.”
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