ABI: RFID End-User Survey Reveals Requirements for Retail CPG, Pharmaceutical Firms

October 31, 2007 // Published as a news service by IHS

Two of the markets of greatest interest to RFID vendors are the high-growth, high-volume sectors of pharmaceuticals and consumer packaged goods (CPG), which together accounted for about one-third of the total responses from a recent end-user survey.

"We were interested in five parameters: the average current and anticipated installed base of RFID hardware; the operating frequencies being used or piloted; users' target return on investment (ROI) timeframe expectations; estimated annual expenditures for RFID systems and average annual RFID system budget allocations," said ABI Research Director Michael Liard.

In the CPG sector, because of the large base of manufacturers and the powerful influence of compliance mandates from Wal-Mart, the U.S. Department of Defense (DOD) and the Metro Group, a high percentage of companies have gone beyond testing and evaluation, and have actually installed RFID systems.

Analysts said the need to comply for many retail CPG respondents trumps the importance of price declines as an adoption driver.

In order to comply with customer mandates, manufacturers have had to adopt RFID regardless of the cost/price point. However, analysts said price reductions will exert a positive influence on future market adoption, especially as end-users become more focused on ROI and total cost of ownership (TCO) as they look beyond minimal compliance for the next stages of deployment.

"In the pharmaceutical sector, the frequency debate continues," Liard said. "Pharmaceutical survey respondents are leveraging either high frequency [HF] or passive UHF [ultra-high frequency], with some evaluating both simultaneously. Those pharmaceutical manufacturers needing to comply with retailer mandates for their OTC [over-the-counter] products tend to favor UHF over HF at the item level, due to dual-infrastructure concerns."

Source: ABI Research.