Guide to CPG Industry Trends
Rising Trends in the CPG Industry
The consumer packaged goods (CPG) industry spans many sectors, including food and beverage, pet supplies, nutrition, cosmetics and toiletries, consumer electronics, cleaning supplies and homewares. While each category has its own demographics and marketing strategies, CPG companies often borrow tactics and strategies from one another. A new trend in the food and beverage market can lend itself to a pet supplies brand and vice versa. The CPG industry also caters to the mass market, both in the brick-and-mortar retail landscape and, increasingly, online.
Therefore, a few broad trends span most CPG sectors. Some of them include:
- A shift towards online marketing and e-commerce.
- Eco-friendly packaging, retail displays and business practices.
- New direct-to-consumer brands and purchasing options coming from traditional CPG companies.
- More stable, diversified and resilient supply chains.
A Quick Primer on the CPG Industry
Consumer packaged goods include any merchandise that customers use and replenish often, such as snacks, drinks, makeup and hygiene products, paper goods, pet food and cleaning products. They are usually sold in individual packaging, traditionally in physical stores such as club stores, pharmacies, grocery stores and big-box retailers.
The CPG industry is vast because it includes so many seemingly different categories. Before we dive into the latest CPG trends, let’s talk a little bit more about the industry as a whole.
- What is a CPG company? First, it’s helpful to distinguish between a CPG company and a CPG brand. The largest CPG companies often encompass hundreds of CPG brands. For example, PepsiCo is a CPG company that includes many individual brands, such as LAY’S®, Pepsi®, Doritos, Tropicana®, Quaker Oats and many more. The brands are the consumer-facing products lining retail shelves, while the CPG company is the overarching organization driving strategy.
- How big is the CPG industry? The size of the industry as a whole can vary depending on what companies you count as CPGs. According to the latest numbers from the Consumer Brands Association (CBA), the CPG industry had a total market size of $1.53 trillion in 2020. CBA also estimated that the industry contributed $2 trillion to the U.S. GDP in 2017, alongside 20.4 million jobs and $1.1 trillion in salaries, wages and benefits. Data for the first quarter of 2021 indicates that the industry continues to surge, achieving 8% year-over-year growth and totaling $1.62 trillion in projected annual sales.
- What is the difference between CPG and retail? The CPG industry includes the manufacturers, sellers and marketers who deal with the physical CPG goods. Retail is the sale of those products to end customers, either at the store or online. CPG companies usually work with retailers such as grocery and big-box stores to sell their products. They might also partner with e-retail giants like Amazon.
- What is the difference between FMCG and CPG? FMCG stands for “fast-moving consumer goods.” It is a subcategory of CPGs. For example, cans of cat food that a consumer buys weekly could be considered an FMCG. In contrast, a container of kitty litter that a shopper replenishes once a month is still a CPG but does not sell fast enough to be considered an FMCG.
What Will I Learn in This Guide?
In this guide, you’ll learn about some of the major trends influencing the CPG industry, including:
- How the digital transformation is driving e-commerce and digital marketing for CPG brands.
- Why sustainability is so critical for CPG companies, and how to incorporate sustainable practices into your business.
- How traditional CPG brands are adopting direct-to-consumer (DTC) e-commerce strategies.
- What CPG companies are doing to bolster their supply chains and tackle some of the unprecedented supply chain challenges they face.
We’ll highlight each of these trends by the numbers, some of the well-known CPG companies and brands succeeding with these new strategies, and how your organization can do the same. To see how Creative Displays Now! can help you incorporate these CPG industry trends into the brick-and-mortar retail landscape, get in touch with us today.
Chapter 1: CPG Brands Are Finding New Audiences Online
The internet is changing the way CPG brands reach and sell to their audiences. In the past, the CPG industry was slower to adapt to the growing e-commerce sector. While they dominated retail stores, many CPG companies struggled to convince customers to do their grocery shopping online or pay for shipping on small, frequently replenished goods like CPGs.
Today, new developments have jump-started many CPG companies’ digital strategies. They’ve found new online marketing tactics that help them drive more traffic to physical and online stores alike. And, as their retail partners incorporate e-commerce strategies like click-and-collect and shipping to customers directly from stores, CPG brands have new opportunities to enter the market. Some brands are even opening new sales channels on popular marketplaces like Amazon, joining the world of e-commerce for themselves.
The Rise of CPG E-Commerce
Until recently, CPG brands have been less susceptible to the seismic shift toward online shopping. Once, it didn’t make sense to purchase these low-cost consumables online because customers often replenish them on their weekly shopping trips. And even today, many shoppers are still doing just that. However, consumer attitude is changing as e-commerce becomes faster and easier to use. E-commerce has also introduced new options such as free shipping and click-and-collect, making buying CPGs online more feasible.
What Percentage of CPG Sales Are Online?
E-commerce has been steadily growing in popularity for years. In 2015, e-commerce accounted for 7.4% of global retail sales, rising to 13.6% in 2019 and jumping to 18% in 2020. Even amid these jumps in online sales, physical retailers could still count on strong sales for CPG products, which are consumable and need frequent replenishment. In particular, food CPG products were slow to gain traction in e-commerce as they are the most traditional grocery items.
Because of the recent trends in online sales, CPG brands now realize that e-commerce is a critical market with a high sales growth potential. Experts estimate that in 2019, 4%-5% of all CPG sales in the United States occurred online. By 2022, experts expect that percentage to rise to 10%. Meanwhile, e-commerce CPG sales exploded in 2020, growing from $31 billion in 2019 to $66 billion in 2020. If these trends continue, we can expect a sizable percentage of CPG sales to occur online from now on.
How Is COVID-19 Affecting CPG E-Commerce in the Long Term?
As the trends for 2020 indicate, COVID-19 had an enormous influence on CPG e-commerce sales. As restrictions on store capacity and consumers’ hesitations guided shopping decisions, many people chose to shop for groceries online for the first time.
More than 22 million consumers bought groceries online for the first time in 2020. Those new customers boosted the share of households buying CPG products online to 40%, up from 27% in 2019. In non-food categories, the percentage rose from 45% to 60%, and in the food category, it rose from 19% to 32%. In the 52 weeks ending November 30, 2020, online food and beverage sales spiked 125%, accounting for 12% of all food and beverage sales. Across all CPG categories, analysts predict e-commerce growth to continue.
Buying groceries online, using either click-and-collect or at-home delivery, has changed the way shoppers think about their grocery shopping. Before the pandemic, many shoppers associated CPG products with their weekly trips to the grocery store. While they first tried grocery shopping online to avoid long waits or crowding in a physical store, they’ve now gotten used to it.
Recent data shows us that shoppers who buy CPG products online steadily increase their basket size over time. In 2018, the average online CPG buyer spent $321. In 2019, it was $348, and in 2020, it rose to $501. With so many shoppers buying CPGs online now for the first time, we can expect them to increase their spending, too. Forecasters estimate that online CPG sales will grow to $103 billion by the end of 2021.
It’s also critical to treat online CPG sales as an additional sales outlet rather than a replacement for physical retail. Even amid the most significant e-commerce boom the CPG market has ever seen, the majority of CPG sales still occur in brick-and-mortar stores. CPG brands are finding new audiences by creating products especially for the online market while enjoying strong performance for their mainstays at physical and digital storefronts alike.
The Rise of Digital Marketing for CPG Brands
CPG products are typically associated with brick-and-mortar retail. As such, at grocery and big-box stores, CPG brands line every aisle with point-of-purchase (POP) marketing and colorful packages that stand out in a crowded store. Successful CPG companies also need to drive demand outside of the point of purchase and have always had a diversified marketing strategy that includes television and print ads.
Digital marketing has also been a critical part of CPG companies’ demand-generation marketing, which is gaining even more importance. In 2020, consumer products brands spent an annual $19.4 billion on digital advertising, up from $13.13 billion in 2017. In 2021, CPG brands will invest a total of $22.58 billion in digital advertising. While many brands have found success marketing CPGs online, the CPG e-commerce transformation heightens the need for companies to find new audiences online.
How Does Online Marketing for CPG Brands Work?
Marketing products online is a complex, constantly evolving job. Trends in internet user behavior pop up rapidly, as do new digital channels. CPGs need to keep up with the evolving digital landscape and continuously adjust their strategy.
For CPG marketers just starting, some of the basics include:
- Gather more audience data: In digital marketing, brands must go beyond age and gender demographics. The e-commerce explosion is an opportunity to collect detailed customer data. To start, use data from online purchases and shoppers’ online activities to inform your customer personas and craft personalized marketing messages for your distinct audiences.
- Use location-based messaging: Current events often affect consumers in different regions differently. A well-crafted message might perform well in a particular area while falling flat in another. Develop specific campaigns that speak to the current concerns of your customers in specific geographic areas. In the digital world, it’s easy to target users by location. You can even show users ads when they’re closer to a retail store. Among marketers who use location-based marketing, 85% see growth in their customer base, and 77% gain a deeper knowledge of customers.
- Use many outlets: Digital marketing offers many channels, such as search engine marketing, social media and paid advertising. Diversifying your digital strategy will help you reach audiences wherever they are online. E-commerce shoppers often provide their email when they check out online, giving your brand the perfect opportunity to build its email list.
How Are Brands Developing CPG E-Commerce Strategies?
How can CPG companies catch up as online sales take off? The key is in developing a solid e-commerce strategy, which can include the following:
- Go omnichannel: E-commerce for CPG brands can take many forms. Some brands may create specific e-commerce stores for specialty, online-exclusive products. Others may sell all their regular products through their website. Meanwhile, they may also be selling their own products through marketplaces like Amazon. In addition to their own online selling, many CPG brands also partner with retailers who have already developed shipping and click-and-collect solutions. With so many ways to shop online, CPG companies need to have a strategy for every digital sales channel.
- Prioritize product reviews: A respectable collection of positive reviews can attract more online shoppers. Digital shoppers aged 18-24 expect 203 online reviews for a product they’re considering. Many digital and omnichannel marketplaces feature user-friendly review sections on product pages, a crucial marketing avenue for any CPG product. If your brand is new to e-commerce, it’s critical to gain more online reviews. Consider asking previous purchasers to share their thoughts or even incentivize them for their feedback.
- Partner with retailers: Since CPG brands still gain many sales from brick-and-mortar retail, your e-commerce strategy should embrace retailers rather than compete with them. Omnichannel retailers like Target and Walmart could be a crucial source of e-commerce sales. You can also use your retailer’s media to target your customers. For example, some CPG brands offer an online-exclusive deal through a retailer’s loyalty program. They can also take advantage of retailer’s customer data to target the right shoppers and personalize their messaging.
Common CPG E-Commerce Challenges and How Brands Have Overcome Them
The increasing focus on e-commerce in traditionally brick-and-mortar product categories create new challenges for CPGs, such as:
- Logistics: Getting CPG products to customers’ doorsteps is different from delivering in bulk to major retailers. Working with retailers whose store operations act as both the point of purchase and fulfillment centers can help. If selling directly to customers rather than relying on retailers, CPG companies need to invest in transportation, warehouse and fulfillment operations.
- Growing competition: Every business is recognizing the potential for reaching new markets online. With so many CPG companies embracing e-commerce and using digital marketing to enhance their customer targeting, brands need to do more to stand out. The best strategy for large CPG brands is to diversify their product offerings to create offerings marketed and packaged for particular customers.
- Blending digital and in-person shopper experience: Part of the omnichannel strategy is engaging shoppers wherever they encounter your products and brands. A CPG brand’s digital messaging and presence must be consistent with the messaging customers interact with elsewhere.
Creative Displays Now! can build creative retail displays that play off your digital campaigns to ensure consistent, omnichannel retail messaging. When your POP displays work off the same messaging as your TV, print and digital marketing strategies, customers can recognize your products and brand on store shelves no matter where they know your brand from. If you’re interested, contact us to get an estimate on your project.