3 Trends Changing the CPG Industry
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Estimated reading time: 3 minutes
The Consumer Packaged Goods (CPG) industry is one of the largest in North America, worth nearly $2 trillion (Investopedia). While there was a time that CPG brands were “firmly attached to the local brick and mortar shelves”, new digitalization and technological disruptions are changing the CPG industry (shopkick). We will explore these trends, and how they are affecting the distribution and transportation of goods.
Online Sales and The Impact of E-Commerce
As recently as 2013, online sales of CPG products accounted for as little as 1% of total web sales revenue; however, it’s anticipated that by 2025 that will jump to 20%. The widespread use of online ordering, coupled with a growing consumer dependence on technology, has led to a major shift in how consumers make purchases (shopkick). With online shopping becoming increasingly popular, CPG brands can reach many consumers that they could not reach before. While this is a good thing for sales, it adds complexity to the supply chain due to volume overflow, more lanes, more carriers, and shipping into new or remote locations. A study by the Grocery Manufacturers Association and the Boston Consulting Group found that CPG companies’ on-time delivery rates were far lower when delivering into smaller-format retailers—especially online retailers—as opposed to traditional retailers and mass sellers they are used to (BCG).
Network optimization is key, and there are a number of ways manufacturers are revamping their distribution strategies to combat this issue, which you can read more about in this blog post.
Millennial Consumers’ Changing Preferences
Millennials will spend approximately $65 billion on consumer-packaged goods over the next decade, which makes them very important consumers for CPG manufacturers and retailers (Forbes). Millennial consumers are concerned about many things that previous generations were not.
- Fresh and Convenient
As we mentioned above, online sales cause consumers to want items on-demand. Brands can take this into consideration when it comes to food. Providing fresh, fast, and convenient options that can be delivered straight to a millennial’s doorstep would be a big advantage for companies.
Millennials want to purchase brands that are environmentally friendly, with a focus on corporate responsibility. Forbes uses the example of a package that allows consumers to only open and use what they need. Often, brands do not even have to make a change to achieve a more sustainable business; they just have to be more transparent with their consumers.
- “Visual Eaters”
It is no surprise that younger generations spend a lot of time documenting their lives on social media, and food is no exception. Brands should use packaging that is visually appealing to and encourage millennials to share the product on their social media channels.
- Added Benefits
This generation is concerned with the “extras” that a product can provide. For example, if a product can promote healthfulness, energy, motivation, etc., millennials will be more likely to feel an emotional connection with the product and become a loyal consumer.
Transparency’s Impact on Customer Loyalty
Modern day consumers don’t just want information about a product, they want full transparency into the company that makes the product (shopkick). From product reviews and recommendations, to ingredient visibility, to sourcing, to a company’s philanthropic efforts, it is important for companies to be honest and share their story. An example of a company that is reaping the benefits from their transparency with their consumers in Ben & Jerry’s. They are vocal about paying their employees double the minimum wage, they are so passionate about community service that it is a part of their mission statement, they use non-GMO ingredients, and more. Ben & Jerry’s decision to create transparency has created loyal customers because they feel as if they have a connection with the brand (StiboSystems).
With these trends changing the industry, now is the perfect time for CPG companies to rethink their supply chains and brand strategy to accommodate the boom in online sales, millennial consumer preferences, and the push for more transparency. Want more like this? Subscribe to our blog to have industry news and tips delivered directly to your inbox.