When it comes to making consumers happy, size is irrelevant.
The constant evolution of consumer demands fuels the consumer packaged goods (CPG) industry. Consumer packaged goods are affordable products that almost all of us consume and repurchase often and over the short term like milk, laundry detergent and toothpaste.1 Vessella, Victoria. Secrets to Success in The CPG Industry [Infographic]. Repsly. 2019. Now, more than ever, CPG suppliers of all sizes face limitless opportunities to adapt their products to reflect consumer needs, including quality, innovation and variety.
Consumer goods are popular and pervasive, and the CPG industry contributes $2 trillion to U.S. GDP, supports one in 10 American jobs and is the largest manufacturing employer in the United States.2 CPG industry contributes $2 trillion to U.S. GDP. IFT. August 7, 2019. Experts expect market growth to continue, as consumer confidence is high. McKinsey reports only 27% of consumers are cutting back on spending today (vs. 63% percent in 2009).3 Grimmelt, Anne, Max Magni, and Alex Rodriguez. US consumers in 2019 are ready to spend—but wisely. McKinsey & Company. December 2019.
And there’s spectacular news for smaller CPG companies: in recent years, they have gained a competitive edge because Small is Big, as we shall see in this industry overview.
But first let’s look at high-level trends within the CPG sector as well as practical tips, which could help CPG suppliers to focus their limited resources to improve their chance to thrive in this exciting industry.
CPG market players
Today the CPG industry has lower barriers to entry due to the marketing power of digital search and social media.4 Infographic: Using CPG Market Sizing Data to Capitalize on Growth. Nielsen. July 11, 2019. While it’s easier to launch and promote a startup, low barriers to entry also mean more intense competition from companies large and small.
The world’s leading CPG companies offer familiar brand names you likely have in your own home. The top CPG brands by dollar sales are:
- Procter & Gamble
- AB InBev
- Tyson Foods
- Philip Morris5 The 50 largest FMCG / consumer goods companies in the world. Consultancy.uk. September 24, 2018.
Despite their dominance, CPG giants are losing market share to fast-moving startups.
As Forbes reports, since 2013, more than $17 billion in sales shifted from CPG giants to startups and 90% of all CPG e-commerce growth came from these new, smaller companies.6 Dan, Avi. The Lesson From The ‘Big CPG’ Lack Of Success: Scale Can Create A Blind Spot For Consumer Needs. Forbes. According to Nielsen, 16,000 new and emerging manufacturers with annual sales of at least $100,000 each made $145 billion in total sales in 2018. Their combined market share rose from 17% in 2017 to 19% in 2018, accounting for $2 billion in sales.7 Infographic: Using CPG Market Sizing Data to Capitalize on Growth. Nielsen. July 11, 2019. These smaller businesses are nimble, hungry and motivated to stand out by responding to consumer trends faster and better than their rivals.
Most CPG suppliers sell their products through retail chains across channels like grocery, pharmacy mass, beauty and convenience stores.
According to STORES Magazine’s annual Top 100 Retailers list the top 10 retailers in the U.S. in 2019 were:
- The Home Depot
- Albertsons8 Schulz, David P. 2019 Top 100 Retailers. NRF.com. July 8, 2019.
Major CPG product categories include:
- Food and beverage
- Beauty, including cosmetics
- Cleaning supplies
- Paper products and office supplies
- Toiletries9 Vessella, Victoria. Secrets to Success in The CPG Industry [Infographic]. Repsly. 2019.
These product categories break down even further into different types of consumer packaged goods. For instance, food and beverage include categories like cereal, salty snacks, and soda.
CPG suppliers can create products as national brands, niche brands, and even private label brands.
Private label products are made anonymously by CPG suppliers to help retailers build their own exclusive store brands to earn consumer sales and loyalty. Private label products continue to grow in popularity as consumer loyalty toward national brands declines, with 51% of Millennials saying they have no real preference between private label and national brands. 10 Pasquarelli, Adrianne. The Millennial Dilemma: The generic generation doesn’t want you. Ad Age. August 21, 2017.
Private labels represent market opportunities for CPG suppliers. For instance, Nielsen found private label products that earned the biggest percentage increase in year-over-year dollar value growth in 2018 were:
- Grass seed (282% growth)
- Antiseptic (165%)
- Pollock fish (140%)
- Insect repellent products (128%)
- Pet beds (109%)
- Snack combos (103%)
- Fragrance oils (91%).11 Infographic: Using CPG Market Sizing Data to Capitalize on Growth. Nielsen. July 11, 2019.
Emerging CPG trends
Retail buyers strive to discover and collaborate with CPG suppliers whose quality products reflect in-demand trends, including:
To differentiate their companies and earn consumer loyalty, more CPG companies are positioning themselves as purpose-led brands whose products align with consumers’ values to serve a higher purpose. For instance, CPG suppliers may show how they align with consumer lifestyles by offering products that are health-conscious, eco-friendly or local. Embracing consumer values can pay off, as research found 66% of consumers will pay more for brands making a positive social impact.12 Vessella, Victoria. Secrets to Success in The CPG Industry [Infographic]. Repsly. 2019.
Deloitte reports sustainably marketed products delivered nearly $114 billion in revenue in 2018, up 29% since 2013. 13 Renner, Barb L, Curt Fedder and Kelly Alonzo. 2020 consumer products industry outlook: Navigating Industry 4.0 in uncertain times. Deloitte. 2020. Sustainability includes responding to consumer demand for less plastic waste from CPG packaging. One-third of U.S. consumers support a tax on all plastic food packaging, and 38% would be more likely to frequent supermarkets that offer fruit and vegetables without plastic packaging. 14 Seigner, Cathy. Survey: One-third of US consumers favor a tax on plastic food packaging. Grocery Dive. August 23, 2018. To prove their commitment to sustainability, more CPG retailers earn certifications like Certified B Corporation, Best Aquaculture Practices (BAP) Certification, GOTS Certified and Rainforest Alliance Certified.
Sourcing products from minority-owned businesses is a growing trend among retailers to intentionally support CPG companies operated by women, veterans, and members of socioeconomically disadvantaged groups, among others. Industry experts predict minority purchasing power will exceed $3 trillion by 2030 and these empowered consumers may feel more willing to buy from retailers whose product assortment represents their needs and communities.15 Whitfield, PhD, Gwendolyn. Supplier Diversity and Competitive Advantage: New Opportunities in Emerging Domestic Markets. Graziadio Business Review. 2008. Top certifications that prove a CPG company qualifies as diverse include: Woman-Owned – WBENC Certification, Ethnic Minority-Owned – NMSDC Certified, MBE, Disadvantaged Business Enterprise – Government Certified, Service-Disabled Veteran-Owned – VA Confirmed and Small Business Certified – SBA(8)A Certified.
As one study found, when consumers spend $100 at a local business, $68 stays in the local economy (vs. $43 for a large business). Local businesses also create the majority of economic growth, as they employ 77 million Americans.16 Wirthman, Lisa. 5 Benefits Of Shopping Locally On Small Business Saturday. Forbes. November 20, 2017. Retailers source local products to streamline logistics processes and costs. They also seek local CPG suppliers to build goodwill by helping consumers feel good for supporting people and jobs in their community.
Blending authenticity and artistry can be lucrative. Unlike mass-produced merchandise, artisan products are made in small batches using high-quality craftsmanship and care to create unique, affordable luxuries. In Q2 2018 alone, the total value of handmade goods, vintage items and crafts supplies sold on handmade goods e-commerce site Etsy rose 20%, to $902 million, as active buyers jumped 17%, to about 36 million.17 Cheng, Andria. No More Of The Same: Why Mass Production Is Actually A Boon For Etsy, Amazon Handmade. Forbes. August 8, 2018. Among the 2.1 million sellers on Etsy, 87% are women, their average age is 39, 50% live in the suburbs and 50% of them started their business to earn money (rather than simply channel their energy into a creative outlet).18 Short, Annabelle. Craft (Handmade) Industry Stats and Trends [Infographic]. Wunderlabel. May 31, 2019.
Marketing strategies for CPG suppliers
Today, CPG suppliers invest in online marketing, which can level the playing field for companies of all sizes by giving them a chance to get in front of consumers and retail buyers.19 Infographic: Using CPG Market Sizing Data to Capitalize on Growth. Nielsen. July 11, 2019. CPG suppliers’ marketing strategies often include a website that includes e-commerce capabilities, search engine optimization (SEO) so consumers can find their companies online with ease and active accounts on social media to boost brand awareness and engagement with vibrant, visual posts. Offline, CPG suppliers also invest in unique packaging design to set their products apart from competitors’ offerings.
Successful CPG suppliers win the attention and business of retail buyers by consistently delivering strong in-store execution. They establish a field marketing team to help drive sales with product samples, and captivating in-store marketing tactics like end-cap displays, planograms and visual aids.20 Vessella, Victoria. Secrets to Success in The CPG Industry [Infographic]. Repsly. 2019.
Smart CPG suppliers work closely with retailers. As Nielsen advises, “be as transparent as possible in the data you share with retailers,” including consumer and competitive insights. Collaborating with retailers through strategic partnerships is a worthy goal, as retailers and suppliers share their synergies and insights for mutually-beneficial outcomes, including top-line growth, cost savings, and a competitive advantage.
Above all, successful CPG suppliers focus on listening to consumers to deliver the products and service shoppers crave. Boston Consulting Group recommends that CPG companies follow consumers 24/7 to understand their evolving behaviors.21 Edelstien, Peri, Krishnakumar (KK) S. Davey, Aman Gupta, Seth Marcus, Jim Brennan, and Cara Loeys. What the Fastest-Growing CPG Companies Do Differently. BCG. June 14, 2018. In a PwC consumer survey, 73% of respondents said customer experience was an important determinant in their purchasing decisions and consumers are willing to pay as much as a 16% price premium for a superior experience. Great service pays off over the long-term, too, as are more likely to stay loyal to companies that offer it.22 Krakovsky, Isaac. How to stand out in a crowded marketplace. Strategy + business. September 17, 2019.
To strengthen their 2020 marketing strategy, smaller CPG suppliers may also find these tips helpful:
12 ways small CPG suppliers can win big
Additional resources for CPG startups and small businesses include National Retail Federation and Consumer Brands Association.
Overall, the CPG industry is an influential and lively space where suppliers, ranging from startups to multinationals, adapt to consumer trends as opportunities for growth. Paying close attention to consumers’ needs and competitors’ moves can help CPG companies pinpoint their unique strengths and position themselves for success.
What CPG market trends and tips would you add?
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|↑1, ↑9, ↑12, ↑20||Vessella, Victoria. Secrets to Success in The CPG Industry [Infographic]. Repsly. 2019.|
|↑2||CPG industry contributes $2 trillion to U.S. GDP. IFT. August 7, 2019.|
|↑3||Grimmelt, Anne, Max Magni, and Alex Rodriguez. US consumers in 2019 are ready to spend—but wisely. McKinsey & Company. December 2019.|
|↑4, ↑7, ↑11, ↑19||Infographic: Using CPG Market Sizing Data to Capitalize on Growth. Nielsen. July 11, 2019.|
|↑5||The 50 largest FMCG / consumer goods companies in the world. Consultancy.uk. September 24, 2018.|
|↑6||Dan, Avi. The Lesson From The ‘Big CPG’ Lack Of Success: Scale Can Create A Blind Spot For Consumer Needs. Forbes.|
|↑8||Schulz, David P. 2019 Top 100 Retailers. NRF.com. July 8, 2019.|
|↑10||Pasquarelli, Adrianne. The Millennial Dilemma: The generic generation doesn’t want you. Ad Age. August 21, 2017.|
|↑13||Renner, Barb L, Curt Fedder and Kelly Alonzo. 2020 consumer products industry outlook: Navigating Industry 4.0 in uncertain times. Deloitte. 2020.|
|↑14||Seigner, Cathy. Survey: One-third of US consumers favor a tax on plastic food packaging. Grocery Dive. August 23, 2018.|
|↑15||Whitfield, PhD, Gwendolyn. Supplier Diversity and Competitive Advantage: New Opportunities in Emerging Domestic Markets. Graziadio Business Review. 2008.|
|↑16||Wirthman, Lisa. 5 Benefits Of Shopping Locally On Small Business Saturday. Forbes. November 20, 2017.|
|↑17||Cheng, Andria. No More Of The Same: Why Mass Production Is Actually A Boon For Etsy, Amazon Handmade. Forbes. August 8, 2018.|
|↑18||Short, Annabelle. Craft (Handmade) Industry Stats and Trends [Infographic]. Wunderlabel. May 31, 2019.|
|↑21||Edelstien, Peri, Krishnakumar (KK) S. Davey, Aman Gupta, Seth Marcus, Jim Brennan, and Cara Loeys. What the Fastest-Growing CPG Companies Do Differently. BCG. June 14, 2018.|
|↑22||Krakovsky, Isaac. How to stand out in a crowded marketplace. Strategy + business. September 17, 2019.|