Did you recently discover a newly launched CPG product via your smartphone or while walking past a store window? Chances are the former—and this is just one of the signs that indicate that the CPG industry, as well as consumer behavior, is shifting more towards a digital-first approach.
The CPG industry is far different from other industries, due to some unique factors that differentiate it, such as its fast-paced nature resulting from quick production cycles, and the need for swift market entry. Pricing remains competitive as ever, with brands relying heavily on data analytics and dynamic pricing models to factor in varying considerations including channel dynamics, user behavior/price sensitivity, and market factors.
Increased Digital Media Adoption & New Channels
Consumers continue to use new channels, sites, apps, and digital touchpoints to connect with brands. Omnichannel marketing strategies are more important than ever, and CPG brands are also establishing first-party connections with their consumers to build a durable customer relationship alongside building first-party data capabilities. The emergence of new marketplaces also provides an opportunity for brands to be more available in convenient shopping spaces accessible to consumers.
Innovation Slowdown
Across the CPG landscape, there has been a slowdown in innovation, be it product innovation, go-to-market innovation, or business-model innovation. According to Nielsen Research, three out of every four CPG launches fail within a year, which has led to CPG companies acknowledging high innovation failure rates. The economic downturn resulting from the impact of COVID-19 and budget cuts for research and development did not help to further innovation and research initiatives for most organizations.
Investment in Sustainability Practices
Large CPG organizations are investing heavily in sustainability practices across their operations and supply chain. These practices may result in the evolution towards the usage of recyclable packaging for products, renewable energy in production facilities, or sustainable procurement practices. The benefits of having these sustainable practices in place can range from better cost savings to regulatory compliance and a heightened reputation.
Healthy and Natural Products to Grow as Product Categories
With the global demand for healthier food and lifestyle practices, there is a corresponding increase in pressure on large CPG organizations to shift their focus to drive a larger proportion of sales from healthy or natural product categories. With lifestyle diseases on the rise and the advent of social media driving an informational revolution on the health benefits or drawbacks of commonly available CPG products, more and more consumers are prioritizing health-consciousness and relying on this information to drive their purchasing decisions. Hence, for CPG companies, building trust with consumers by doing very basic things like including an accurate list of ingredients within product packaging will continue to be important. There is also a rise of plant-based and organic products in the market as a by-product of this larger trend. The regulatory requirements in certain countries (such as the UK) also mandate that specific restrictions are put in place to prevent unhealthy products from taking up shelf space.
Privacy & Durable Measurement Takes Center Stage
With the digital analytics landscape constantly changing—from the sunset of Universal Analytics to the industrial shift to move away from third-party cookies (even though Google announced that they are no longer deprecating third-party cookies, it recommends preparing for privacy-preserving alternatives)—large CPG organizations are continuing to invest in building a durable and privacy-centric first-party data architecture. Performance is not at odds with privacy, and it is not to be considered a trade off; InfoTrust is consistently involved in helping our clients measure their marketing and media performance in a compliant manner.
Concluding Thoughts
As we move towards 2025, the CPG industry will inevitably evolve, influenced by changing consumer behaviors and broader market dynamics. Competitive pricing, investments in sustainability, and the growing demand for healthy products will play crucial roles in shaping the strategies of CPG companies. Brands that can adeptly navigate these trends and prioritize consumer needs are likely to succeed in this rapidly changing landscape.
