Consumer Packaged Goods

Five Forces That Are Shaping The Consumer Packaged Goods Industry’s Future:

Consumer packaged goods (CPG) are everyday things that need to be replaced or replenished on a regular basis, for eg. Food, beverages, and clothes.

Consumer packaged goods industry is intensely competitive with a high number of MNCs competing with each other for market leadership. Procter & Gamble, Unilever, and L'oreal S.A. are major manufacturers, with revenue ratios of 3.60 per cent, 3.32 per cent, and 1.79 per cent, respectively, in 2019.

The worldwide consumer packaged goods market size is expected to grow at a CAGR of 3.0 per cent from USD 1938.1 billion in 2020 to USD 2382.2 billion in 2027.  There are a few trends shaping up within the industry which will lead to the growth of consumer packaged goods market size.

           

The rise of the digital consumer 

While technology has been instrumental in the expansion of the consumer products business, it will be genuinely disruptive in the future years. CPG companies face some major strategic questions in figuring out how to win in this new digital world, including how to create a successful business through online retail channels, how to create brands and categories in a  hyper-connected world, and how to utilize technology-driven opportunities to better understand consumers and connect with them more frequently. CPG firms must step up their game with online retailers in order to gain a fair piece of this fast-developing channel.

The shift to value

The global financial crisis has driven consumers to value offerings, and it is a trend that is likely to stick. Recent McKinsey research suggests that 70 per cent of US consumers are looking for ways to save money.  Fifteen per cent are “trading down” to cheaper brands during the recession, and almost half of consumers say their experience with cheaper brands, including private labels, has exceeded their expectations. The shift to value has major implications for the CPG industry’s profit formula. Not least, it could erode the pricing power of brands. Indeed, our analysis suggests that private-label players are riding the value trend to become a serious force across CPG categories. 

The impact of demographic shifts on consumption patterns

While the consumer markets' centre of gravity will inevitably move toward the developing globe over the next decade, all markets will see significant demographic shifts. The world's population, in particular, is rapidly ageing. According to the United Nations, the number of individuals aged 65 and up will treble to 1 billion in the next 20 years.  One in every four Western Europeans and one in every five North Americans will be old by 2030. To fulfil the requirements of elderly consumers, CPG firms will need to go outside the box.

 Increasing supply chain volatility 

This supply-side trend will be as disruptive due to rising input costs, driven by the growth of larger, fewer suppliers and natural-resource limitations. Globalized commerce has provided a great opportunity for the most successful CPG firms to grow into new markets and combine supply and manufacturing. However, the combination of globalization and specialization has resulted in a significant increase in global commodity input price volatility. Global supply networks, which have generated so much value in the past, may face increased instability in the future.

Leading market research companies which provide Consumer packaged goods industry analysis reports across the industry are Strategy Here, BIS research, Modor Intelligence and CSP.