There’s no disputing the impact that e-commerce has had for industries across the board. However, Consumer Packaged Goods (CPG) players are at an e-commerce tipping point and are realizing that an effective online strategy is crucial for growing sales. According to McKinsey, online CPG sales will account for between 10 and 30 percent of overall growth CPG growth over the next five years.
The fact is, e-commerce sales for big brands like Coca-Cola and Unilever still account for less than 10 percent of total sales, and often less than five percent. There’s still a long way to go for CPGs to make e-commerce a significant contributor to sales growth. That being said, there are quite a few CPG categories where companies are beginning to crack the code and present their offerings online in engaging ways to consumers.
Here are more facts about the top ten CPG categories that are primed for year over year growth in 2016, and how CPG brands can position themselves to succeed likewise.
First it’s important to note that some of the most innovative experiments in e-commerce are now occurring in the CPG sector. Take one of Amazon’s latest initiatives, for example. They’ve recently rolled out Amazon Pantry, which lets Amazon Prime users to select from more than 2,000 products, place them in a box and have them shipped out for a small fee. Amazon then rolled out the Prime Now service, which offers home delivery within 1-2 hours. They’ve also formulated a “Dash Button,” which is an internet-connected device placed anywhere in the home that provides a simple, one-touch way of ordering refills of their favorite CPG products.
And it’s not just Amazon that’s blazing a CPG trail in digital commerce. Grocers are finding success with “click and collect” programs, in which consumers can purchase products online and simply pick them up at the store. Campbell’s Soup is also customizing soup packages catering to Millennials with their clever designs of the Campbell’s Go soup-in-a-bag product line.
E-commerce is driving CPG growth
Recent figures released by 1010data found that CPG sales increased by 52 percent in 2015. The fastest growing brand was Dove at 136 percent YOY, but it’s worth noting that four of the top 10 CPG growth brands were in the pet food sector. This includes Hill’s Pet Nutrition, Purina, Nature’s Variety and Taste of the Wild contributing to a sector which grew 55% and generated $760 million in e-commerce sales for 2015.
So it should be no surprise to discover that the Consumer Healthcare Products Association devoted an entire work shop to e-commerce as a channel disruptor for CPG brands. This came at its Annual Executive Conference in March of this year. Even the CHPA notes that the adoption of e-commerce in the over-the-counter (OTC) pharmaceutical industry has been slow. However, the move to e-commerce is inevitable, and brands are already changing the way OTC retailers and suppliers are doing business. This includes new digital strategies like geo-focused push messaging that allows brands to connect with consumers on a more individualized basis. Dollar Tree, for example, uses geographic targeting to reach a broader range of demographics across a wider physical location. This has helped make Dollar Tree a leading discount retailer in North America, by informing consumers on relevant products available in their area, and changes in OTC and CPG product portfolios.
E-commerce adoption increasing for CPGs
As it now stands, retailers are adopting e-commerce as the norm in customer-facing aspects of the industry. Multinational brands like Mondelez are embracing the trend, setting a lofty goal of increasing e-commerce purchases by tenfold over the next few years.
CPG e-commerce grew by 42% last year, with the majority of that growth being fueled by Amazon. More than 20 percent of that came from Amazon’s Subscribe and Save service, which grew by more than 200 percent year over year, according to 1010data. The Subscribe and Save feature automatically sends specific CPG products at regular intervals designated by the customer. This is in addition to the beta testing of the Amazon Fresh grocery delivery service in selected zip codes across the country.
As e-commerce continues to increase in popularity, CPG sales are sure to increase as well. These top ten categories are great examples of how brands are innovating to meet customers online in the right ways and making shopping more convenient, cost-effective and enjoyable.