Traditional marketing strategies are no longer as effective as they once were. This is a lesson that businesses across the globe, encompassing all industries, have been learning since the emergence of the world wide web in the early 1990s. Internet search giant Google arrived on the scene in 1998, and redefined marketing on every level. The way shoppers find brands is dramatically different than it was just 20 years ago, and some industries are struggling to keep up.
Many top players in the consumer packaged goods (CPG) industry have not been quick to adjust to the massive shifts in consumer behavior. They’ve been slow to adapt to new channels, as well as the smaller brands that are confidently taking a more customer-centric approach, thus capturing their own share of the more than $600 billion market.
This is forcing CPG companies into unfamiliar territory. In order to thrive, they must keep pace with emerging industry trends and find unique ways to leverage them. This is the only way they can maintain – and even gain – market share and attract shoppers.
Snapshot of the CPG Industry
CPG is an ever-growing industry. In 2017, 90% of CPG industry growth was attributed to online sales. By 2020, industry sales are expected to reach $721.8 billion. Powered by scale, there has been a 50% increase in the number of SKUs over the past seven years.
In terms of shopper behavior, online sales made up 90% of the growth in the CPG industry last year. This indicates a need for brands to transition to an omnichannel strategy that caters to the growing number of shoppers who use smartphones and digital devices to make purchases.
5 Emerging CPG Trends
There are several anticipated trends in 2019 that are expected to impact the CPG industry.
1. Online Shopping
An estimated 70% of consumers globally who shop for CPG brands are doing a least a portion of their shopping online. Most of the products tend to be personal care, beauty items, and other non-perishable goods. Growth in this area is expected to continue as more people learn about the diverse range of items that can be successfully purchased online.
While e-commerce is growing in popularity, most companies realize the huge potential that exists when they tap into both online and brick-and-mortar spaces. An omni-channel approach provides shoppers with more options and delivers a unified shopping experience across all channels.
This is also having a reverse effect, as brands that began as e-commerce companies move in-store. The Honest Company, for example, has seen much success by scoring distribution partnerships with major retailers like Walmart and Target.
3. Mergers and Acquisitions (M&A)
Shoppers are not only gravitating toward online channels, but they are beginning to prefer products that are considered healthy, natural, environmentally friendly and authentic. This is causing large CPG brands to lose shelf space and market share to small upstarts.
In response, top companies are increasingly purchasing and merging with smaller companies to regain footing in the industry. In 2017, there was a 45% jump in global M&A activity among the leading CPG manufacturers – resulting in a 15-year high of 60 deals. This trend is expected to continue as more of them realize the value of direct-to-consumer (DTC) channels (which provide better insight into the buying journey) and a customer-centric approach.
Unilever is a great example of this, as the CPG giant has made 10 acquisitions in the last two years, which included Dollar Shave Club, Seventh Generation and Schmidt’s Naturals.
4. Direct-to-Consumer (DTC) Channels
The majority of leading CPG companies rely on retailers to connect shoppers with their products. However, DTC channels are quickly growing in popularity. More shoppers prefer to have direct contact with brands by shopping the manufacturer’s brick-and-mortar store or website when seeking to purchase products.
This allows companies to make deeper connections with their shoppers and maintain control over how their message is delivered. It presents an opportunity to do more than simply sell a product; they can begin building a relationship, which is a growing expectation among shoppers.
Gillette is taking the DTC route with its launch of Gillette on Demand. This digital initiative allows shoppers to skip the stores and buy razor blades directly from the company via a subscription or one-time purchase. Bypassing retail channels allows these companies to collect more data about their customers and reduce their dependence on physical shelf space.
5. Brand Authenticity
Many people prefer to spend their money with companies that have values close to their own. Often, they will not shop retailers or buy brands that don’t take a solid stand on social issues like human rights, environmental sustainability, and health.
In addition, shoppers expect them to live up to their claims, whether it’s quality, benefits, features, or the promises it makes regarding how a product should make them feel. Ultimately, shoppers prefer companies that keep their promises. This is pushing CPG brands to take the lead in identifying new and unique ways to provide authenticity that draws shoppers in and builds the foundation for relationships.
Dove launched its Self-Esteem Project as a way to further connect with shoppers. Their mission statement aligns with their marketing strategies on a consistent basis. This has altered its public perception to one that authentically champions women’s empowerment and redefining beauty. This has served to boost Dove’s popularity and transform it to something beyond just another personal care brand.
When leveraging these new and emerging trends, keep the following tips in mind:
- Learn from successful CPG brands. Analyze their marketing strategies and adapt them to fit your own.
- Give your shoppers multiple channel options, and be prepared to invest more into your digital business as online shopping grows in popularity.
- Adopt values that incorporate health, environmental sustainability, human rights, and other worthy causes.
- Consider investing in direct-to-consumer channels to better understand your shoppers and how they interact with your products.
- Build relationships with your shoppers. Align your brand in a way that resonates with your target audience’s needs, interests and values. Then create campaigns that bring that connection to life, like Dove and its Self-Esteem Project.
With ongoing shifts in shopper behavior, industry changes and emerging channels, CPG brands must leverage those new and anticipated trends in order to remain relevant in today’s marketplace. Shoppers expect more from companies beyond a purchase, so they must meet those demands or get left behind. Seek out unique ways to incorporate these trends into your growth strategy, and utilize these tips and strategies by emulating other winning brands to achieve success.