Over the past fifteen years, digital technology and e-commerce have forever altered consumer purchase trends. While the consumer packaged goods (CPG) industry may have slightly lagged, smart brands are realizing the importance of these trends and identifying ways to adapt. In fact, as recently as 2013, online sales accounted for less than 3 percent of overall CPG sales.
But what exactly does the future of purchasing behavior on consumer packaged goods hold? What will be the critical developments over the next 15 years that CPG brands need to take note of?
The Changing Consumer Profile
Demographic shifts in the overall population are contributing towards changing the future behavior of CPG consumers. For example, the middle class is changing along with the household size shrinking, meaning a purchasing shift towards less volume, but more high-quality CPG goods to serve smaller families. More women and those from the millennial generation are stepping into leadership positions, with mothers being the sole or primary breadwinner in a record 40% of all households with children as of 2011, giving those groups additional spending power. CPG brands will need to figure out how to offer the best products to serve the needs of those demographics as their disposable income increases.
How consumers evaluate CPG products, along with who in the household decides on the purchase, might change drastically in the future as well. Whereas in the past, people evaluated CPG products based on advertising and visual stimuli, consumers now base their decisions on recommendations and online reviews more than ever. And with the rise of concierge services, bots, and automated online purchasing, CPG brands need to realize that consumers are no longer always the ones making purchasing decisions anymore.
New Personal Consumption Patterns
Personal consumption patterns are also likely to change over the next 15 years. The new focus will be on experience and personalization. Take curated beauty product service Birchbox, for example, that offer CPG makeup and other products based on the person’s tastes and preferences. Consumers are also focusing more on CPG products that promote health and wellness, such as low calorie and gluten free foods. “Going Local” is another consumption pattern that will increase, as people view these products as more healthy and better for the local economy.
It’s important to realize that more CPG products are being created than ever before. This isn’t just due to large companies, like Unilever, diversifying their product portfolios, but an increase in the number of startups and small-to-medium size businesses (SMBs) entering the CPG space. In many ways, these startups are better positioned to capitalize on some of the above trends and add more personal depth to the CPG experience. That’s why it’s vital for existing CPG brands to focus on patterns like hyper-personalization and wellness, while at the same time making sure to differentiate their products in the minds of consumers.
The Honest Company is a great example of how to capitalize on these emerging trends. This brand provides home cleaning and personal products like soap, baby products, and laundry detergent, but differentiates themselves as a family-friendly brand that uses socially conscious ingredients, and prides itself on transparency. It’s something that reassures mothers, for example, that the detergent they use to wash their children’s clothes is safe and environmentally friendly. The Honest Company did $170 million in sales in 2014 and has contracts with major retailers like Costco, Target and Whole Foods. Now valued at $1.7 billion, The Honest Company is a perfect example of a brand that capitalized on new personal consumption patterns to build a differentiated product line and successful business.
Understanding the Grocerant
Another emerging trend that will only accelerate is the shift from cooking from scratch to “Grocerants.” This is especially popular amongst the Millennial demographic. A Grocerant is typically defined as a retail food item that is ready to consume or can simply be heated up before serving. Traditionally, these items can be found in grocery stores in the deli and lifestyle section, convenience stores, and the prepackaged foods areas. But increasingly, the lines between grocery stores and restaurants are blurring, resulting in the Grocerant category or high-quality, ready to eat foods.
A concept like Whole Foods, for example, where ready-to-eat meals are available for purchase is a perfect example of the Grocerant trend. Even stores like Walgreens are adopting similar concepts. That’s because consumers are increasingly time-starved and on the go, especially the Millennial generation, who are typically single or in a household where both spouses work long hours. They’re looking to purchase meal components that they can bundle into a customized family meal that will please everyone, without spending the time it takes to gather all of the individual items and cook from scratch.
Technology has been, and will continue to be, a key driver in the future of purchasing behavior on consumer packaged goods. Moving forward, some of the key areas are likely to be: mobile technology, the Internet of Things (IoT), robotics, artificial intelligence, consumption driven by social media, and advanced analytics on all of these.
Growth in innovation also presents great opportunities for forward thinking CPG brands. PepsiCo, for instance, has been able to offset declines in traditional sales with upwards of 9% growth due solely to product innovation. In the future, it will also be wise to focus on digital advertising. Digital ad sales have been steadily increasing over the past few years in CPG and are projected to be over $8 billion in the U.S. alone by 2019. Brands will also need to adopt a “mobile first mindset,” as consumers increasingly utilize smartphones for shopping, price comparison, and researching coupons.
There’s no way to tell for certain where the purchasing behaviors of CPG consumers will stand in ten, fifteen, or twenty years, but there are trends that are affecting things now and are more than likely to shape the future. Shifting demographics, the adoption of Grocerants, and technological advances are sure to impact CPG consumers in the very near future, and smart brands will do their best to incorporate these changes into their strategy.