U.S. CPG Industry

A type to good that is consumed every day by the average consumer. The goods that comprise of this category are ones that needs to be replaced frequently, compared to those that are usable for extended period of times. While CPGs represent a market that will always have consumers, it is highly competitive due to high market saturation and low consumer switching costs for example the global financial crisis has driven consumers to value offerings, and it is a trend which is likely to stick. Recent Mckinsey research suggested 70 percent of US consumers are looking for ways to save money. Fifteen percent are trading down to cheaper brands during recession and almost half of the consumers say their experience with cheaper brands including private labels has exceeded their expectations. According to the report from Grocery Manufacturers association and PwC, CPG industry generates estimated $2.1 trillion of revenue and contributes over $1 trillion worth of value added to overall U.S economy.

The industry’s growth over the past decade has been phenomenal. CPG companies have launched innovative products to meet an ever-growing array of human needs and desires; as a result they have expanded rapidly into the consumer markets of developing world. To make this expansion possible and profitable, CPG companies have invested heavily in building global scale of along every part of value chain, including R&D, marketing and sales, operations like procurement, manufacturing and distribution. According to the study, many CPG companies are looking to innovate by reaching consumers in more places or tailoring products for local customer tastes in emerging markets. Additionally, understanding customer priorities is central to innovation as consumers in the United States are buying more carefully, buying different pack sizes, taking advantage of volume discounts, and trading down to non-premium brands.

As consumers make more product and brand purchase decisions in-store, shelf performance becomes an area where CPG companies can gain market share. Although, performance depends upon how CPG companies are striking balance between different customers with different sets of needs. As per Customer and Management Channel Survey released in August 2012, CPG companies winning in their categories are three times more likely to invest in growth channels, 50 percent more likely to use price optimization tools and invest twice as much time in talent development. Overall, the report also found that winning CPG companies have outperformed their peers in four key areas: investment in key areas, use of analytics to fine tune pricing and promotion, prioritizing the retailer relationships and commitment to talent development and strategic planning efforts. In today’s world, social media is also playing a vital role in CPG industry. This provides CPG companies with a unique opportunity to engage with its customers. Successful CPG brands are meeting today’s consumer by establishing a social presence, directly engaging their customers, sharing helpful content and learning their customers’ needs and interests.

Demographic and economic shifts are the two major factors which over the next ten years will dramatically reshape the growth of consumer packaged goods. These factors will create both challenges and opportunities for CPG marketers, and companies that anticipate the shifts could have a competitive advantage. It will be absolutely critical for CPG companies to adapt in order to gain the attention and brand loyalty of the ageing baby boomers, multi-cultural families and lower income consumers of future.