It has been a “messy” couple of years for consumer packaged goods (CPG) firms.
First supply chains were disrupted by the trade war between the U.S. and China, then Covid-19 came along and both radically altered consumer purchasing patterns as well as further deepened supply chain headaches.
While things have temporarily improved as a result of U.S. pandemic stimulus measures and Covid-19 vaccine rollout, there’s still no clear indication that this recovery will be durable and supply chain issues will fully resolve any time soon. The new normal for CPG firms is an uncertain landscape, changing conditions and potentially different buying habits as consumers make durable shifts in spending patterns as a result of their experience during lockdown and beyond.
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Three Trends in Consumer Packaged Goods for 2022
Three trends emerge in the CPG space as a result of this new normal. These include ongoing high variability in purchasing patterns based on CPG segment, opportunities for small firms to gain market share right now, and overall cost pressures that should exist for some time.
1. Ongoing Purchasing Variability
Roughly 70 percent of consumers say they expect their routines will be disrupted for at least the coming year, according to recent research by McKinsey & Company. This should bring with it continued variability in CPG purchasing.
CPG firms with products that assist with nesting at home and work-from-home environments saw excellent growth over the past couple years, with more absolute growth in 2020 than all of 2016-2019 combined according to KcKinsey. Demand for such products should continue to be strong in the near future even as the world starts to emerge from Covid-19.
Firms that benefit from increased physical store sales or rely on social behavior such restaurant dining also should continue to see increased purchasing as stimulus-flushed consumers buy the things they’ve been missing during lockdown. But the outlook is tenuous, according to McKinsey. Nobody really knows if growth in these segments will continue after the initial flurry of buying activity, but signs tentatively point to ongoing robustness. CPG firms will need to monitor consumer trends closely both on the macro-level and within their business.
2. Opportunity for Smaller CPG Firms to Gain Market Share
One interesting trend that has been taking place over the past year and looks to continue is the opportunity for smaller CPG firms to gain market share as a result of the disruption in buying patterns.
The opportunity comes from increased consumer willingness to try new products during the pandemic, with as high as 76 percent of consumers experimenting with new brands they found online according to a recent study. The study found that 37 percent tried new brands, and 26 percent tried new private-label brands.
This has helped smaller CPG firms raise their combined market share from 18.2 percent of overall CPG spending in 2019 to 19.2 percent by the end of 2020. Smaller firms that market heavily online and take advantage of the major ecommerce marketplaces should continue to see positive results in 2022 and beyond.
