Between March 7 and March 21, 2020, Nielsen reports that total sales for consumer packaged goods (CPG) in the U.S. increased by $8.5 billion from the previous two weeks — that’s 15x the normal rate of change for a typical two-week period.

The surge in sales can be directly attributed to COVID-19. Because of the global effects of the virus, many CPG trend predictions for 2020 have already become obsolete or resulted in a change in priorities. Below, we highlight the top seven CPG trends that we’ve seen during the first half of 2020.

1. Direct-to-Consumer Sales

In the midst of COVID-19, consumers are looking toward any business that can fulfill their needs, including small direct-to-consumer (DTC) brands.

Retail Customer Experience explains that small DTC brands that make health products and household essentials have seen a significant uptick in sales in the last few months. In the last two weeks of March, Peach, an eco-friendly bathroom tissue manufacturer, saw a 279% increase in new customers compared to the previous two weeks. Similarly, Touchland, a hand sanitizer manufacturer, sold out of their products and have a waiting list of 10,000+ orders to get through.

What About Retailers?

What about CPG brands that sell their products through retailers? If they can sell directly to consumers, how are retailers being affected? These questions have plagued retailers for the last few years, especially with the rise of CPG eCommerce websites.

Take Wrangler for example. Their products are available in brick-and-mortar and online stores, like Kohl’s, as well as directly through their own eCommerce website. If a shopper purchases jeans through the Wrangler eCommerce store, Wrangler has the advantage of gaining insight into that customer’s valuable data — that’s data that wouldn’t have been available to them if the shopper purchased through Kohl’s. However, this can end up cannibalizing customer sales. If Kohl’s isn’t selling Wrangler products, there is a good chance they may not prioritize them in their inventory.

One possible pivot is for CPG brands to serve as fulfillment centers for their retailers. In this scenario, a customer would purchase Wrangler jeans from the Kohl’s website, and the customer’s closest Wrangler distribution center would fulfill the order. This keeps the sale under Kohl’s jurisdiction while also sharing a bit of valuable customer data with Wrangler.

2. Customer Service

COVID-19 has exposed weaknesses for many businesses, with customer service being one of the most telling. There’s no such thing as “business as usual” anymore, and customer service teams in every industry have had to adapt.

It’s easier for consumers to be patient with a brand if they understand what’s going on. Right now, many processes are out of sorts and expectations are all over the place. In addition, not every consumer understands that a global pandemic can severely disrupt a supply chain, so it’s important to keep a clear line of communication with your customers.

Coca-Cola company customer communication example

We’ve seen this done in many ways during COVID-19 — email announcements, social media posts, and website banners like the Coca Cola one above. These extra lines of communication show that a brand has a plan in place and is actively doing everything they can to keep their customers up to date.

3. Sustainability Shift

According to Acosta, 73% of consumers are willing to change their purchase habits to improve the environment. However, COVID-19 has caused consumer priorities to shift — at least in the short-term.

Panic buying and the hoarding of essentials during the first few weeks of the pandemic brought with it bare store shelves, backorders, and negative inventories for brick-and-mortar and online stores. Consumers who normally prefer eco-friendly products and mission-based brands had no choice but to settle for whatever brands of essential products were available. On the other hand, consumers have also realized their loyalty to certain brands and products. Being forced to try a new toothpaste because it was the only option will really show you how much you loved your previous brand.

From 2013 to 2018, 50% of CPG growth was attributed to sustainable products. While consumer behaviors have been sporadic during the pandemic, sustainability priorities are sure to resume as we navigate our new normal. CPG manufacturers can use this time to analyze consumer data and buying patterns before and during COVID-19 to assess opportunities.

4. Meal Kits & Subscription Services

Before the coronavirus, the total market size for subscription eCommerce services was valued between $12 billion and $15 billion, according to McKinsey. Recurring services like HelloFresh, Blue Apron, and Dollar Shave Club are an easy and often affordable alternative to one-off purchases and frequent trips to a brick-and-mortar store. In the age of COVID-19, receiving essential items like meal ingredients, clothing, and shaving products by mail is one of the most convenient ways to stay home and self-quarantine.

These subscription services saw an incredible surge in demand during the spring of 2020, which caused supply chains disruptions and long delays for customers. CPG brands like Nestle and Unilever have already invested in their own subscription services, with other brands likely to follow suit.

This growing trend presents new growth opportunities for the CPG industry. However, before brands can leverage this potential, IRi explains that, “marketers need to make the path from the grocery store to the dinner table simpler and more time-saving for the customer.” Specifically, “manufacturers could offer easy, time-saving recipes or innovate an existing dinnertime product to eliminate some of the time it normally takes to prepare.”

5. Private Label Competition

Private labels (also known as “store brands”) have long been a fierce competitor for CPG companies, outpacing national brand growth for both edible and non-edible goods in the last three years. For retailers, private labels offer tight control over the supply chain and higher profit margins. And with panic buying during COVID-19, sometimes private labels are the only products available, thus solidifying their advantage over CPG brands.

Experts agree that CPG brands can do more to create emotional connections that boost customer loyalty. Specifically, competing with private labels “demands a greater commitment from CPG marketers to innovation and a clearer communications strategy to remind consumers — especially younger generations — of what is special about their brands.”

While 54% of consumers think it’s at least somewhat important that the products they buy are produced in an environmentally friendly way, sustainability can also include aligning a brand with a cause. For example, RAWZ Natural Pet Food donates 100% of profits to providing service dogs to those in need, as well as funding for research and rehabilitation efforts for people suffering from traumatic brain and spinal cord injuries.

Competing with private labels starts by understanding your target demographics. Retail Wire states that Gen Xers are the most brand-loyal generation, while Millennials tend to be more cost-sensitive and quality focused. Millennials and Gen Zers are also more likely to purchase a product from a brand that is sustainable or mission-based — for example, Warby Parker and Toms. With this in mind, CPG brands looking surge ahead of private labels need to differentiate themselves both on and off the shelves.

6. Wellness & Self-Care Products

Before COVID-19, Acosta reported that 66% of U.S. adults believed that self-care and healthfulness had a significant impact on their food and beverage purchase decisions. With high anxiety levels increasing for many people from COVID-19 concerns, this percent is likely to skyrocket as self-care and CBD-based products surge in popularity.

As Forbes highlights, coffee brands are infusing their products with CBD, a natural compound in cannabis that can ease the effects of anxiety and stress. One Austin-based company, CBD TakeOut, is going a step beyond in response to COVID-19 by offering wholesale prices and donating profits to Texas relief funds to help the service industry.

The $9.9 billion dollar self-care industry, which includes foods and beverages that focus on promoting health and wellness, is also on the rise. Before COVID-19, Acosta predicted that the self-care industry would grow to $275 billion by 2025. With consumers more focused on their health and wellbeing in the age of the coronavirus, more CPG brands are exploring self-care avenues, like adding prebiotics and vitamins or removing harmful ingredients from their existing products. In addition, natural product lines like Johnson & Johnson’s Aveeno Active Naturals are expected to reach $25 billion by 2025.

7. Data Analytics

If anything, COVID-19 will present CPG manufacturers and retailers with an abundance of data to examine. Particularly, CPG brands can evaluate how the virus may have effected forecasting, inventories, and consumer behavior both temporarily and for years to come.

In the first half of 2020, many CPG brands shifted the production of their regular products toward manufacturing personal protective equipment (PPE), or increased production of essential products. Some companies may have redirected certain budgets, like IT or marketing, to production in order to meet these inventory demands. Another notable factor is location. Different areas of the country and the world entered and exited various phases of stay-at-home orders at different times, making geography one of the most crucial demographics for analysis.

There are a multitude of ways businesses adapted to the pandemic, and many companies have employed data scientists and robust data analytics platforms to get a better understanding of the short and long-term effects.

Hitachi Solutions supports the CPG industry by leveraging the full power of the Microsoft Dynamics 365 and Azure solutions. From product management and procurement to sales and customer service, we provide end-to-end solutions that can help you meet ever-changing consumer demands. To learn more, contact us today.