Grow Your Business with These Top CPG Trends for 2021

8 CPG Trends That Are Changing the Industry

Restrictions from the pandemic are lifting and business are re-opening brick-and-mortal buildings. While we’re in the process of shifting back to new normal, so is the consumer-packaged goods (CPG) landscape. The CPG landscape has changed immensely in the last year and continues to do so. While many of the 2020 trends are here to stay, new trends have emerged in 2021.

With many people still working from home, the industry continues to experience an extreme uptick in demand across all channels, especially online and direct-to-consumer (DTC) channels. This surge in demand has put immense pressure on companies and their already strained supply chains. As the years progress, so does technology, which will continue to shape the marketing strategies and sales for the CPG industry.

1. Omnichannel Approach to Shopping

ECommerce & DTC Sales Remain Strong
Online shopping skyrocketed out of necessity but will remain due to convenience. Even though brick and mortar stores are open again, 83% of consumers intend to continue shopping online the same amount or more. As a result, CPG companies are reevaluating their online presence and making it easier for consumers to purchase their products.

During the COVID-19 pandemic, PepsiCo launched two DTC websites that made it easy for customers to order or create their own bundles from their favorite brands. For example, customers can choose bundles by category, such as “family,” “snacking,” or “breakfast,” or by beverage type, including Starbucks coffee, energy drinks, bottled water, and soda.

Online Food & Beverage Becomes the Largest CPG Segment
According to Supermarket News, online food and beverage sales increased by 125% from November 30, 2019 to November 30, 2020. Experts attribute this to people spending more time in the kitchen and discovering their inner chef in 2020. What started as a necessity quickly became a trend, and prepared meals at home are on the rise. With flexible shopping options like online shopping, quick delivery, and buy online, pick up in store (BOPIS), it’s easier than ever to get groceries.

Online Growth for CPG segment from November 30, 2019 to November 30, 2020
Online food and beverage sales, including grocery and restaurant delivery has jumped 44%. Health and beauty have grown 38%. Home and kitchen grew by 8%. Pet supplies grew 8%. Baby care grew 2%.

Grow Your Business with These Top CPG Trends for 2021

Grocery Shopping In-Store is on the Rise
As the world steadily returns to normal, consumers are growing more comfortable shopping in-person again. According to a study from Inmar, 33% of US consumers are primarily buying groceries in-store, and 48% are splitting time between in-person and online shopping. We expect to continue to see a mix of in-store and online shopping. Because of this, we also expect to see an increase in demand — and rapidly depleting inventories.

Many CPG companies are embracing evolving technology to monitor inventory and ensure that their most popular products are consistently in stock. Modern supply chain management solutions leverage business intelligence and data analytics to help CPG brands optimize inventory management and forecast future demand. Utilizing technology helps streamline inventory management, delivery schedules, and forecasting future trends.

2. Customer Convenience

CPG Brands Look to Build More Resilient Supply Chains
A product supply chain is arguably the foundation of any successful CPG brand. A product starts in the warehouse and distribution centers and travels to retailer or other outlets. Breaks or vulnerabilities in the supply chain can be detrimental to businesses, as many have recently learned. Production and shipping can be delayed by many factors, including weather events, materials issues, slow-downs in customs, and, as we’ve learned, global pandemics. This has forced CPG brands to rethink their supply chains, suppliers, and planning processes. Many businesses are moving to local and/or in-house production and updating their supply chain processes to maximize throughout.

In order to streamline data management and analysis, CPG brands are advised to invest in a comprehensive order management suite that enables them to integrate data in one platform. Such a platform can help brands to expand their customer reach, build stronger consumer relationships, and gain valuable insights into customer needs.

In a recent survey, 85% of respondents reported struggling with inefficient digital technology in their supply chains; 75% also stated that they faced problems with production and distribution.

Supply chain management software is revolutionizing logistics, including inventory tracking, work order management, scheduling, equipment monitoring, product delay tracking, and more. Predictive maintenance enables CPG brands to optimize supply chain efficiency by ensuring that all production equipment operates at peak performance levels. For example, brands can use IoT-enabled devices to monitor the location of containers and merchandise, providing visibility into scheduling.

Some CPG companies are deploying technologies to their suppliers to help drive better quality products and more efficient processes. For example, Land O’Lakes is utilizing technology to help farmers becomes more profitable and sustainable. Land O’Lakes is partnering with Microsoft to “pioneer agricultural innovations, enhance the supply chain, expand sustainability practices for farmers and the food system, and close the rural broadband gap.” An effective supply chain starts at the source, and technology can — and should — be used in every step.

Product Personalization Creates Tailored Experiences
Successful companies are getting to know their customers better. This means understanding buying trends, customer patterns, and more. McKinsey recommends setting up a centralized customer-data platform (CDP) to keep data in one place. This is handy for CPG companies to distribute the right products to the right customers. Along with boosting sales, this will also boost brand loyalty.

A reliable CDP, such as Microsoft Insights, should offer invaluable information on customer behavior, experience, and demographics all in one place. This enables employees to access this important data. By breaking down data silos, CDP enables CPG firms to refine market segments and create more personalized messages, products, recommendations, and experiences across all channels.

Brand Loyalty
Retail Wire states that Gen Xers are the most brand-loyal generation, while Millennials tend to be more cost-sensitive and quality-focused. All consumers — but Millennials in particular — prioritize customer service and base their loyalty on positive experiences. There is an overwhelming amount of information thrown at consumers every day and oversaturation in every market. One bad experience can turn a person off to a brand. Companies that don’t prioritize customer experience will see increased churn and may lose valuable customers.

3. Going Green

According to Acosta, in 2019, 73% of consumers were willing to change their purchase habits to improve the environment. This number is increasing as CPG consumers become more aware of sustainable practices, like using sponges made from natural sources or refillable hand soap containers.

Since consumers are more aware of environmental concerns, it’s important for CPG companies to show their customers that they care. Customers may be more likely to buy a product if it has a validation on it, like a Green Seal or EcoLogo on the packaging. These seals “help to further validate the amount of recycled fiber content and a minimal environmental impact during processing,” according to an article in Cleaning & Maintenance Management. These seals are a strong differentiator and can set a product ahead of the competition. Buying sustainable products is at the forefront of consumers’ minds and sustainability must be at the top of any CPG manufacturers mind to stay relevant.

4. Bring the Store to Your Door

As work-from-home becomes the norm for many businesses, meal kit services will continue to see a rise in popularity. Subscription services saw an incredible surge in demand during the spring of 2020, which caused supply chains disruption and long delays for customers. Some larger CPG brands like Nestle and Unilever have already invested in their own subscription services, and smaller brands are following suit.

5. Private Label Competition

Private labels or store brands have been fierce competition for CPG companies for years. In fact, they have outpaced national brand growth for both edible and non-edible goods in the last three years. Private labels offer tight control over the retail supply chain and produce higher profit margins.

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.”

This is where CPG brands can leverage engagement insights and analyze how customers are interacting with their website. They can track things like what pages are getting the most views, what links customers are clicking on, how long customers are spending on each page, and more.

6. Wellness is on the Rise

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 the COVID-19 pandemic, Acosta predicted that the self-care industry would grow to $275 billion by 2025. With consumers more focused on their health and well-being, more CPG brands are exploring self-care avenues, such as developing new probiotic- and vitamin-enriched products 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.

Giving Back
Consumers want to feel good about their purchases, not just financially, but also emotionally, which is why it’s important that CPG brands embrace corporate giving and sustainability. One easy way to give back is to donate goods and funds to support those in need, which many brands chose to do during the COVID-19 pandemic. One Austin-based company, CBD TakeOut, donated profits to Texas relief funds to help the service industry during the COVID-19 pandemic. Giving back can help humanize brands, which makes them more relatable and memorable for consumers.

7. Data Analytics

Many companies are shifting to DTC sales, which decreases distribution and third-party costs. This, along with the increase to the shift in online sales, enables CPG companies to have more complete data. Companies can track a multitude of analytics, including consumer buying behavior, demographics, online behavior, and more. An article from Consumer Goods Technology states that, “Businesses that have successfully adopted data analytics-enabled decision-making have seen up to a 22% increase in demand for specific products.”

8. CPG Goes Digital

Brands Fight to Win the Digital Shelf
Consumers across all generations made the shift to online shopping due to COVID-19 — and it looks like the trend is here to stay. According to a PYMNTS survey, 21.7% of seniors and Baby Boomers said that their shift to online shopping is permanent, compared to just 11.8% who said they only changed behaviors temporarily because of the pandemic. CPG brands need to not only offer products online, but also offer a positive brand experience. As mentioned earlier, the key to having a positive brand experience is by knowing your customer, which AI and customer insight data play a huge part in.

Reimagine Your CPG Strategy with Hitachi Solutions

Hitachi Solutions supports the CPG industry by leveraging the full power of Microsoft Dynamics 365, Azure, and the Power Platform. With our Digital Compass initiative, we work with valued CPG customers to prioritize their technology initiatives and transform their business model. With our Digital Transformation Advisory Services, we work with our clients to establish a roadmap to innovation with each solution implementation and project. To learn more, contact us today.