The Pandemic’s Effect on CPG Companies – A Trends and Patterns Overview

The pandemic has changed the way we interact socially and with brands. While some stocked up on necessary supplies for the lockdowns, supply chains were disrupted, retailers were forced to shut down and CPG companies struggled to ensure skyrocketing demands.

Although global trade fell by 8.9% in 2020, the steepest drop since the global financial crisis, the CPG industry in the United States saw a 10.4% growth in the same year. This is a substantial increase from 1.4%, 2% and 2.2% growth in 2017, 2018 and 2019 respectively.

Given this exponential growth, CPG companies are struggling to adapt to the evolving consumer behavior and consumption patterns. Despite strong vaccination drives and increased awareness, new COVID-19 variants threaten to disrupt the supply chain yet again.

IRI & Boston Consulting Group Analysis. “US CPG Channel Growth, 2012-2020”

The CPG industry is projected to be valued at $15,361 trillion by 2025. While working towards adapting to changing times, it’s important to understand the trends and patterns that affected the industry during the pandemic.

Purchasing Behaviors During the Pandemic: Stockpiling and Panic Buying

COVID-19 is not just a health crisis, it is also an information crisis. While shopping for essentials was necessary for the lockdowns, the rumors, misinformation, and uncertainty led to panic buying across the world.

Irrational stockpiling disrupted the supply chain and led to supply shortages. Experts opine this ongoing supply chain crisis to last until 2023. Along with this, the supply chain crisis also impacted brand loyalty, with more than 80% consumers buying a different brand than usual. 51% of these purchases were due to out-of-stock products.

The Hyperlocal Challenge

As a result of the stockpiling, panic buying and supply chain disruptions during the initial days of the pandemic, national CPG manufacturers found it hard to keep grocery shelves stocked. Several companies scrambled to restock essential products.

In 2020, the United States’ CPG industry made about $933 billion in sales through measured channels. As impressive as it is, large manufacturers lost (collectively) about 1.3 share points or $12.1 billion in sales to smaller niche players. This is primarily due to the supply constraints, channel shifts and category shifts.

What’s interesting is that during 2013-18 sales from small players amounted to about $17 billion.

The Digital Commerce Revolution Is Here

The spread of COVID-19 and the subsequent lockdowns accelerated the shift towards digital commerce. E-commerce shares in retail sales too peaked during the pandemic.

Mastercard Economics Institute. “Development of e-commerce shares in total retail sales in selected countries before and after the coronavirus (COVID-19) pandemic as of January 2021.”

The e-commerce market is projected to expand by $1 trillion by 2025. Mcommerce or mobile commerce, in particular, is gaining traction, with US retail mcommerce sales seeing a 41.4% growth in 2020. New digital commerce trends that emerged include Augmented Reality, one-tap payment solutions and click-and-collect services.

To adapt to this evolving landscape, it is important for CPG organizations to integrate e-commerce in revenue growth management decisions in 2022. The pandemic reinforced the role of data organization and analytics solutions in creating a robust revenue growth management strategy for CPG companies. “In-store and e-commerce retail sales share in the United States between 2021 and 2025”

Experts predict this digital commerce adoption will significantly grow post the pandemic, with omnichannel shopping scales tipping more towards online. Gaining deeper insights into consumer behavior and analyzing various touchpoints across the consumer journey funnel is important to adapt to this evolving landscape.

With hyperlocal buying on the rise coupled with an increased penetration of mobile and e-commerce, large CPG companies are in dire need of an integrated analytical tool that can, forecast demand, simulate scenarios, analyze data, help plan, optimize and measure assortment, marketing and distribution efforts.

How Can CPG Companies Leverage Data to Adapt to Changing Trends and Consumer Behavior?

Revenue growth through AI-driven analytics

CPG companies dislike being uncertain. Through an AI-driven analytics solution, they can create scenarios for which they can forecast demand while understanding key growth drivers and be prepared for any possibility.

By leveraging data, CPG organizations gain crucial insights into factors that drive customer decision-making and purchasing habits. These insights are essential to set up a data infrastructure and map out an omnichannel approach.

An integrated analytics tool uses advanced algorithms to measure the impact of change in real time, which facilitates faster strategic responses to dynamic situations.

Data in Marketing

CPG digital ad spend is expected to grow to $30.56 billion, and with the incremental role that marketing plays in revenue growth, an integrated analytics tool is needed to measure, monitor and optimize investments. With shopping moving online, being abreast of customer patterns and preferences is prudent. A strong and compelling digital presence and marketing strategy can help CPG companies stay ahead of the curve.

An AI-driven analytics solution that is equipped with ‘Marketing Mix Wizard,’ ‘Campaign Manager’ and ’Channel Performance’ apps help CPG companies strategically invest, measure and optimize MROI. It also helps identify opportunities for improvement, as well as mitigate wrong spending.

Co.dx’s suite of revenue management applications can help CPG companies drive category growth, discover opportunities, develop strategies and optimize return on trade spend.

Looking for a simplified revenue growth management solution to help you navigate the unpredictable patterns of the industry? Contact us.