Consumer-Packaged Goods are part of the fabric of our lives. Many play a purely functional role, like the toothpaste or washing detergent you buy each month. Others forge a deeper emotional connection – whether that’s treating yourself to your favorite sweet snack or snapping open your favorite can of soda on a hot summer’s day.
Many of these products have been around for decades, but while the brands may have stayed the same, the market hasn’t. The evolving needs and habits of consumers means businesses are now having to re-evaluate their assumptions about the ‘mass market’ and their buying behavior.
Changing consumers, changing brands
PwC’s 2017 CPG Trends Report  suggests that the consumer market is now made up of two groups: ‘survivalists’ and ‘selectionists’. The former group are inclined to cut back on extravagant spending and seek the best value items – tending towards budget retailers and online outlets that provide both convenience and low prices.
Selectionists are more discerning, choosing products based on perceived quality. Popular brands like Lululemon and Lush are already achieving success by catering to this group, offering a premium experience for their customers.
This shift in consumer behavior has caused problems for brands that fall between luxury and discount, often forcing to adapt their business models to include an online proposition. But this diversification is not always driven by necessity. The same PwC report  highlights Knorr as a brand that has taken advantage of its offline reputation (quality stock cubes) to create a strong online proposition: replete with recipes, videos and cooking advice .
The future of CPG?
- The mass market will stagnate and we will see fragmented areas of high growth, as niche business that satisfy specific consumer needs become more feasible.
- Consumers will bring digital expectations to physical stores: seeking hybrid online/offline experiences when shopping.
- The online retail industry has already seen massive disruption , and behemoths like Amazon will continue to expand in more product categories.
- Groceries will be a key battleground, with suppliers battling for digital ‘shelf space’. Some forecasts predict e-groceries could capture up to 15% of the grocery market  in Europe by 2030.
- Plucky start-ups will attempt to cut CPG giants’ market share with direct-to-consumer offerings on repeat purchases like toothpaste, makeup and razors. Dollar Shave Club, for example, has managed to snag a decent chunk of market share from industry stalwart Gillette (which was down from 70% in 2010 to just 54% in 2016 ).
- Most importantly, new technology will continue to revolutionize both back-end processes and front-end consumer interactions. Smarter marketing, targeting and production will enable brands to offer higher value products at lower prices.
What about marketing?
CPG businesses have typically relied heavily on traditional media like TV and display advertising to drive brand awareness among consumers, with trade promotion forming the bulk of their spend elsewhere. The lack of investment into digital promotions has arguably influenced consumers’ purchase behavior on digital channels: just 45 % of consumers  say they bought groceries and household items online in the past 3 months.
However, this could be set to change. 2016 saw digital spend overtake traditional advertising spend  in the CPG category (15.9% vs 15.5% respectively). That gap is predicted to widen even further in 2017, with digital taking up almost 20% of budgets compared to just 13.3% for traditional advertising.
There have been several high-profile examples of digital-first campaigns, highlighting this as a growing trend. The #LikeAGirl  campaign for Always, for example, has garnered over 64m views on YouTube since 2014, while Hefty’s “Party Hard Moms ” campaign took home the Internet Advertising Competition’s ‘Best Social Media Campaign’ award in 2016.
Proctor & Gamble have been openly critical  of the integrity of programmatic ad networks, and have taken steps to scale down their ad spend in this area. P&G’s Chief Brand Officer Marc Pritchard, speaking at the International Advertising Bureau’s Annual Leadership Meeting this year, had this to say:
“We have a media supply chain that is murky at best and fraudulent at worst. We need to clean it up, and invest the time and money we save into better advertising to drive growth.”
It seems that despite the efficiencies afforded by digital ways of working, CPG businesses are (justifiably) hesitant to commit too heavily. Big CPG businesses are increasingly concerned with marketing directly to consumers, and large-scale online campaigns are great for brand visibility, but progress will be slow.
Shifting consumer attitudes and business models will be a catalyst for change, but only time will tell how much businesses will have to adapt. One thing is for sure: digital transformation  is coming.
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- ^ digital disruption (www.clickz.com)
- ^ Consumer-Packaged Goods (CPG) (www.clickz.com)
- ^ PwC’s 2017 CPG Trends Report (www.strategyand.pwc.com)
- ^ PwC report (www.strategyand.pwc.com)
- ^ recipes, videos and cooking advice (www.knorr.com)
- ^ McKinsey & Co (www.mckinsey.com)
- ^ massive disruption (www.clickz.com)
- ^ up to 15% of the grocery market (www.mckinsey.com)
- ^ 70% in 2010 to just 54% in 2016 (www.foxbusiness.com)
- ^ $225bn on marketing (adage.com)
- ^ % of consumers (digit.hbs.org)
- ^ digital spend overtake traditional advertising spend (adage.com)
- ^ #LikeAGirl (www.youtube.com)
- ^ Party Hard Moms (www.youtube.com)
- ^ programmatic (www.clickz.com)
- ^ openly critical (www.cnbc.com)
- ^ digital transformation (www.clickz.com)