Read our updated trends report here: 2023 Consumer Products Trends
Since the onset of the COVID-19 pandemic, the consumer products industry has faced its share of struggles – supply chain disruptions, global lockdowns, labor shortages, spikes in online shopping, and an evolving consumer base. Many companies had to implement new business models, such as pursuing direct-to-consumer channels and exploring the eCommerce market, to respond to these disruptions and adapt to an increasingly digital landscape. The pandemic also forced consumers to consider their values and priorities, more actively pursuing companies that also had a commitment to those values and leaving years of brand loyalty at the door.
For the past 2.5 years, the industry has adapted and responded to these disruptions and to the needs of its consumers in the best way it could. Now, it’s time for CP companies to be more proactive. Whether it’s diversifying supplier networks to establish resilience, being more intentional with revenue growth management strategy, or investing in recruitment and retention efforts for labor and talent, CP businesses must position themselves ahead of the curve to better anticipate and meet the needs of consumers and remain competitive and profitable in this industry.
2022 Consumer Products Trends
Here are five consumer product industry trends that companies should be mindful of as they consider ways to take a more proactive approach to business in 2022.
Trend 1: Supply Chain Resilience
COVID-19 highlighted the weak points in the industry with supply chain volatility, so much so that a Global Supply Chain Pressure Index was created to measure potential disruptions. Consumer product companies experienced textbook supply and demand issues – empty warehouses, backed-up shipping containers, global lockdowns, raw good and labor shortages, all-time high price of shipping containers, among other issues, during a huge uptick in demand contributed to supply chain disruptions worldwide.
For years, CP companies deployed a strategy based on leanness; limited inventories and limited suppliers to produce the lowest cost to serve was an approach based solely on profitability and shareholder interests. These strategies, however, inhibit the ability to meet those huge upticks in demand and prohibit supply chain resilience.
The eCommerce market continues to grow, as consumers appreciate the convenience and flexibility that the digital landscape provides. Consumers are expecting more options for same-day or two-day delivery. While impossible to compete with same-day or two-day delivery options from eCommerce giants like Amazon, it is important for CP companies to find ways to differentiate themselves in the eCommerce market.
eCommerce growth also means an increasingly important focus on eCommerce fulfillment and providing a seamless experience for the changing needs of the consumer. For CP companies, the supply chain plays an elevated role; they need to invest in solutions to ensure profitability while also meeting consumer expectations and needs. Prior to the pandemic, the global supply chain was already complex. Now, entering the third year of the COVID-19 pandemic, growing geopolitical uncertainty is still a threat.
A particularly important geopolitical consideration for the global supply chain is the strategic rivalry between the US and China. The former administration tried to maximize authority to disrupt US-China supply chain business, and protectionist policies aimed at hindering industrial competitiveness in China are encouraging CP companies and the US government to rethink their strategies to build a resilient supply chain. Supply chain disruptions stemming from geopolitical instability and uncertainty will continue to be inevitable. Already, we’ve seen the current administration take steps to intervene to provide some source of relief for companies.
CP companies must rely on data and analytics to provide visibility to inform decision-making and better manage supply chain disruptions . Technological solutions that provide predictive analyses and supply chain transparency will enable businesses to be more agile, resilient, and responsive. Additionally, it’s imperative that businesses work to diversify their supply chain networks and identify alternative sourcing strategies. Supply network flexibility is necessary to alleviate challenges brought on by supply chain disruptions, and partnerships or 3PL providers can provide more stability for a business and ensure resilience in the face of future challenges.
Trend 2: The Nature of Competition
Over the past decade, the consumer products industry has experienced a boost in innovation due to the growing number of new entrants in the market. We are increasingly seeing smaller companies and aspiring entrepreneurs enter the field, making a true, lasting impact through digitally driven business models. New entrants to market – many digitally born and digitally driven – are challenging reputable CP companies and brands who have worked for years to establish consumer loyalty. They’re using “business models that are asset-light, information rich, and heavily instrumented” and acquiring customers through both a DTC approach and efficient consumer engagement strategies.
Going digital is no longer a suggestion. The challenge for CP companies is to keep a consumer-centric approach – prioritizing consumer loyalty and engagement – in addition to that digital presence to remain relevant and competitive. The CP industry has also seen an increase in DTC. While there are low barriers to entry, many DTC brands are struggling to remain competitive and profitable. Take, for example, Warby Parker, a DTC eyewear company that has experienced increased sales but widening losses as it struggles to predict future operating results despite a loyal consumer base.
How can CP companies remain relevant and profitable in the DTC space?
An investment in DTC allows CPG companies to build direct relationships with their consumers, better understanding and anticipating their needs through first-party data and opportunities for testing the market. Pursuing customer engagement strategies, like loyalty and reward programs, will encourage consumers to want to buy from your company. Consumers don’t just want your product; they want a good experience getting your product.
A consumer-centric approach to the DTC business is imperative to stand out in an increasingly competitive industry. Investing in consumer engagement will benefit them and your business.
CP industry will continue to see a blurring of lines between CP and retail. Increasingly, companies are establishing an omnichannel presence as they as recognize the benefits of a hybrid approach with eCommerce and brick-and-mortar stores. As such, companies looking to pursue this approach need to invest in a holistic strategy that prioritizes the consumer while also achieving a profit.
Mergers and acquisitions are an avenue to retain a competitive advantage in today’s market. We’re seeing CPG businesses shed categories and segments of their business to become more focused on a particular area. For example, Unilever attempting to buy GSK’s consumer healthcare assets while allegedly disposing of its food business is an example of how CPG giants can strategically scan the market to remain key competitors.
If CP companies are strategic and intentional in their approach to M&A, they can successfully expand their consumer base, gain a competitive edge, and contribute to industry-wide innovation.
Continue reading by downloading the full report below and learn more about our Consumer Products Consulting Services here.
Read last year’s Consumer Products Trends Report here.