Below is an excerpt from our FMCG Industry Trends report. Download the full trends report at the link below.
As many have said in a variety of contexts, 2021 has been a year of unprecedented global change. The pandemic brought a variety of challenges to global logistics and changing consumer demands. The fast-moving consumer goods industry anticipated many of these challenges, as 2020 highlighted areas necessary for improvement and amplified past and new consumer demands. FMCG industry leaders can no longer solely rely on their past best practices to continue customer retention and growth. With an abundance of new entrants, natural disasters, supply chain volatility, and evolving consumer demands, companies can no longer be laggards in these areas of change if they wish to compete. Based on our research and industry expertise, we have identified the top five industry trends for 2022. There is an increasing focus on serving customers through direct-to-consumer channels, on operational resiliency throughout FMCG supply chains, and on satisfying consumer desires for ethical and sustainable shopping. Additionally, companies are furthering their investments in creating experiences for their customers, along with use of the Internet of Packaging throughout their supply chain process. FMCG companies who embrace these 2022 industry trends will be best prepared to adapt and successful for what lies ahead.
FMCG Industry Trend #1: Customers are Drawn to Direct-to-Consumer Channels
As the world continues to become increasingly virtual, through advancements in technology and societal preference shifts towards convenience and ease of use, the consumer industry has shifted towards more direct-to consumer-shopping. This trend has only been exacerbated by the COVID-19 pandemic, as many consumers felt safer ordering products online. This dramatic uptick in DTC demand has created a need within the fast-moving consumer goods industry to innovate to accommodate this channel shift . In 2020 alone, the total online grocery sales grew 54%, with a total of 12% from e-commerce sales. However, the growth is expected to continue and remain correlated to consumers’ growing preferences and comfort and convenience. It is estimated that in 2021 there will be a further 12.5% growth in online grocery sales, on top of the 60% increase over the pre-pandemic five-year sales. Additionally, it is estimated that the online share of the global fast-moving consumer goods market by 2025 will be 10% of the overall market. The pandemic has underscored the importance of DTC for FMCG as consumers are not going to decide to stop online shopping in a post-pandemic economy. In fact, DTC is going to continue to grow as more consumers experience its benefits.
FMCG Industry Trend #2: Increasing Operational Resiliency throughout FMCG Supply Chains
As the world has become more global, companies across industries have applied cost-saving tactics such as shipping overseas, typically in concentrated areas, to lower their labor and warehousing costs. However, cost-saving strategies have also created avoidable risk towards supply chains and their overall operations due to volatile input costs. Volatile input costs emerge from 3 components: the emergence of bigger and fewer suppliers, reliance on overseas countries, and potential natural resource shortages. As companies continue to specialize and consolidate, other companies mount higher pressure to keep margins low and outsource. For instance, China and Russia alone account for approximately 50% of the world’s aluminum production. Additionally, that same consolidation leaves companies at the mercy of said countries’ political and financial markets. Lastly, natural resource shortages will continue to pose a major threat to businesses because of company-wide shutdowns or evacuations of facilities. Proactive companies have begun bracing for raw material shortages and many are bolstering their business continuity plans. This issue was only exacerbated by the COVID-19 pandemic as countries held their productions for various amounts of time and put additional strain on global supply chains. Between May 2020 and May 2021, prices of commodities tracked within the Producer Price Index rose by 19%.
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Coauthor Mary Trbovich