The consumer products (CP) industry continues to experience lingering impacts from an uncertain economy, leading to price increases and fluctuating demand in the last three years. As we look to 2024, these economic uncertainties will be compounded by various factors such as the U.S. election, geopolitical tensions, changing consumer demands, and the growing presence of artificial intelligence. CP leaders will be faced with challenges to both achieve profitable growth and resonate with consumers despite macroeconomic pressures. Moreover, we see the abundance of data as an opportunity and complex challenge as organizations grapple with how to realize strategic and actionable insights that drive business value.
To be best positioned in the consumer products industry today, CP organizations must focus on how they leverage their differentiated capabilities to act on the trends in front of them. Most importantly, each of these trends should not be viewed in their functional silos of sales, marketing, manufacturing distribution, and finance. Rather, CP leaders must engage in cross-functional collaboration to effectively manage each competency and deliver against consumer expectations.
In this piece, we’ve outlined four core competencies across digital channel engagement, pricing and revenue growth management (RGM), distribution channel optimization, supply chain resiliency, and how CP companies are leveraging Artificial Intelligence (AI) to meet their specific business objectives around those competencies. Combined, investments and improvements against these key competencies will help companies realize a competitive advantage in today’s CP market.
2024 Consumer Products Trends
Trend #1: Experiential Marketing is No Longer a “Nice to Have”
Consumer interactions with brands continue to evolve into 2024, influenced by the growing divide in generational wealth and purchasing habits, along with a preference for experiences over things. CP companies have opted to keep their SKU count low and focus on their core product offerings. While there are fewer choices for product variants, there’s no shortage of experiences across physical and digital channels that provide opportunities for CP companies to connect with consumers in other ways beyond purchasing products.
Over the last several years marketers have become savvy about the needs and patterns of millennials, and most recently, Gen Z’s consumer behavior took the world by storm. However, as we head into 2024, we would challenge companies to continue to focus on learning the patterns of Generation Alpha, while also not overlooking the Baby Boomer generation.
As the first entirely online generation, we’re seeing Generation Alpha make its mark quickly when it comes to consumer preferences. They’re not interested in “kiddie brands” but more likely to adopt adult brands before they even reach their teens. For example, we see the Gen Alpha generation is obsessed with skincare and inspired by influencers on social media. Even more concerned with a brand’s purpose than Gen Z, Generation Alpha is sure to push brands’ purpose-driven marketing to the next level. On the other hand, in 2024, we’re seeing Baby Boomer’s social media footprint expand. Since this group has the real buying power, brands that will win in 2024 will be sure to keep this group top of mind, with a particular focus on attributes tied to health and wellness.
In 2020 and 2021, we saw COVID dramatically decrease consumer choices as businesses pared down SKUs to mitigate supply chain issues. But several years later, many of these additional SKUs haven’t returned – and consumers don’t seem to mind. Before COVID, CP companies invested heavily in personalization, intending to attempt to cater to each potential consumer’s unique needs. But now, brands from Coca-Cola to Kimberly Clark are taking advantage of SKU rationalization and helping consumers not face the paradox of choice.
In 2023 phygital marketing experiences came to the forefront, as brands looked to bridge the digital space and physical world. In 2024, experiential marketing will become more mainstream, extending beyond just brands paving the way. We know that half of consumers say they “shop the omnichannel” – looking to both online and offline channels to meet their needs – so brands that successfully make this experience seamless will come out on top.
Trend #2: Setting the Right Price for Value-Driven Consumers
Despite a more recent positive economic outlook than this time last year, many consumers are still feeling the pinch of inflation, especially when it comes to lower-price point grocery items. Over the holiday season, consumers displayed a willingness to spend, but also a high degree of sensitivity to discounts and largely avoided big ticket items. Further, price increases over the past several years have left consumers sensitive to price changes and seeking value in the items they do purchase.
The methods that consumers use to find value in the marketplace are often determined by their income level. High-income consumers have traditionally looked for bulk value and tend to seek out retailers, like Costco, that specialize in large-volume purchases. On the other hand, lower-income consumers seek out low entry-level price points that can typically be found at stores, like Dollar General, that frequently offer lower prices for smaller pack sizes. In 2024, consumers are likely to continue to be cautious with their purchases and search out value wherever they can find it.
As consumers hunt for lower price points, retailers are also pushing back against higher prices. Carrefour recently made news in Europe when it announced plans to discontinue PepsiCo and FritoLay products amid government pressure to reduce consumer food prices and resist ‘shrinkflation.’ In the U.S., retailers are looking to boost their margins by investing significantly in private-label brands to communicate to consumers that these products offer significant value at a lower price point than branded items. Walmart has even gone as far as to incorporate scale images of their private-label products into their retail media marketing to help consumers visualize how those products will fit into their everyday life.
Manufacturers were certainly not immune from inflation themselves, but they seem to be running out of runway to take portfolio-wide price increases as pressure mounts from consumers and retailers alike. As a result, Revenue Growth Management (RGM) tools are becoming even more essential to ensuring a positive outcome not only for manufacturers, but for consumers and retailers as well. Tools like Trade Promotion Optimization and Price Pack Architecture can ensure manufacturers reach the right consumers with the correct price points, while retail media and shopper marketing can help manufacturers keep branded products top of mind in the eye of the consumers and provide additional revenue streams to retailers. Moving forward, manufacturers need to emphasize their RGM capabilities to ensure their products remain competitive in a challenging environment. Continue reading by downloading the full report below.
Read last year’s Consumer Products Trends Report here.
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Contributions from Kathy Petruzzelli