30-second summary:
Disruptions in the CPG market provide new information and ways to communicate and sell products and services, but only if marketers understand how to take advantage of them.
Now, with the internet’s explosion of consumer-generated content, customers have access to an abundance of reviews that may be more influential than anything the brand itself could say on behalf of its products’ capabilities.
With virtually every brand online nowadays, consumers have more options for where to shop than ever before, right at their fingertips. While the internet makes it easier for consumers to purchase from CPG brands, it also has fostered an epidemic of disloyalty.
CPG brands need to ensure they are employing age appropriate marketing messaging and channels in order to most effectively advertise and sell their products to audiences.
CPG brands no longer have the luxury of being a consumer’s sole choice when they step into the market, which means those brands need to continuously prove their value and profitability to the retailers they want to carry and promote them.
Not only do industry staples now have to compete with house brands, but a dramatic increase in direct-to-consumer goods is also loosening the market strongholds of established CPG brands.
CPGs are, by their nature, used regularly by consumers and therefore need to be frequently replenished, a quality that has enabled the CPG market to grow steadily and with much success over the years.
For some brands, that growth has recently accelerated even further thanks to the immense demand sheltering populations across the globe are currently placing on particular CPGs.
However, despite this acceleration, positioning a specific brand amidst all the options on the market can still be an uphill battle.
Even before the COVID-19 outbreak radically altered consumer purchasing behaviors, a digital revolution was underway, quickly changing the CPG industry landscape and consequently prompting brands to change the way they do business or risk downfall.
But while forces such as a proliferation in ecommerce activity and the rise of the digital consumer have the potential to overwhelm CPG brands who don’t take the time to understand these updates, there is the opportunity for those who are proactive in reevaluating their business strategies to prosper.
Disruptions in the CPG market provide new information and ways to communicate and sell products and services, but only if marketers understand how to take advantage of them.
The top challenges marketers are facing when it comes to reaching, connecting with, and influencing today’s consumers include:
1) Abundant ecommerce opportunities
It’s undeniable that consumer shopping habits are changing these days, with online shopping representing 11% of all retail sales in the U.S. – and that is prior to spikes caused by the coronavirus outbreak.
A major portion of that belongs to CPGs, whose online sales grew over 35% in 2018 and has steadily increased since. This uptick results from the overwhelming popularity of digital marketplaces like Amazon, who carry expansive varieties of CPG brands.
But while this shift presents greater exposure for brands, it also diminishes opportunities for CPG producers to build connections and loyalty directly with their consumers due to the lack of room for individual marketing on the platform.
For example, when a brand’s CPGs are adopted into subscription delivery programs, there’s minimal dialogue between the brand and the consumer.
2) The shift to online shopping
With individuals limiting their trips to brick-and-mortar establishments to just the essentials these days, online shopping has, seemingly overnight, become the new purchasing norm.
But even before this climate shift was the presence of the digital consumer rising, whose behaviors work in tandem with the expansion of online shopping opportunities.
With access to nearly every brand on the market online, the digital consumer now has much more agency over their shopping journey.
Under normal circumstances—without widespread product shortages and increased consumer concerns over cost—today’s shoppers can browse for optimal pricing, assess competitor offerings, and read reviews and ratings.
And while brands could never control word of mouth, they could otherwise largely shape the perception of their products with advertisements and in-store displays and offers.
Now, with the internet’s explosion of consumer-generated content, customers have access to an abundance of reviews that may be more influential than anything the brand itself could say on behalf of its products’ capabilities.
3) Demands for ethical responsibility
Additionally, today’s shoppers are becoming increasingly more conscious of the ethics behind their purchasing decisions.
A CPG brand’s reputation is no longer solely based on how effective their goods are at fulfilling their intended function but rather how they stack up in terms of sustainability, transparency on ingredients, honest and ethical practices, thoughtful social media presences and even how they are responding to the demands of COVID-19.
The wealth of information available on the internet means that it’s easy for consumers to find out what ethical steps brands are taking—or aren’t.
4) Weakening brand loyalty
With virtually every brand online nowadays, consumers have more options for where to shop than ever before, right at their fingertips. While the internet makes it easier for consumers to purchase from CPG brands, it also has fostered an epidemic of disloyalty.
The global marketplace presents limitless CPG options for consumers, enabling them to shop around for the products purporting the greatest value, often times for the lowest price.
To underscore consumers’ flimsiness, Nielsen discovered that only 9% of Americans consider themselves to be firmly committed loyalists.
Especially with certain products in such high demand due to coronavirus concerns (e.g., hand sanitizer, disinfectant spray) and some of their go-to brands out of stock as a result, consumers are less concerned with who is manufacturing the product so long as they can buy it.
Because of this, however, now may also be an opportune time for the newcomers and underdogs on the market to capture new buyers. As consumer priorities and needs change amid COVID-19, keeping their brand top of mind with shoppers have the potential to pay off.
5) An aging customer base
As in many countries, the U.S. population is shifting from a youth-oriented consumer market to one predominated by the older and elderly, with the U.S. Census Bureau projecting adults over the age of 65 will outnumber children under 18 for the first time in 2024.
Because of this, CPG brands need to ensure they are employing age appropriate marketing messaging and channels in order to most effectively advertise and sell their products to audiences.
6) Shifting demographics
Similarly, demographic shifts will also alter the CPG market, with people of color projected to become the majority of the American working class by 2032 and the country projected to become majority-minority in 2045.
Of this shift, the increasing Hispanic population in America—which grew from 16% in 2008 to 18% in 2018—occupies the largest proportion.
It is currently the largest ethnic market in the U.S., valuing at $1.5 trillion, as well as the second fastest-growing minority market, rising by 212% ($500 billion) since 2000.
These figures matter for marketers because different demographics tend to research and shop for CPGs in different ways, and so making an impact on these groups depends on delivering the right messages at the right time and place.
7) More private-label competition
Private-label goods are nothing new to the market, but with more and more retailers realizing a consumer receptiveness to purchasing more upscaled and expensive “house brands,” there has been a consequential increase in production, with private-label products now representing over 19% of sales.
As such, CPG brands now face greater competition, especially because private-label brands tend to be offered at a lower price point.
8) Diminishing shelf space
Stores have only so much shelf space, and with more CPGs available than ever before, the competition for it is tight. Further, retailers are going to favor their own private label products, leaving even less room for national brands.
CPG brands no longer have the luxury of being a consumer’s sole choice when they step into the market, which means those brands need to continuously prove their value and profitability to the retailers they want to carry and promote them.
However, getting onto a store’s shelf is also only half the battle; placement in a prime location (e.g., the ends of aisles) comes with a higher price tag.
9) Direct-to-consumer competitors
Not only do industry staples now have to compete with house brands, but a dramatic increase in direct-to-consumer goods is also loosening the market strongholds of established CPG brands.
In response, many CPG brands have expanded their range of direct-to-consumer products and services in order to remain competitive, but successful execution of this depends on their ability to deliver a seamless, multichannel experience that engages existing customers while capturing new ones.
10) Shrinking marketing budgets
Not only do today’s marketers need to tackle all these challenges, but they must do so with, in general, tighter budgets due to the financial hardships posed by the coronavirus outbreak.
As a quick fix for conserving capital, brands may be inclined to cut advertising for the rest of 2020; however, this could have drastic consequences for its long-term success.
Slowing advertising efforts now has the power to diminish their impact once they’re revved up again, leading to an 11% revenue decrease in 2021. CPG brands don’t need to market less; they need to market smarter.
A multitude of factors—the expanding digital landscape, the economy’s shifting emphasis on online shopping, and drastically different market demands as a result of COVID-19—has complexified the CPG market.
In order to not only survive the current state of the market but also stay competitive well into the future, CPG producers need to reconfigure their marketing strategies to best approach industry changes and reach evolving audiences—but it can be difficult to know where to start.
To learn how CPG marketers can overcome these common pitfalls and devise new customer-oriented, long-term marketing plans that set them up for a future of success, stay tuned for our next story on the power of dynamic marketing data.
Tina Wilson is EVP, Media Analytics & Marketing Effectiveness in the US for Nielsen. A 25-year Nielsen veteran, Tina leads teams that are the epicenter of media consulting, leveraging Nielsen’s world class data assets to inform clients’ decisioning on reaching audiences, acquiring and distributing content and understanding media outcomes.
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