Insights on Innovation

REGARDLESS OF SIZE, consumer packaged goods (CPG) companies are honing their marketing tools to prepare themselves for continued growth in the face—and aftermath—of COVID-19’s spread across the globe. To help brands best prepare, Boston Consulting Group (BCG) and IRI released their eighth annual BCG/IRI CPG Study, which looked at sales at more than 430 consumer packaged goods companies with more than $100 million in 2019 sales.

According to the study, the U.S. consumer packaged goods industry increased by 2.2% in 2019, outpacing 2018’s growth of 2.0%. The researchers also noted that private-label and small brands continue to grow their shares of the CPG market. Since 2014, approximately $19 billion in CPG sales have shifted from large- and mid-sized brands to private-label brands.

The growth leader among large companies, a category defined as having sales greater than $5.5 billion­ — Constellation Brands — led for the third year in a row. Johnson & Johnson, Tyson, General Mills, and Procter & Gamble rounded out the top five large companies — all of which, except for P&G, saw sales volumes increase in 2019. Leading mid-sized companies, which are defined as having sales between $1 billion and $5.5 billion, include VPX, maker of the sports drink Bang; e-cigarette maker Juul; and comeback kid Hostess. Leading small CPG companies, which earned between $100 million and $1 billion in sales, include newer brands such as e-cigarette maker NJOY and sports-drink company BodyArmor as well as established brands such as beauty and cosmetics innovator Kiss.

Researchers identified four main drivers of CPG market growth: acquisitions and innovation, careful pricing changes, increased emphasis on eCommerce, and introducing products that satisfy six emerging trends. Researchers described the interrelation between these drivers as such: “In addition to acquisitions and innovation, leading companies are also implementing careful pricing changes, placing more emphasis on eCommerce, and introducing products that satisfy emerging consumer trends, such as increased demand for multi-functional beverages, protein-on-the-go, premium self-care, better-for-you snacking, simple and transparent ingredients, and products focused on the Hispanic market.”

In a second-quarter statement issued by BCG, IRI Strategic Analytics president Dr. Krishnakumar S. Davey noted the brands both large and small were already well-positioned to capture continued growth — even though some trends, e.g., such as protein-on-the-go, are challenged during the global COVID-19 pandemic. At the time, Davey said he saw smaller brands continue revenue growth despite the emergence of COVID-19.

The findings of BCG/IRI’s early research is reinforced by Innova Market Insights’ annual Top Ten Trends report, which was unveiled in late October. The report, which has delivered insights to a variety of packaged goods stakeholders including retailers, brands and even manufacturers for more than a quarter of a century, uses an extensive tracking system for new food and beverage product launches in more than 90 countries and advanced data analytics to convert industry-leading market research into meaningful guidance on present and future trends in fast-moving consumer goods (FMCG), including the aforementioned packaged food-and-beverage markets. Because this research methodology was already in place, the firm could quickly record and analyze the pandemic’s effects on shopper behavior and the FMCG markets that serve them. The firm identified these top trends for the coming year:

• • Transparency triumphs
  • Plant-forward
  • Tailored to fit
  • New omnichannel eating
  • In tune with immune
  • Nutrition hacking
  • Mood: The next occasion
  • Product mashups: When trends collide
  • Modern nostalgia
  • Age of the influencer

Nielsen Research also noted many of these more thoughtful shopping behaviors in a report released in late September—citing these behaviors as evidence of a much more discerning grocery shopper. This new type of shopper, Nielsen researchers posit, emerged after the wake of the initial widespread panic-buying sparked by COVID-19. The analysis showed that CPG brands and their retailer customers responded to the sudden and strong demand by pulling back on promotional efforts in part to focus on their supply chains to keep up. This led to higher prices on 64% of more than 500 grocery store categories and consumers moving from fear-driven shopping to more thoughtful purchasing with more careful consideration of what they buy, why they should purchase these goods and how much they pay for packaged products.

BXP editors agree with BCG, Innova Market Insights and IRI that innovative and responsive CPG brands can be cautiously optimistic about the upcoming year; we also agree with Nielsen that brands and retailers need to pay close attention to more thoughtful consumer groups. Innovative brands must take advantage of evolving shopper behaviors to differentiate themselves both on physical shelves and virtual marketplaces.

In September 2020, the IRI CPG E-commerce Demand Index showed that online e-commerce continues to grow and is up 36% for the month. Furthermore, demand for click-and-collect fulfillment at the total CPG level is up 120% versus the same period a year ago.