Cadent Consulting revealed that consumer goods companies put more than 21% of their earnings toward marketing, up 1.3% from a year ago and totaling $225 billion in annual marketing spending.
As we move into the new year, CPG companies will stop blindly working to grow their bottom lines, since most execs say they are working on process improvements, digital marketing strategies, and new product introductions.
84% of industry leaders and decision makers think that sales will grow in 2020, and while that number is high, it’s a 6% decrease from last year.
2019: A Big Year for Food & Beverage
Food and beverage companies dominated 2019’s growth rankings. 11 of the top 20 spots on the Morning Consult’s fastest growing brands report were claimed by food brands and delivery services. On the list:
- White Claw
- Impossible Foods
- Kind Snacks
- 100 Grand
Every 2 minutes, a new product is launched in the US marketplace.
CPG unit volume sales are consistently around 1% growth YoY. Nielsen released its top 25 innovation winners for 2019, and 15 of the 25 most innovative products were from food companies. On the list:
- bubly Sparkling Water, PepsiCo
- Caulipower, Caulopower LLC
- Dave’s Killer Bread, Bagels, Flower Foods
- DEVOUR, The Kraft Heinz Company
- Lay’s Poppables, Frito-Lay North America
- RITZ Crisp & Thins, Mondelez International
- RXBAR, RXBAR
- Lamb Weston Grown in Idaho
2020: CPG Trends
After reviewing the innovative and fastest-growing brands reports from 2019, it got us thinking about what’s to come in 2020. For one, CPG companies will strive to become more efficient in trade spend. Companies cannot overlook or underestimate the impact their spend has on the bottom line. Looking ahead, manufacturers will base their trade spend strategy on consumer behaviors, food trends, competitive pricing, and technology.
“The true value of today’s emerging technologies has remained in the hype cycle for much of retail and CPG, but the dawn of a new decade will see a rapid acceleration in meaningful use cases,” said Jeanne Danubio, President, Nielsen Connect, North America. “From the transformative effect of 5G to the increase in frictionless commerce—all underpinned by trust and transparency—the consumer landscape will become increasingly complex.”
Omnichannel Business Strategy
To succeed in an omnichannel world, CPGs must boldly go everywhere their customers are.
- Omnichannel describes the type of retail that integrates the different methods of shopping available to consumers (think — social media, mobile apps, voice assistant, brick-and-mortar).
- It’s time to get familiar with the omnichannel shopping experience – omnichannel retail is expected to grow by 30%, disrupting the dynamic between CPGs and their customers.
- 70% of today’s shoppers already purchase or research CPG products online
- According to Infiniti’s CPG market research experts, online channels contributed to nearly 70% of overall CPG growth in the last decade. Therefore, ‘going digital’ is becoming one of the major CPG industry trends today.
- Home delivery services are expected to become one of the most favored CPG industry trends in the coming years.
- Digital ordering and payments are expected; “the smartphone will be the wallet of 2020,” said Dennis Lombardi of WD Partners. “And cash will go the way of the AM band of the radio.”
Continue reading about the omnichannel experience and consumer touchpoints in this Smoke Jumpers magazine article.
Buyers value transparency in business operations and prefer eco-friendly products.
- According to the World Economic Forum, plastic waste represents an annual loss to the global economy of more than $80 billion.
- Many CPGs have adopted innovative, recyclable packaging knowing that consumers want to avoid waste.Transparent packaging is a major CPG industry initiative. Top CPG brands are exploring new packaging alternatives such as bio-plastics and well-known options like transparent glass containers.
- 54% of consumers think it’s at least somewhat important that the products they buy are produced in an environmentally friendly way.
- Restaurant operators look to new natural resources for menu innovation.
- “Sustainability is more than a menu initiative,” said Aimee Harvey, managing editor at Technomic. “It’s emerging as part of the food service industry’s new circular economy, evolving from a linear approach of create-use-recycle to create-use-reuse-sustain.”
- Executives said health and wellness was the top motivator for new product launches, followed by sustainability and convenience. This fits with recent SPINS data showing natural product sales growth is outpacing the total food and beverage retail market. Such products hit $47.2 billion in dollar volume for the year ending in May, a 5% jump from the previous year-long period.
Learn more from the article Sustainability Without Compromise in Smoke Jumpers magazine.
Whether you’re in a fast food restaurant, on a college campus, in a grocery store or at a stadium, you now have access to meatless meat.
- Sales of plant-based food grew by double digits and at five times the rate of total food sales in the past year.
- In 2018, shipments of plant-based proteins to foodservice operators increased 20%.
- 95% of people who purchased a plant-based burger this year also ate meat.
- Up to 60% of “meat” may come from non-animal sources by the year 2040.
- 60% of Americans claim to be reducing their consumption of meat-based product.
Keep reading about plant-based meat in the blog How Food Manufacturers are Embracing Plant-Based Meats.
Pet Category Growth
Promotions aren’t just for people. The pet category is growing and wants in on the action.
- Since 68% of US homes have a pet, it’s no surprise that the pet food segments have experienced explosive growth over the past few years.
- E-commerce sales of pet consumables increased 53% in 2018, and Amazon attracts more than half of those who purchase pet products online.
- “Talk to any pet owner, and they’ll tell you how difficult it is to put a dollar limit on what they’d spend to give their loyal companion a happy life, and it’s this outlook that continues to drive growth,” said Bob Vetere, President and CEO of APPA.
Learn how legacy CPG companies are increasing their focus on the pet category in the article Man(ufacturer’s) Best Friend.
Private Label Rivals
Private label market share will jump 10% over the next decade.Private-label products continue to gain market share, providing shoppers an affordable alternative to national brands and giving retailers a boost in profitability.
- Nielsen reports that nearly one in every five items sold in US supermarkets was a store brand.
- 90% of millennials are buying private label to save money.
- Private label market shares total 25-30% across many categories and retailers.
- Private label industry as a whole grew by 4.1% last year compared to national brands at 1.4%.
- Cadent Consulting cites the growth of private label as a leading influential factor in how brands are adjusting their spend.
Get more information about private labels in this blog post.
The omnichannel environment will become second nature, private-label products will leak into legacy brand share, and meatless meat will be a standard on menus and in grocery carts. To stay relevant in the space, and to beat out your products competition, CPGs should be alerted to trends and strategies to stand apart from the rest.