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5 CPG Marketing Challenges in 2021


Marketers of consumer packaged goods (CPG) face an array of evolving challenges in today’s retail landscape.

The surge in online shopping since the COVID-19 pandemic began has altered consumer behavior so that many shoppers now prioritize convenience and availability over brand loyalty. And with less foot traffic in brick and mortar retail stores, CPG marketers have less control over which brands shoppers see now that many have turned to ecommerce options to purchase groceries, clothing, and cosmetics. 

The effect of the pandemic on consumer behavior and the rise of ecommerce are not the only challenges facing the CPG industry in 2021. Marketers of consumer packaged goods must also adapt to changes in demographics as the population ages and minorities comprise a larger share of the consumer market. 

CPG marketers must also contend with increasing competition from private labels and their effect on brand loyalty, as well as diminishing shelf space and the potential for shrinking marketing budgets. In this article, we explore these 5 critical CPG marketing challenges and share some strategies for turning them into opportunities in 2021. 




Ecommerce & Online Shopping 

Ecommerce sales have grown steadily over the past decade, and by Q3 2020, ecommerce sales accounted for 14.3% of total retail sales. As more retailers have moved to online sales as a response to the COVID-19 pandemic, it’s likely this trend will only continue. In fact, one estimate predicts that ecommerce sales of groceries alone will see an 17.3% CAGR between 2020 and 2023.

While online shopping provides more options for consumers,  it also creates two new hurdles for CPG marketers: a shift in the balance between digital and in-store marketing, as well as an audience of consumers with more information and buying choices than ever before. 

  • More digital, less in-store marketing. The consumer packaged goods industry was predicted to grow digital spend by 5.2% in 2020 as the pandemic drove increases in search marketing. This growth in digital spend creates a more crowded market, but it also allows brands to bring more precision to their targeting. This type of hyper-specificity in CPG marketing improves alignment between the consumer and the trade promotions, creating a path to increased brand loyalty.
  • Increased consumer control for online shoppers. Ecommerce gives consumers access to more information and more shopping options than ever before. In this digital environment, smaller brands can often thrive. That’s because ecommerce levels the playing field by exposing customers to a wider range of brand options as well as access to user reviews and other information that may influence their decisions.  

Ecommerce also makes it easy for buyers to compare prices and explore promotions before completing a purchase, which means CPG marketing must now meet the needs of a more well-informed consumer. 




While it may seem more difficult for CPG marketers to influence consumer’s impulse purchases in the digital sphere, online advertising can be a highly effective way to expand a brand’s reach and acquire new customers. In order to make the most of this opportunity, CPG marketing for online audiences must be data driven. 

The key here is to control online spend by understanding all pricing and promotion options, as well as the ROI of every advertising dollar spent. For example, CPG marketers will likely find themselves advertising on multiple platforms such as Amazon, Ibotta, or online grocery store ads. Marketers need the ability to distinguish between channels that are effective at achieving business goals from those that are not. 

Using a trade promotion optimization (TPO) solution can bring additional layers of insight into digital advertising activities, including the ability to layout digital events and analyze correlations with promotions. With TPO, Marketers can consolidate and compare data from multiple sales and promotions in order to drive strategic decisions and determine the best opportunities to achieve target ROI. 


Pricing Pressure & Brand Loyalty

Consumers are always looking for good deals, and this is especially true during times of economic uncertainty.  One study found that 54% of consumers consider themselves to be more cost conscious than before the pandemic. Another sobering statistic for marketers: the same study found that household income for 35% of consumers had decreased because of the pandemic. Shoppers are more cautious about spending and many have smaller budgets to manage. 

As a result, private labels have become increasingly important for shoppers, with 29% of shoppers surveyed reporting that they have increased their purchases of budget brands and 42% reporting that they have scaled back spending on premium brands

For CPG marketers, this means: 

  • Premium brands face greater competition from private-label brands that offer cost-conscious shoppers a lower price point, increasing the chance of lost sales
  • Store-owned brands or discount dollar store alternatives may crowd out CPG brands, complicating your marketing efforts. Target, Walmart, Dollar General, and more outlets are prime examples of retailers using private labels to edge out CPG brands. 
  • Brand loyalty may be at risk as private labels offer their own options that benefit from perceived affordability and the retailer’s own brand recognition. 
  • Margins may continue to decrease as private label brands continue to apply pricing pressure to premium brands. 



It’s essential to understand where your brand stands and how your sales are stacking up against both CPG competitors and store brands/private labels. That means continuously analyzing competitor actions, assessing their impact, and having x-ray insight into how many products you’ve sold compared to store brands and other competitors. 

grocery _ sale in aisle

TPO software harmonizes data from multiple sources to drive decision making. For example, pricing managers can use TPO to determine the most effective strategy for regular sales and promotions, while brand managers are able to focus on competitors, better understand their business base, and plan for new product launches.

Trade promotion optimization also supports approval teams, who benefit from access to unified sales data, and sales managers who depend on the consolidation of multiple data sources to make timely, fact-based decisions.


Shifting Demographics

Rapidly changing demographics present another challenge for CPG marketers.  Take these recent statistics, for example: 

  • By 2034, the U.S. Census Bureau projects that Boomers and older adults will outnumber children for the first time in U.S. history. (That’s 77 million adults aged 65 + compared to 76.5 million children under the age of 18.)
  • Generation X (1965 – 1980), comprise the smallest generation in terms of population, but punch above their weight in terms of spending power. They make up 25% of the U.S population while earning 31% of total U.S. income. 
  • Millennials (1981 – 1996) have already overtaken Boomers to become the single largest generation by population. 
  • Generation Z (1997 – 2012) comprise the most racially diverse generation in U.S history, and number an estimated 67 million. 
  • In the U.S., minorities are projected to comprise the majority of the working class by 2032
  • By 2030, the proportion of the U.S. population who identify as Latino or Hispanic will grow to 21.1%, while those identifying as White will decrease to a historically low 55.8%. By 2045, White Americans will officially become a minority, dropping below 50% of the population
  • The proportion of African American and Asian Americans will continue to increase over the next few decades. 
  • The foreign-born population of the U.S. quadrupled between 1965 and 2018, and the number of immigrants and their children living in the U.S. is expected to double by 2065

Each of these data points helps illustrate the seismic shift in the U.S. consumer market that will unfold over the next few decades. CPG marketers will need to anticipate what these changes mean for them in terms of who they’re marketing to, and how they’re marketing to them. Doing so will require analysis of changes in consumer behavior, spending power, and the cultural considerations that impact both. 



CPG marketers will need a two-fold strategy to find opportunities as demographics and consumer behavior shift in future years. First, marketers need to understand how to most effectively reach each target audience. Second, messaging and strategy must be appropriate for each specific consumer group. 

Take social media, for example. Data suggests that platforms such as Facebook and Instagram have the broadest reach in terms of audiences, but we also know that these platforms are used by the highest number of persons over the age of 50 when compared to other social media options. In contrast, platforms such as Twitter and Snapchat report a higher number of users in the 18-29 age group. 

We also know that men and women consume social media in different ways. The number of women using Pinterest is almost triple the number of men using the platform, while Snapchat appears to have an equal number of women and men users. 

Use of social media platforms by age group

Age Facebook Instagram LinkedIn Twitter Pinterest Snapchat
18-29 79% 67% 28% 38% 34% 62%
30-49 79% 47% 37% 26% 35% 25%
50-64 68% 23% 24% 17% 27% 9%
65+ 46% 8% 11% 7% 15% 3%


                                                                                                                                     –Pew Research 2019


Other types of media can also be used strategically to target changing demographics. In today’s market, that includes mainstays such as television and traditional radio, as well as newer services including podcasts, streaming media, and apps. 

Similar insights into differences in social media usage by race, education, and income level are also critical for CPG marketers looking to send the right message to the right audience on the right platform. 


Diminishing Shelf Space 

Competition for shelf space has always been tight. With more CPG brands and private labels on the market than ever before, it’s become even more difficult to capture valuable in-store real estate. CPG marketers know what’s at stake: securing a spot at eye-level can lead to 35% more attention for a product.

cereal aisle

Apart from the normal competition for shelf space, marketers of consumer packaged goods must also contend with

  • Retailers taking more control of placement decisions. According to the Wall Street Journal, “grocers are relying on their own proprietary research to decide how and where to shelve certain products,” a change that may mean “less space for traditional supermarket staples” from brand name manufacturers. 
  • Pressure to demonstrate CPG brand value and profitability. As retailers exercise more control over product placement, they may favor “niche items and store brands that deliver higher margins.” In other words, CPG marketers will need to build a convincing case that placing their product in a key slot brings more reward than risk. 



Securing shelf space (and negotiating slotting fees) depends on strong communication between CPG brands and retailers. CPG marketers must take a data-driven approach to making the case for their product, in order to attain desirable shelf placement and to negotiate slotting fees (when possible). 

Trade promotion optimization can help CPG marketers with product placement negotiations by harmonizing multiple data streams into a single, unified story. That includes retailer ROI and margin analysis, predictive analytics, and what-if scenarios that can help make a convincing case for placement. The more insight a marketer can bring to the table, the better their chances of building a relationship with retailers that benefits both parties. 




Marketing Budgets 

Marketing budgets face increasing scrutiny anytime the economy hits a downturn, but the pandemic has done more than that; it’s also changed the way people shop and budget. These changes in consumer behavior may be more long-term than initially anticipated. One survey found that 66% of respondents plan to continue avoiding busy places, including retail stores, even after restrictions have been lifted. According to the same report, over half of Millennial and Gen Z shoppers expected their pandemic lockdown habits to continue after the pandemic. 

Discussion Blacksmith Applications Retail TPO

While the long term impact of COVID-19 on CPG marketing budgets remains to be seen, there’s evidence that some marketers are already seeing their budgets cut. According to a recent Garnter report

  • Almost half (44%) of CMOs reported midyear budgeting cuts in 2020 as a direct result of the pandemic. 
  • Cuts to marketing budgets include canceling or postponing customer-facing marketing events (44%), delaying the launch of new products (41%), and reducing headcount (37%). 
  • Industries that reported concern about the future impact of COVID-19 include respondents in travel and hospitality (22 percent) and consumer product brands (34 percent). 

While it might at first seem logical to cut overall marketing budgets and/or trade spending in an atmosphere of uncertainty,  there are some good reasons why trade promotion budgets should remain intact. For example, CPG marketers will want to keep pace with competitor activity, retailers may require trade promotion spend, and ultimately, there’s the possibility of lost revenue if trade promotion budgets are trimmed. 

There is an additional reason why it’s wise to maintain trade promotion spend during a downturn. According to the Harvard Business Review, marketing during a downturn can play an especially important role in preserving brand loyalty. That’s because shoppers are more cost conscious and may be more willing to abandon trusted brands when presented with lower cost, more accessible options. 

One silver lining for CPG marketers in the current economy: it may be cheaper to increase the share of voice against rivals during a recession. HBR also found that companies that were able to increase SOV during the 2008 recession were able to capture market share from rivals following the recession. 



Rather than trimming marketing budgets and trade spend indiscriminately, CPG managers should look for opportunities to spend dollars more wisely. That means having access to data that can inform strategies, reassessing consumer behavior, and keeping a close eye on competitors. 

Trade promotion management software consolidates and centralizes multiple data streams including pricing, contracts, margin analysis, calendar panning, and other information that streamlines reporting and brings control and transparency to your trade promotion efforts. As a result, trade spend managers can make agile, strategic decisions that meet challenges and exploit opportunities where they can be found. 


Solve All Your CPG Marketing Challenges 

For CPGs every metric matters. As you strive to achieve business goals and drive revenue growth, success always hinges upon the ability to bring control and transparency to trade promotion activities, and to demonstrate the value of our strategies and their impact on the bottom line. 

Whether that means in-store or online promotions, trade promotion management and optimization software simplifies the work of organizing data, optimizing strategies, planning, forecasting, as well as analyzing and reporting results. Learn more about Blacksmith Applications and how we lead the pack when it comes to turning CPG marketing challenges into opportunities.