Believe it or not… we’re about to celebrate the new year and enter Q1 2021.
Consumer goods manufacturers have faced unprecedented new challenges this year amid the pandemic:
- Meeting consumer demand
- Managing logistics and supply chain
- Reinventing forecasting
- Safety, shelter-in-place, social distancing
Promotions were cancelled, orders were cancelled and factory safety was prioritized like never before. In this article, we’ll review the best of 2020 and predict what trends to be ready for in 2021.
“A common element impacting food industry sectors during the pandemic is the stark difference between the fortunes of retail and foodservice,” says American Bakers Association (ABA). Those supplying retail stores generally experienced surging demand. On the flip side, “foodservice suppliers faced sharp sales declines.”
COVID-19 has upended how you operate and how consumers behave. Even looking ahead, we know that the pandemic will remain in the picture.
What key CPG trends are going to dominate 2021? First, let’s recap 2020’s top CPG trends:
- The unpredictable: The global pandemic shakes up business and behavior
- The strategy: Omnichannel is the key ingredient to meeting the buyer’s ever-changing needs
- The initiative: Sustainability builds (brand) value
- The product: Plant-based foods continue to thrive (in foodservice and retail channels)
- The category: Pet products are among the fastest-growing online retail categories
- The growth: The global private label food and beverages market will grow by $215.81 billion during 2020 – 2024
We’ll continue to build on these trends moving into 2021. Keep these themes top of mind as we move into the new year.
And keep reading because we’re piling on 5 new CPG trends you should know about.
2020 Highlight Reel
The Most Loved Food and Beverage Brands
According to Morning Consult, a global data intelligence agency, “2020 has undeniably reshaped how consumers think about brand love. As the pandemic continues to alter brand perceptions and shift consumer needs, companies must commit to understanding what’s driving love to stay relevant today – and into the future.”
These 15 consumer goods brands were rated the most loved in 2020:
- Heinz Ketchup
The Top 15 Chains in 2020
Based on 2019 US systemwide sales, Technomic has determined the top 500 highest-grossing restaurants. QSR magazine reminds us to “consider it more like a baseline” since the brand rankings are “what brands had been up to pre-pandemic.”
- Taco Bell
- Burger King
- Panera Bread
- Pizza Hut
- Chipotle Mexican Grill
- Sonic Drive-In
- Olive Garden
The Best Brand Innovations of 2020
“We’re seeing a significant uptick in product innovation, especially within retail and CPG,” says Amy Shipley, managing partner and director, SRG.
Nielsen released its 2020 Top 25 Breakthrough Innovations list. The marketing research firms says that brands on this list “reflect a wide range of products and approaches that succeeded in marketing meaningful connections with consumers.”
- Bang energy drinks
- Ripple Plant-Based Milk
- Beyond Meat Beyond Burger
- Blue Bunny Load’d Sundaes
- BodyArmor Lyte
- Pop-Tarts Bites
- Gatorade Zero
The Unfavorable: Menu Reductions
Because restaurants were mandated to close dining rooms, operators of all sizes opted to streamline their menus. Smaller menus help restaurants shed complexities and costs, but foodservice manufacturers may be left off future orders. Foodservice manufacturers: Show your customers the best ways to maximize your ingredients on their menu. Think of how your product(s) will add value in their kitchens.
- Taco Bell dropped 12 items from its menu including potatoes, Quesarito, and the fan-favorite Mexican Pizza.
- KFC swapped out its potato wedges for fries. In a statement the fast-food company said that while “we know there are wedge-lovers out there who may be disappointed, consumer response to or Secret Recipe Fries during the test and rollout has been overwhelmingly positive.”
- McDonald’s removed Chicken Selects from its menus as a result of the coronavirus pandemic. To further simplify operations, McDonald’s also cut salads from its menu noting that they will “focus on serving our most popular choices and will begin temporarily removing some items from the menu.”
- Panera Bread decided to cut the Tuscan Chicken Sandwich, the Maple Bacon Scrambled Egg Wrap and the Cheese Brittany from its menu.
The Prediction: Holiday 2020
This holiday season, shoppers are expected to spend $1,496 per household, with food and beverage ranking among the top items for purchase, according to Deloitte’s 34th annual holiday survey of consumer spending intentions and trends.
👍 Promotions will influence 81% of consumers this holiday season.
👍 43% of consumers plan to purchase food and beverage for themselves, outpacing all other retail categories.
👍 25% of consumers plan to shop for gifts at supermarkets and grocery stores during the holiday season (up from 14% five years ago).
The survey respondents expect to spend 59% of their holiday budget online. Deloitte’s says that ecommerce sales will grow 25% – 35%, year-over-year, during the 2020-2021 holiday season, compared to sales increasing by 14.7% in 2019.
5 CPG Trends to Prep for in 2021
The pandemic has changed us forever. Food shopping and dining are no exception.
Without a doubt, adaptation is the key initiative firing up business strategies in the new year. Boston Consulting Group warns that CPG companies that are unable to move fast and nimbly to change the way they view and respond will find themselves struggling to catch up.
Food brands – regardless of products, sizes or channels – must adapt to new consumer behaviors and mandated restrictions.
“However much time you spent before building plans… it’s blown up,” says Tom Theis, Director of Revenue Growth Management for J.M. Smucker. “What happened last month is probably obsolete today.”
Adaptability is crucial skill. “I think we have been very flexible as a broad food and beverage industry,” Robb MacKie, ABA’s President and CEO says. “We’re adapted to new learning.”
Because of the fast-paced changes the food and beverage world is experiencing, 2021’s key CPG trends all stem from adaptability:
At home dining 📍
No contact food shopping 🛒
Health and sanitation 🧼
Brand loyalty 🧻
SKU rationalization 🧯
At Home Dining 📍
Restaurant sales have taken a nosedive because consumers are eating at home. In total between March and September, eating and drinking place sales were down nearly $162 billion from expected levels.
Fortnue.com reports that in March 2020, the USDA’s monthly food sales figures showed that money spent on food away from home had dropped from $67.6 billion in February to $54 billion in March, a 20% decline.
During the same period, sales of food at home increased from $62.9 billion to $79.3 billion, or 26%.
Then, in April 2020, spending on food away from home plummeted 34% over the previous month to $35.7 billion. That’s less than half of what Americans spent on food away from home in December 2019.
According to Acosta, more than half of US consumers eat at home more today than before the pandemic. The overnight shift has devastated restaurants. The National Restaurant Association reports that over 100,000 restaurants in the US have closed permanently.
“Many US consumers won’t be flocking to restaurants and other foodservice venues” after the pandemic winds down says Acosta’s study.
No Contact Food Shopping 🛒
The pandemic has created a permanent shift to online food orders.
Digital ordering and delivery have grown 300% faster than dine-in traffic since 2014. The pandemic has absolutely advanced that trend.
In 2020, from February to April, as restaurants pivoted to takeout and delivery, there was a 169% increase in the number of restaurants actively using online ordering.
What are consumers ordering? They’re looking for comforting, simple and cost-effective options – proven by these top 3 items – sandwiches and wraps, burgers, and pizza (+9%).
“In 2019, digital orders—either on a smartphone or a website—for delivery grew by 16%, and digital orders for takeout grew by 33%,” says The NPD Group’s David Portalatin. “I think that what you’ll see is those companies that were already winning with those kinds of consumer offerings probably come out of this a little stronger than some of their peers.”
60% of restaurant operators say that offering delivery has generated incremental sales. Portalatin says that only 3.4% of all restaurant orders were for delivery prior to the pandemic.
Online Grocery Shopping
During the COVID-19 outbreak, new ecommerce users increased their usage of the channel by 156%.
BCG says that 35% of US shoppers new to ecommerce in March plan to continue making grocery purchases online after COVID-19 restrictions are over. The shift to ecommerce will drive more than 70% of sales growth across food and beverage categories through 2022.
The use of online grocery services more than doubled from February to March 2020, from 13% to 30+% of US consumers, according to Brick Meets Click.
In 2020, 34% of shoppers said they view their grocery store circular online, and 26% access the digital circular via their grocer’s mobile app says Supermarket News.
Acosta found that 30% of grocery shoppers redeem online/mobile coupons downloaded to their smartphone, up from 24% in 2017. 44% redeem electronic coupons downloaded to their shopper loyalty card, versus 35% in 2017.
Health and Sanitation 🧼
Sure, health isn’t a new priority for consumers… but it takes on a new meaning during a global pandemic.
Datassential finds that customers are reporting more plant-forward eating habits – nearly 40% of people say they’re eating less red meat today compared to a year ago, while 49% say they’re eating more vegetables today.
In addition to healthy eating, sanitation will take the front seat as a health priority for food and beverage companies in 2021.
Sanitation is now a regular part of the conversation for the food and beverage industry. It starts at the manufacturing facilities and works its way to individual restaurant and supermarket procedures.
Food and beverage facilities will now focus on cleaning surfaces, ensuring proper ventilation.
Common sanitation procedures for operators and retail include
- Taking employee temperatures before the shift
- Reinforcing hand hygiene
- Regularly disinfecting surfaces
- Remove self-service (water fountains, buffets, tabletop condiments)
- Discarding menus and replace with digital or disposable options
Availability > Brand Loyalty 🧻
Brand loyalty is usually based on long-held, implicit beliefs. It’s something that doesn’t quickly change. During times of crisis, many shoppers reevaluate their priorities and purchase criteria, which can result in new buying behaviors.
According to 4A’s spring 2020 survey, 70% of respondents planned to buy from brands they were familiar with. Still, 78% of consumers said they’d buy any brand available for the products they need.
Data from AlixPartners shows that 65% of US consumers have tried new brands during the coronavirus pandemic — 79% did so because their usual option was out of stock.
“Consumers are suggesting that they’re going to continue and stick with the brand they’ve tried at a pretty high rate,” said Randy Burt, managing director in the consumer products practice at AlixPartners. “Those brands that are able to stay on shelf, that are able to deal with the spikes in demand caused by COVID-19 and the shift from away-from-home to food-at-home, are the ones that are going to be able to potentially strengthen their brands over time.”
SKU Rationalization 🧯
With SKU rationalization, you decide whether a product should be kept or discontinued based on sales data, costs and inventory. The goal is to pull items that aren’t different enough or don’t generate meaningful incremental profit.
Before the pandemic, retailers generally “reset the category twice a year – and that’s when you saw some rationalization,” points out David Gottlieb, Managing Director at Trax.
Now CPGs regularly evaluate product performance and many plan to consolidate production around core SKUs to streamline operations and drive efficiency. Retailers want to slash less profitable or slower-selling items too.
When shutdown and stay-at-home orders started back in March 2020, Frito-Lay cut SKUs to get more products into the market faster.
“We reduced about 21% of our SKUs to deliver the volume of our most in-demand products, ensuring availability everywhere for consumers,” notes Mike Del Pozzo, senior vice president of sales for Frito-Lay North America. The company later restored most of its paused product bar codes, but not all.
Mondelez International did the same. Dirk Van de Put, Mondelez CEO explained during a 2020 earnings call that the company would remove 25% of its SKUs. “You can imagine if you reduce your SKUs quite a lot, there’s many benefits across the business for that.” Those benefits include reduced inventory and packaging costs and simplifies the supply chain.
“Our supply chain has been resilient, and we’ve delivered consistent service to our customers. Case fill rates, in fact, are at better-than-average levels. We’ve seen an increase in demand in developed markets, and we’ve met it by focusing on the most important SKUs. Our strong relationship with our suppliers have helped us maintain critical raw materials and packaging supplies.”
Van de Put says that Mondelez is confident in its people and portfolio. The company expects to manage through the pandemic and emerge stronger. He continues, “We’re working on making our business simpler.”
CPG Expectations for 2021
COVID will continue to transform our lives and our work. Ecommerce will continue to grow as shoppers prioritize convenience and safety. SKUs will get cut as retailers simplify their processes. Price and promotion will be incredibly important to the consumer as the economy fluctuates and news is released.
The conclusion? As an industry, food manufacturers must be ready to adapt on a dime.