In the past few years, many consumer packaged goods (CPG) companies have noticed a shift in consumer wants and needs. In the wake of the COVID-19 pandemic, many CPGs shifted their offerings to meet new demands. But what now? As many states are reopening and attempting to go back to a more normal way of life, what does the consumer want, and how can CPG companies use it to gain an advantage against the competition? In this blog post, we discuss how CPGs can stay competitive in a post-COVID world.
Many consumers are increasingly opting for products that are packaged sustainably, produced sustainably, and have more sustainable ingredients. Especially within the post-COVID era when many consumers are more comfortably venturing back into stores—and where there are rows of competition from other brands—labeling your products with language promoting their sustainability is a great way to catch consumer attention and stand out among similar products.
Although there is a cost increase to create a more sustainable product, studies suggest that consumers are willing to pay for it. A study conducted from 2013 to 2018 by NYU Stern’s Center for Sustainable Business found that 50% of CPG growth from 2013 to 2018 came from sustainability-marketed products. Additionally, the report noted: “Products marketed as sustainable grew 5.6 times faster than those that were not. In more than 90% of the CPG categories, sustainability-marketed products grew faster than their conventional counterparts.”
Several other top brands are already taking major strides in the sustainability movement. Nestlé, for example, has committed to 100% recyclable or reusable packaging by 2025 and will reduce the use of virgin plastics by one third by 2025. Whereas, Proctor and Gamble committed to 100% recyclable or reusable packaging by 2030 as well as reducing global use of virgin petroleum plastic in packaging by 50% by 2030.
If CPG companies want to stay competitive, they must evaluate all aspects of their products and determine the best way they can take steps to offer more sustainable versions. Not only does this make a more competitive product on store shelves, but it positions the company in a positive light from a public relations and media perspective.
Companies can move toward sustainability by considering how to make more of their products recyclable, introducing more biodegradable or compostable packaging, prioritizing the use of renewable resources in manufacturing, and/or creating a recycling program to make it easier for consumers to recycle their products. Retailers can promote sustainability by clearly identifying sustainable items on store shelves or in designated easy-to-shop sections, offering samples of sustainable CPGs, and sharing coupon codes for must-try sustainable CPGs. With growing consumer demand for sustainability, companies that are willing to pivot and make sustainable changes to their products, packaging, and production will emerge on top.
Along with the shift to a more sustainable lifestyle, consumers are moving toward a healthier lifestyle. This is especially true post-COVID, as many consumers became acutely aware of their health during the global pandemic and sought to make healthier decisions.
In the last few years, even PepsiCo has seen a huge transformation within their inventory offerings due to the consumer demand for healthier snack options. Drug Store News reports: “The company’s portfolio has been transformed over the past few years, with healthier-for-you products containing grains, fruits, vegetables, low-calorie beverages and low-fat/low-sodium snacks now accounting for 45% of the company’s sales.”
In addition to demand for healthier food options, many consumers are converting their personal hygiene products to healthier versions. Grand View Research reports: “The global organic deodorant market size was valued at USD 62.9 million in 2018 and is expected to expand at a CAGR of 14.1% from 2019 to 2025.”
Consumers want healthier options in all areas of their lives. CPG companies can gain an edge in this transition by reducing the amount of added sugar in their foods, promoting whole-food ingredients as LÄRABAR, Simple Mills, Siete foods and many other brands are famous for, using more natural ingredients in personal care products, and marketing their products with health-conscious branding to ensure consumers know about their positive changes. Retailers can support healthy CPGs by offering in-store stands with samples, creating special signage for health brands or sections, and putting health-conscious items front and center on store shelves.
COVID helped some CPGs and challenged others. For example, over-the-counter cold and flu drugs increased in sales by 150% in the weeks following the COVID outbreak, while grocery e-commerce increased by 25%. But many CPGs struggled, as more than 40% of U.S. consumers slowed their purchases. This means that it’s especially important for retailers and CPGs to not simply offer more products—but the right products.
Offering more SKUs isn’t always the answer, as it can complicate already-competitive store shelves, confuse customers, and lead to waste. Instead, it’s important for retailers to streamline their CPG offerings. According to McKinsey & Company, CPGs that skillfully manage this complexity can increase net sales by 1 to 4% and boost margins by up to 8%. In order to achieve this for product assortment, retailers should first identify and remove non-value adding SKUs through software like Date Check Pro. Then, retailers and CPG companies can aim to fill gaps in assortment, rather than simply adding more products for the sake of it. Retailers should also analyze which SKUs erode margins and focus on higher-margin SKUs that have the potential for higher sales volumes, margins, and customer demand.
Just because the demands of the shopper are pivoting does not mean that consumers are letting up on consuming. On the contrary, Americans love to try new products—from food to personal care—and this became especially true during the pandemic, when consumers had more time at home to experiment with new items and hobbies, and also craved novelty during ongoing lockdowns. A convenient way to discover new products and try new things is by joining a subscription service.
According to a report by Global Banking and Finance Review, 70% of business leaders say subscription business models will be key to their prospects in the years ahead. Additionally, more than half of online shoppers (54%) have subscribed to a e-commerce subscription box service. Today, the subscription box market is worth around $15 billion.
CPG companies can take advantage of this shift toward online shopping and subscription boxes by offering CPGs either as part of another subscription box, or by even creating a monthly subscription box of their own. Subscription boxes can also be a great way to automate repeat purchases, as 32% of all subscription boxes are replenishment-based. A subscription box is an excellent way to get new items in front of the right audience, or a great option if your business is producing a large variety of CPGs and wants a fresh new way to offer them to consumers.
Navigating Consumer Needs Via SKU Rationalization
The world will never be exactly the same after the pandemic, and neither will consumer shopping. It’s important to know how to determine what consumer packaged goods to offer, in what quantities, for which location and season.
SKU rationalization enables you to weigh the costs of producing and stocking each item against the benefits of selling it. As a core category management process, you can use SKU rationalization to decide which items to retain, increase, reduce, or eliminate from your inventory based on historical sales data or demand. SKU rationalization helps minimize your risk and feel more confident in the unique product offerings at each grocery store location.
To learn more about how to use SKU rationalization, download the following e-book, which brings together insight from Date Check Pro and Itasca Retail. In this e-book, you learn:
- Why the right category assortment is important for stores and their customers.
- How to avoid the factors that lead to having too much inventory.
- The essential data needed to guide SKU rationalization decisions.
- The solutions that will enable retailers to get the job done right.