CPG Category Research
Some pain points of consumers in the United States CPG industry are slow innovation and inadequate expenditure on innovation, consumers are expecting CPG companies to address global issues, and consistent customer experience.
Pain Points/Challenges/Unmet Needs of Consumers in the US CPG Industry
Slow Innovation and Inadequate Expenditure on Innovation
- According to Forbes, big CPG brands no longer command the attention they used to and they are being overtaken by fast-rising startups.
- This is because the big CPG companies, "once bolstered by scale, the size of Big CPG companies has created blind spots for niche consumer needs and underserved demographics."
- Big GPG companies have been slow to innovate while the new entrants are innovatively launching new products and disrupting the market.
- Big CPG brands' marketing spending is six times more than their research and development spending. These brands, as per Forbes, don't take research and development to be a priority and this has been manifested in the companies releasing fewer and fewer new products to the market.
- According to Forbes, "big CPG’s approach to innovation is flawed: Cycles are long, product reformulations are rare, and new launches few and far between."
- In addition to a lack of innovation, big CPG companies don't seem to understand their customers' needs. Their approach is to apply scale to mass marketing but customers want "localness, natural, personalized products that reflect authenticity and their values."
Consumers Are Increasingly Looking to CPG Companies to Adress Global Issues
- Another pain point of consumers in the United States CPG industry is that they are increasingly expecting CPG brands to take charge of solving global issues.
- The customers are expecting corporates to embrace corporate citizenship and sustainability. Consumers want to know the source of ingredients and the entire process a product undergoes before it gets to them.
- According to Deloitte, 88% of consumers in the US and the UK want companies to want CPG brands to improve their social and environmental footprint and 48% of consumers in the US are positive that they can alter their consumption habits to reduce the impact on the environment.
- CPG companies, therefore, are seeking to meet these consumers' needs and capture these market segments.
- Examples of CPG brands on the forefront include Ecolab, Burberry, H&M, Hugo Boss, Nestle, PepsiCo, Unilever, among others.
Consistent Customer Experience
- Today's customers are becoming increasingly empowered and digitally informed to make their own purchasing decisions. Customers now have access to a myriad of online customer reviews and price-comparison tools to guide their purchase decisions.
- While there has been increased transparency, customers still find it hard to run a price comparison for every item on their grocery list. This is a need that CPG brands have failed to meet.
- According to Deloitte, " the complexity and cost of new channels and services can make it more difficult for brands to deliver a consistent experience."
- As the CPG ecosystems become more complex, customers are finding it hard to expect consistent customer experience from CPG companies.
- According to the US CPG Industry Outlook for 2020 from Deloitte, "through strategic investment in customer-centric digital technologies, various players are blurring the lines between CPG and Retail in their efforts to earn consumer trust."
US CPG Industry SWOT Analysis
Decreased Barrier of Entry
- One of the strengths of the CPG industry in the US, which mostly favors new entrants into the market, is the lowered barrier of entry. The decreased barriers of entry have facilitated the rapid entrance of CPG startups that are disrupting the industry.
- The decreased barrier of entry into the industry has been facilitated by technology, thus "bringing about cheaper marketing and distribution costs."
- With the help of social media, startups can now reach their potential customers without spending a lot on marketing.
- According to Inc, the low barriers of entry also help direct-to-consumer CPG brands to take advantage and disrupt an industry that is popular for being hard to adopt.
Some CPG Brands Can Go Big by Focusing on Specific Ethnic Demographics
- According to CBI Insights, some startups focus specifically on particular ethnic demographics and tailor their CPG offering to them.
- As opposed to "using a one-size-fits-all approach, some smaller companies focus on the needs of a specific ethnicity and develop great brands around that base."
Traditional Pain Points
- As per Inc, one of the weaknesses traditional CPG brands have is that no matter how much they try to reinvent themselves to appeal to new customers and the mass market, the customer won't get on board.
- Today, customers have more power than ever before so this becomes a serious pain point. Millennial consumers have "a shorter attention span moving from one new thing to the next new thing often- adopting almost indiscriminately, but not long term."
- According to experts, there is an opportunity for CPG brands to go bespoke, hot in the heels of "uptick in recommerce, upcycle, and bespoke brands."
- This is an area of interest to consumers and it has promising potential. According to Blythe Jack, Managing Director of TSG Consumer Partners, "as business models work to adopt and feed into mass consumer behaviors, we have to make sure there is viability. We are seeing a lot of new businesses show up in the marketplace based on consumer demand and customization, but we are still waiting to see if there is enough of a viable business model to support these consumer wants and demands."
Health-Conscious Consumers/Shifts in Consumer Preferences
- One emerging trend is that consumers are "becoming more concerned with sustainability and the social impact of the products they purchase and the brands they purchase from." While this may be considered a risk, it's actually an opportunity for CPG to adapt to the changing needs of the consumers.
- According to CBI, consumers are willing to pay more for natural products and their priority is on the number of preservatives and not if the food is processed.
- According to Buzz, CPG companies recklessly venturing into the direct-to-consumer business model. While there is a lot of hype and buzz around the model, there isn't much market proof to justify the massive amount of capital being invested into the brands, some of which are very early concepts.
- According to Sara Buckley, Managing Director at KeyBanc Capital Markets, "wellness and social good upstart buzzwords have changed the way younger companies are coming in and chasing consumer wants but buzzwords don't equal market proof and profitability. It's hard to understand what return they're underwriting to and a lot of those companies are going to have a hard path to profitability. This is somewhat of a backwards trend I think we will see reverse over the next five years, where this early traction and devastating fall off will discourage such reckless funding, and encourage more market proof first."