Key trends in the consumer packaged goods industry

Consumer Packaged Goods companies (CPGs) are facing many industry shifts. To remain competitive in this dynamic marketplace, it is essential for businesses to apply a data-driven method to quantify how various trends are likely to affect your planning and bottom line. This blog will examine how Business Intelligence and Financial Planning and Analysis (BI and FP&A) tools can help CPG companies address and manage changes in purchasing power, supply chain volatility, wellness over sustainability preferences and the ongoing rise of digital transformation.

Shifts in purchasing power - from Millennials to value consumers

As Millennials continue to enter the workforce and climb into leadership positions, their purchasing power will increasingly impact the consumer goods industry. This generation has grown up with the speed of technology at their fingertips. With the immediate gratification of social media notifications, personalized digital marketing, and 1-click online purchasing, it is essential to cater to the needs and expectations of this fast-paced generation. CPG companies will need to adapt by enhancing their omni-channel presence, consider influencer marketing via TikTok and offer fast delivery service.

Brand loyalty is eroding and consumers are increasingly driven by value (especially in tough economic times) so established brands can rely less on their reputation. This value shift offers opportunities for new businesses to enter markets and gain traction. CPGs may need to be able to sell directly to this segment or create private label brands to combat the desire for value products. With the assistance of a business intelligence and financial planning and analysis solution (BI and FP&A), CPG brands can monitor consumer behavior by the hour and forensically determine if marketing strategies are working and if purchasing decisions are being driven by price and what new products are driving online sales.

Supply chain volatility

Globalization has been a huge opportunity for many CPG companies. It has provided an opportunity to expand into new markets, as well as to source products from markets previously out of reach. However, the opening-up of markets has led to fewer, yet bigger, and more specialized suppliers, which has made the industry supply chains more volatile, according to a report by McKinsey. As well as the rise of the bigger CPG players, the industry has experienced widespread supply chain volatility in the last 5 years. From the global pandemic, political crisis in Europe and the Middle East and a rise in natural disasters caused by climate change - this instability is relentless and far reaching. These ongoing events have increased transport costs, caused longer waits for products and increased costs for consumers and made cpg reassess suppliers and diversify.

Minimizing the exposure to this volatility is a constant challenge for CPG companies. A dedicated BI and FPA solution enables you to use key metrics to monitor all facets of your supply chain. For instance, you can compare and analyze your suppliers’ level of service and pricing. This careful analysis of supply chain costs can help you select the suppliers with the best performance for your needs. The ability to assess your supply chain in an objective, fact-based manner will allow you to respond to disruption.

Wellness over sustainability

When you review consumer behavior and how consumers are spending, value for money is currently more important than supporting sustainable products. Only a few years ago, the younger market would prioritize sustainable products but with the rising cost of living they are now not willing to pay a premium for these products. The wellness trend is driven by the long-living boomer market and people who are retiring much later. Statistics also show that huge markets like India, China and the Middle East are spending more on fitness and wellness services as well as products like vitamins, serums and beauty equipment. There is a real opportunity for CPG companies in this sector, so they need a strong handle on their data and reporting. A beauty retailer in South Africa is taking advantage of e-commerce and Phocas BI to improve its reporting efficiency and fuel its growth.

Accelerated rate of digital transformation

Technological advancements have drastically changed our way of life: from the internet to artificial intelligence, we are always connected to the world and information. We are inundated with advertising, opinions, and a minute-to-minute news cycle. As a result, consumer preferences and behavior are likely to change faster than ever before, and CPGs can no longer rely solely on traditional methods of analysis and decision-making.

Adaptation is the key to survival. Failure to adapt to customer preferences will lead to a loss of market share. CPG businesses that implement a BI and FPA solution have access to up to date data, can plan across operations and have the ability to spot trends as they are emerging. Top-tier BI solutions like Phocas provide managers and executives with the lightning-fast information they need to adapt to the speed of change.

As income disparities increase, mid-market CPG companies will face more pressure to meet the needs of all consumers. As a consequence, CPGs must re-evaluate their pricing strategies, open new distribution channels, and become more innovative in their offerings.

Adoption of a BI and FP&A solution can help reduce this pressure by providing actionable insights. For instance, BI can help CPGs develop effective strategic plans across departments, streamline expenses, monitor trends, and uncover new sales opportunities for the value seeking consumer.

Smart use of data is critical to better decision making

The use of data is an essential factor in the success of the CPG industry. All business people need clear, fact-based insight into what’s happening in their businesses. This data-driven insight is necessary to respond to changing trends with innovative solutions.

Quality BI and FPA solutions recognize the need for innovation and continue to develop new features to respond to shifting industry needs. Traditionally, experienced leaders have relied on their finely-honed gut instincts to make decisions. With the use of BI and FP&A, those leaders can use their chain of thought as a guide when querying the data to get down to the facts. This combination of gut instinct and facts is critical to the effective decision making necessary for CPGs to predict and respond to rapidly changing consumer demands.