Many conveniences get taken for granted today with our fast and convenient way of life, including the impact consumer packaged goods (CPG) have on how we as consumers shop, buy and use goods. Keeping up with product trends, including CPG options, is vital. What are consumer packaged goods? The simple answer is that average consumers use items daily that require routine replacement or replenishment. These items get used once or a handful of times, have to be repurchased and are usually packaged in daily/weekly short-term packaging. This is an excellent basic consumer packaged goods definition and is what most CPG manufacturers use as a working basis for their products.
The following logical questions concerning CPG products involve understanding what a CPG manufacturer is and what CPG manufacturing is like in today's industry. As specialized products, packaging, warehousing, and distribution require technical knowledge and insights, manufactured CPG products have an exact approach to making these products and getting them into the hands of consumers. CPG consumer packaged goods continue to be one of the most in-demand and critical niches within the consumer market today.
As highlighted by Investopedia, consumer packaged goods are dominating forward growth and consumption trends because (despite experiencing a slow-down in growth over recent years, the CPG industry is still one of the largest sectors in North America, valued at approximately $2 trillion, led by well-established companies like Coca-Cola, Procter & Gamble, and L'Oreal.) Now, more than ever, CPG suppliers and distributors of all sizes face nearly endless opportunities to adapt their products to meet consumers unique and growing needs. These include the quality, affordability, innovation, convenience, and variety of packaged consumer goods. What are consumer packaged goods, and how can distributors, manufacturers, and logistics companies maximize their profits? Read on to find out.
Like nearly every niche driven by consumer need and demand, CPG markets face continuing instability and volatility across all aspects of manufacturing, supply chain distribution, and consumer purchasing. Added to this, the shifting consumer demands, shopping trends, economic pressures, and CPG consumer packaged goods become a market that must be overseen. Improving retailer relationships and extending the reach of CPG providers is critical to balancing the continued pressure felt throughout the industry today.
Consumer packaged goods represent such in-demand aspects of life today that inflation and rising costs have not done much to stop consumers from spending, at least not yet. In early 2022, at the start of COVID shutdowns and supply chain disruptions, consumers experienced their first taste of what the CPG manufacturing market would morph into over the next few years. Two main categories of trends and influences significantly impacted the consumer packaged goods market and influenced how CPG manufacturers responded. These include economic pressures and consumer demands.
CPG distribution still plays a vital role in consumer-driven commerce and product distribution across many industries and markets. As McKinsey & Company pointed out, (US inflation grew to nearly 8.5 percent in March 2022, with May 2021 to March 2022 period showing the highest inflation in a decade. Yet, US consumers spent 18 percent more in March 2022 than they did two years earlier and 12 percent more than they were forecast to spend based on the pre-COVID-19 trajectory. US consumers had approximately $2.8 trillion more in savings than in 2019, and many didn't hesitate to dip into those savings as pandemic restrictions eased across the country.) While disrupted by COVID shutdowns and disruptions, this consumer spending trend shifted focus from one type of packaged consumer goods to others. Instead of focusing on products related to work or socializing, the focus was on home goods and products; a trend was still seen today.
Consumer packaged goods as an industry have always depended heavily on consumer trends and buying habits to dictate what is and is not done. Consumers today spend more on specific categories while others have seen a steady decline during the pandemic and continue as recovery continues. These changes stem from access to products, routines, and habits. Others result from inflation, price increases, and other economic and market instability. Still, PCG producers and shippers face new difficulties with market monitoring and predictive planning for direct store delivery, warehouse management, and retail distribution.
CPG manufacturing express who saw a peak in demand could quickly shift warehouse
and inventory to categories that boomed during the pandemic: sporting apparel, home goods, personal care products, pet supplies, cosmetics, casual wear, and software and electronics. Other categories ended up dropping sharply due to a decrease in use and demand and more price increases than other areas: gasoline, dine-in restaurants, professional clothing, hospitality venues, and travel. Consumers bought mainly goods rather than services or experiences, which further boosted the demand for packaged consumer goods, which those who the correct data and insight could plan and prepare for more easily. This adaptability and scalability helped some companies better weather the distribution and uncertainty of the last two years.
The CPG consumer packaged goods industry, will continue to grow and expand in response to consumer buying habits and shifting market trends. As recovery continues and local, national, and global markets return to normal, the focus on CPG markets remains strong. The constant need to secure CPG goods and invest in more accessible ways of transporting containers and pallets will only intensify. EMarketer predicted at the end of 2021 that (the retail industry was the first vertical in the US to spend $20 billion on digital advertising, a threshold crossed in 2018. By the end of 2022, retail will exceed $50 billion in spending ($57.20 billion). CPG and financial services will remain distant trailers in second and third place, respectively. At the same time, the bulk of industries will spend between $10 billion and $20 billion per year through the end of our forecast period in 2023.)
The increasing investment and marketing campaign focus on CPG manufacturers show their attention to the growing need and continual demand for convenient and easily-accessible goods. Consumers will likely always want and need consumer packaged goods, whether toothpaste, toilet paper, shampoo, drinks, frozen food, medical supplies, medications, home goods, or any of the nearly countless other packaged consumer goods in demand. Preparing for the future is a unique challenge in the packaged consumer product industry but investing in marketing, innovation, lean methodology, and advanced data processing is always a significant investment that more than pays for itself.
By its nature, consumer packaged goods markets are impacted by the habits of consumers. However, it is not just local shoppers that can influence these CPG trends. With e-commerce rising in popularity even as the pandemic's effects dwindle, global markets continue to fuel more need for CPG manufacturing. With this demand, sellers, manufacturers, shippers, and retailers must consider local, international, and global planning and logistics. Some packaged consumer goods are easily manufactured and shipped domestically, while others have to get imported or exported to meet outside needs and demands.
There is no sign of this trend slowing down any time soon, as Forbes pointed out that (E-commerce will account for 20.4% of global retail sales by the end of 2022, up from only 10% five years ago. In other words, the e-commerce space is becoming more crowded; Consumers echo the go-global movement. A recent survey revealed that 76% of online shoppers have made purchases on a site outside their own countries.) The path of international packaged consumer goods production and distribution never has been and never will be frictionless. Inadequacy in one area impacts another, and disruptions limit growth opportunities. Cross-border supply chains are tricky to manage when dealing with consumer packaged goods. Still, international protocols for exported or imported goods can become challenging as demand rises.
The inherent challenges of packaged consumer goods can be overcome with the proper focus and attention to industry-specifics. Answering the question of (what are consumer packaged goods and how can related challenges be overcome) starts with a focus on the following:
CPG distribution services are complex and ever-changing, so manufacturers, distributors, and retailers must focus on domestic and global markets when looking at CPG product shipping. Forecasting is critical for continued growth and success within the industry.
Managing third-party logistics and short-term and long-term plans for CPG distribution services within the CPG consumer packaged goods industry is a challenge unique to shippers and distributors today. There always has been and likely always will be a need for packaged consumer goods; consumers will not give up the convenience and access CPG products offer. Managing the ins and out of manufacturing, shipping, storing, distributing, and selling consumer packaged goods will require continued adaptation and scaling to meet changing CPG trends. Bringing disparate data sets, teams, and partners together over multi-mode transportation lines, including road, port, or air, further complicates matters.
A closer look at the US CPG manufacturing and distribution market before COVID-19 is revealing, as pointed out by McKinsey & Company, (Zooming in on the large CPGs (more than $2.5 billion in US revenue), we see that all of their organic volume growth and almost 90 percent of their overall value growth came from their small and medium-sized brands (less than $750 million in revenue), even though those brands contributed only 42 percent of 2016 revenues. Small brands (less than $150 million in revenue) especially outperformed: they contributed 50 percent of value growth.) In the wake of the industry-altering impact of COVID-19, the consumer packaged goods market continues to grow at unprecedented levels.
As people continue to embrace the remote and at-home way of life, the demand for affordable, convenient, accessible, and innovative packaged consumer goods will likely never return to pre-pandemic levels. Maintaining forward growth and process within the CPG industry requires cooperation between manufacturers, distributors, retailers, and consumers. Preparing for the future by learning from the past and maximizing efficiencies in the present is the best way to ensure the packaged consumer goods industry continues to thrive.
Maximizing the productivity and profitability of the packaged consumer goods industry comes down to finding the rig industry partner to work alongside. Keeping the CPG supply chain moving is a group effort, whether it is the CPG manufacturer, the shipper, the distribution center manager, or the end retailer. Because these items are used and replenished regularly, the CPG industry has grown more competitive every year, with numerous brands and companies competing for valuable shelf space and space within the consumer’s mind. The best shippers and transportation service providers in the CPG industry offer reliable transportation through thick and thin.
In the United States, CPG brands of various sectors, sizes, and prices have continued to pump more into their advertising and marketing campaigns to reach more customers and keep their packaged consumer goods readily available. The right industry partner can make all the difference with consumer packaged goods. Contact Port Jersey Logistics today to learn how to answer the questions of what are consumer packaged goods and how they are best managed in today's ever-changing market.
