When one big CPG firm struggles to generate growth, it is often because their strategy is wrong. However, when several of the world’s largest food, beverage and beauty companies consistently struggle, then it is likely that something in the wider market is changing.

Unfortunately for CPG companies, that “something” is actually plural, as several things are conspiring to cause market disruption and dislocation. Taken together, these challenges present both risks and opportunities. But capitalizing on them, or defending against them, first requires CPG firms to have a thorough understanding of the various dynamics at play.

In this article, we identify and explain the top seven issues.

Autopilot consumption

Consumers have always been busy; however, today’s shoppers are more harried than ever before. Fragmented lifestyles, demands of work, and social pressures all mean that people have, or at least feel they have, less time.

One of the responses has been to look for time-saving solutions, especially when it comes to mundane tasks like buying household essentials. This is driving more people to use subscription services, where they get certain regularly used items, like laundry detergent, delivered on a recurring basis.

While this saves time for the consumer, it is generally bad for CPG firms and creates several issues.

The first of these is that when consumers use subscription services they are essentially shopping on autopilot. After the initial subscription decision is made, it is hard to influence shoppers to try new products, switch brands, or buy more with volume discounts and offers. It’s not so bad for the brand that has secured the subscriber, but other brands are more locked out and far less able to influence that consumer.

Craving convenience

Another function of a busy consumer is the switch away from ingredients to prepared foods. The increase in dining out, the rise of meal kits, the growth of ready-meals, and the rise of on-the-go snack boxes are all elements of this trend.

This growth has been facilitated by the rise of firms like Blue Apron and meal delivery providers such as UberEats and GrubHub.

The problem for grocery CPG firms is that the more consumers buy ready-prepared food, the less they need certain CPG products like tinned tomatoes or cooking oils. For just one individual consumer, the impact of this switch is small, but collectively it adds up to a massive reduction in volumes.

CPG firms can find opportunities in supplying caterers and the manufacturers of meal kits, but this is nowhere near as lucrative as supplying consumers. There is also good news in the fact that some of the categories, like on-the-go snack boxes, are ones that CPG firms can, and have, entered.

Small is beautiful

Whether fair or not, consumers tend to have more trust in small brands. This is especially true of younger shoppers. They associate “small” with positive attributes like localness, honesty, trustworthiness, decency and sustainability.

Unfortunately, the giant nature of many CPG firms puts them on the wrong side of this trend. While not all consumers shun brands because they are large, a growing number do, and this causes an issue for Big CPG.

Acquiring niche firms, using individual product brands rather than the overall corporate brand, and emphasizing attributes like social responsibility can all help CPG firms mitigate this issue.

Boredom requires innovation

Although today’s consumers are bombarded with more products than ever, their boredom threshold is extremely low. People want to try and experience new things, especially in a sector like grocery where products can be tasted, smelled and touched.

Unfortunately, Big CPG’s traditional approach does not cater to this. Innovation cycles are long, product reformulations are rare and often incremental, and new launches few and far between. This stands in marked contrast to a lot of other retail sectors like apparel, electricals and home furnishings where product cycles are shorter, assortments change more regularly, and fashion and tastes play a role in driving that change.

The problem for Big CPG is that innovation and newness are precisely what smaller firms do well. This is one of the reasons why many consumers across many categories have migrated away from bigger brands to smaller alternatives.

Channel shift

One of the biggest issues for Big CPG is adapting to changes in where and how people shop. This used to be predominantly at stores, where consumers would faithfully trundle up and down every aisle. That era is now fading fast.

Nowadays more people buy groceries online. This isn’t just a simple change in channel – it creates a fundamental shift in how people shop that’s challenging for CPG brands.

The first issue is that CPG firms do not control the online channel in the same way that they influence stores. In shops, consumers see what the retailer and CPG firms want them to see. However, the consumer has far more control when online. They can search or filter, pick out certain brand types, and often set their own preferences. This makes it more challenging for CPG firms to influence behavior and product selection. Moreover, it levels the playing field for smaller brands: in stores, they might get a limited section of shelf space, but online they get as much page space as the big brands.

The second issue is that the shift online has created a situation where shoppers are visiting the center of the grocery store far less. As this is where many staple and household goods are located, CPG firms lose an opportunity to influence and persuade consumers. It also reduces impulse purchasing, which affects volumes.

Price pressure

In a bid to make their dollars stretch as far as possible, many Americans are seeking value for money when it comes to shopping. As grocery is one of the biggest areas of consumer expenditure, it has been particularly susceptible to this trend.

The dramatic rise of dollar retailers like Dollar General, the increasing incursion of deep discounters like Aldi and Lidl, the rise in retailer own-label penetration, and the focus on low price by retailers like Target and Walmart are all part of the market’s response to consumer demands.

The issue for CPG firms is twofold. First, they potentially lose sales to own-label products. Second, they run the risk of having to reduce their own prices, thereby compressing margins.

Notably, at the same time as this is happening, consumers are also happy to trade up on some products. However, this higher-end arena is often the preserve of the niche firms, not of big CPG brands whose products are usually positioned in the middle of the market.

Health and wellness

Consumer consciousness around health and wellness has increased over the past five years. This throws up several challenges for CPG players.

First, a switch to fresh produce from prepared and prepacked goods is hurting sales. Second, consumers are more likely to trust smaller brands on issues like sustainability and health; big CPG products are often seen as processed and unnatural. Third, more consumers want their CPG products to come with added benefits like vitamins or clean energy supplements, and large CPG firms have been poor at adapting to this. Fourth, many CPG companies have been slow to respond to trends like organic.

Taken together, the health and wellness trend is creating a lot of dislocation for CPG firms, and this is now being exacerbated by regulations on sugar and other ingredients.

Any one of these trends would be enough to cause widespread change across the industry. However, the conference of all the issues presents a major challenge to the industry. Fortunately, the disruption also creates a multitude of opportunities.