5 Predictions for the CPG Industry Post COVID-19
Consumers will undoubtedly be forever changed by COVID-19. Psychology experts claim it takes 66 days for new behaviors to become habits, and at this point we’ve been living with the pandemic almost eight times longer than that. This has caused fundamental shifts in shopping behavior and has heightened expectations across a number of purchase criteria, leaving many CPG brands dreaming of a vaccine that could safeguard them from these side effects. With a return to “normal” seeming more unlikely by the day, the industry must be prepared to meet the needs of today’s affected consumers.
For CPG brands willing to embrace the fact that things may never get back to normal, the opportunities are limitless. This article breaks down five key trends that CPG brands must be prepared to take advantage of in a post-COVID-19 world.
Sales Channels Are Irrevocably Blurred
During the early days of the pandemic, pantry loading and supply chain constraints left many consumers searching for essential items in unlikely places – such as toilet paper in local convenience stores and fresh food in dollar stores. At the same time, the health and safety concerns associated with COVID-19 forced people to severely change almost every aspect of how they shop. This placed a greater emphasis on digital channels, but it also led to an increase in retail trip consolidation and larger basket sizes. In addition, it renewed the importance of trip efficiency and retailer proximity. As a result, the lines between sales channels have irrevocably blurred. Consumers now expect the same products to be available across all channels, from convenience and dollar to grocery, mass, drug and e-commerce.
Strategic Positioning: CPG brands must be prepared to meet today’s consumers where they are at every moment. This requires moving past organizationally siloed, channel-specific strategies and embracing a consumer-first, integrated commerce mindset.
“Stay at Home” Is Here to Stay
In 2007, IKEA launched an advertising campaign called “Home Is the Most Important Place in the World.” During the COVID-19 pandemic, that tagline became truer than ever. Homes around the world quickly took on a variety of additional functions, serving as everything from offices and gyms to gastropubs and grocery stores. Forced to rethink their current housing situations, many consumers made drastic home improvements; some even purchased new houses that better served their changing needs. Today, people have grown accustomed to spending most of their time at home, and they’ve invested a significant amount of money to make it more comfortable and effective to do so. Many have also taken up new hobbies while at home, such as crafting, gardening, cooking and baking. As a result, it will likely prove difficult to draw consumers away from their homes, even after COVID-19 is no longer a risk.
Strategic Positioning: With Americans continuing to consume more at home, it’s important for CPG brands to consider how needs and occasions have changed and to align their marketing communications with these new usage patterns. On the sales side, brands must prepare for the possibility that their high-performing “golden stores” may change as consumers spend less time away from home.
Economic Inequality Is Exacerbated
The COVID-19 pandemic has exposed and exacerbated the long-term issue of economic inequality in the United States. As the rich stow away the money they’re saving from not dining out, commuting to work, or traveling, the poor are forced to cut back even more, with many relying solely on unemployment benefits. Changes to consumers’ financial situations – even if only perceived – ultimately drive changes to their purchasing behaviors. Those who perceive their financial situation as improving are more likely to increase spending and “trade up” to premium value propositions and high-end retail stores. Those who think their financial situation is worsening are more likely to cut spending by “trading down” to private labels and price-conscious stores. These two groups will recover very differently from the pandemic, and the growing disparity between consumer income cohorts will lead to increased CPG market bifurcation in the long term.
Strategic Positioning: CPG brands must assess the sensitivity of each product category to income bifurcation and adapt their marketing and commercial strategies accordingly. Available levers to pull include value propositions, product offerings, pricing, distribution and communications.
Transparency Is Increasingly Important
Consumers have awakened from their autopilot mode, and their demand for more in-depth information about products is growing. Now that they have supercomputers attached to their hands, today’s consumers will no longer settle for the scant details typically available on a product’s packaging. It is important for the brands they buy from to be transparent about a product’s ingredients, sourcing and production process. Beyond the product itself, the ethics of a brand play a bigger role in purchasing decisions than ever before. Things like food safety, sustainability and animal welfare are increasingly important to consumers, who want to make informed choices based on their personal values and desires. They are no longer interested in supporting legacy-minded “profit-generating machines” and are actively seeking out companies that make commitments to their customers, employees and the community at large.
Strategic Positioning: No one is perfect, but being transparent about where your brand is currently, listening to customer feedback, and communicating your progress provides a great foundation for improvement.
Sustainability Concerns Are Elevated
China’s Operation National Sword, which in 2017 put a ban on the import of plastic waste, used paper and miscellaneous scrap goods, created an unprecedented recycling crisis in the United States. COVID-19 has amplified this problem by increasing the demand for plastics such as personal protective equipment, food containers and shipping supplies. The consequences of our elevated consumption during the pandemic will drive an increased urgency to fix America’s broken recycling system. While many point to the short-term spike in waste as being event-driven, a larger secular trend of population and income growth over the next decade is expected to drive even higher demand for plastics. Widespread changes will only happen if consumer participation creates influential pressure upstream throughout the CPG industry. There are early signs of this happening already, with 54 percent of surveyed consumers stating they take sustainable packaging into account when purchasing a product, and 83 percent of those 44 and younger saying they would be willing to pay more for it.
Strategic Positioning: Whether you adopt smaller packaging or implement additional sustainability standards, every CPG brand can help make a difference. It might not be perfect timing, but remember to always “skate where the puck is going to be, not where it has been.”
American consumers were forced to significantly alter their daily routines because of COVID-19, and this will cause tremors throughout the CPG industry for years to come. To survive, brands must be willing to embrace this “new normal.” The ones that do will be better equipped to meet the changing needs of consumers now and in the future.