A Brave New World for CPG Brands
Consumer goods brands used to be able to rely on the consumer’s whim. You forgot to use mouthwash before a job interview? You grab a pack of gum at the local pharmacy or corner store. You and your partner decide to stay in and have a movie night so you grab some snacks on the way home before cozying up.
But what happens in a world where people are no longer going into a physical store as often as they used to? If the explosion in e-commerce was a sea change for CPG brands, the Covid-19 pandemic was a tidal wave. CPG brands immediately had to pivot and fully embrace ecommerce and direct-to-consumer platforms in ways they never expected or imagined.
Online shopping has been the biggest tangible change amidst the pandemic, with e-commerce sales setting records across the globe. But Covid-19 hasn’t only changed habits around physical shopping. It has rapidly accelerated tech adoption and consumer consciousness around the globe. Taken together, these new behaviors have spurred changes that are likely to last far beyond when the pandemic thankfully recedes.
Nearly 6-in-10 people are more conscious about their overall health due to the pandemic, while 3/4ths of say they plan to eat and drink healthier from now on. But consumers’ concerns also go beyond their own selves—70% say their awareness around human-caused climate change and degradation has grown, while 67% feel that those with less have been unfairly burdened by the effects of the pandemic.
All of this has resulted in CPG brands understanding that they must embrace two strategies that they may have been avoiding—going direct and getting personal. CPG brands have responded in myriad ways, some successfully and others less so. As outlined at the recent CAGNY conference in New York, we’ve seen a boost in data-driven marketing; e-commerce adoption at scale; a shift in behaviors due to Covid-19; sustainability as a force for good and growth; customer centric products; and an emphasis on locality.
But in order to drive growth through doing direct and getting personal, CPG brands must understand how these new trends interact and feed off of each other. It is in those intersections that CPG brands can find opportunity. Ultimately, what these brands must do is consider how best to balance these trends against their own growth and purpose goals. Then, they can effectively go direct with the right intentions and get personal with purpose.
The Shift to Online Shopping
The arrival of Covid-19 and the ensuing lockdowns were a seismic moment with major ramifications. But in some ways, the pandemic merely sped up some already ongoing trends—some that many CPG brands were in the midst of trying to adjust to. eCommerce and online shopping were chief among them, as huge swaths of the global population began to not only prefer these behaviors, but shift to them out of necessity. When 3/4ths of the population basically stops engaging in out-of-home activities, things are no longer what they seem.
For some CPG brands, this was a good thing. Brands with a focus on cleaning and cleanliness found great demand for their products, even if their supply chains and selling strategies weren’t quite yet in lockstep with the new demand. Brands who rely on impulse purchases were on the other end of the spectrum, left figuring out how to replicate that moment in digital, tech-enabled experiences.
Wherever a brand was before the pandemic, they now have an incentive to maintain eCommerce as a key distribution method that goes direct to the customer. The necessity of online shopping has grown most brands’ eCommerce revenue, and the trend will only continue. That means that companies can’t only depend on figuring out a way to sell their products online, they need to continue to innovate in the space to ensure they’re creating personal experiences that drive love of the brand.
The Increase in Data-Driven Marketing and eCommerce
As the digital revolution took hold, companies knew they needed to invest in data. But now that investment needs to not only be there, but be strategic and purposeful. For CPG brands, leveraging new and emerging technologies which strengthen their data capabilities is key, as these new data streams will allow companies to optimize their marketing spend and influence product decisions. Brands can glean deeper insights than ever before about their customers, which leads to cross-selling products based on previous purchases.
The explosion in eCommerce has affected many CPG brands like never before, as 41% more customers began purchasing their groceries online during the pandemic. This behavior is likely to last, presenting CPG brands the challenge of maintaining the growth they’ve experienced as the pandemic recedes.
Brands increasing their data-driven marketing spend as they grow their eCommerce capabilities are interlinked efforts that can improve each other. The more a company invests in eCommerce, the more they connect with customers in the digital realm—and the more data they are able to access. Companies can take advantage of these two trends by creating an integrated marketing ecosystem fueled by a data practice. This helps inform strategies to go direct that will result in meaningful experiences for the customer.
Balancing eCommerce and Sustainability Efforts
eCommerce represents a huge growth opportunity for all companies, particularly CPG brands. But a growth in eCommerce also negatively affects the environment. In 2019, Amazon’s carbon footprint increased 15% thanks to an increase in sales. And though Amazon is the major eCommerce player, it’s just one aspect of the global eCommerce movement. And the resulting emissions are also just way eCommerce affects the environment, as increased consumption brings about increased usage of nonreusable plastics and other products with negative environmental impacts.
In the past, brands might have been able to get away with their products and practices having this kind of impact on the environment. That is simply no longer the case. Nearly 60% of consumers report that sustainability is a key to their purchase decisions, an eight percent increase from the previous year. Consumers will pay a premium for purpose-driven products, which places pressure on brands to activate their products as a force for good in the world. Brands can no longer simply say they don’t harm the environment—they must actively seek to make a positive impact on it and in the communities they serve.
This presents a tough challenge for brands, who must manage a balancing act between their eCommerce growth and their sustainability efforts. If companies don’t act mindfully with their eCommerce, they can hamper their progress in other areas and risk reputation damage.
How Sustainability and Locality Go Hand in Hand
Growing in eCommerce gives CPG brands the ability to reach consumers in new markets more easily. Emerging economies such as China, Russia, Brazil, and parts of Africa are attractive because of their rapidly-rising middle classes. By 2030, Asia could represent 2/3rds of the global middle-class population. And even if brands already play in these markets, the opportunity exists to more easily expand their product portfolios, often through acquisitions and partnering with current distributors.
However, a tension exists between entering new markets and a company’s sustainability efforts, too. Rapid growth in new markets can often force sustainability down the priority line. Each new market has its own environmental regulations, or lack thereof, while also having a unique impact on carbon footprint and emissions. There’s a lot to know and learn, and that can cause brands to skip steps in order to grow more quickly. But international growth without sustainability in mind may be fool’s gold. Keeping sustainability at the forefront may mean things take longer and be more arduous, but it’s crucial to going direct and getting personal with intention and purpose. And it will create a much stronger foundation for longer-lasting growth.
eCommerce Makes the World Smaller
By 2050, 80% of the world’s population will be in Asia and Africa. As companies look to scale their eCommerce efforts, these markets will become a key driver of new growth for many brands.
When entering new markets, brands must rely on their data capabilities to understand the nuances of the consumer in each location. eCommerce expansion can brings about an increase in sales, and also reams of new data. But data is only as good as the insights you glean from it. Making sense of data from new markets is critical, and data from one market can mean a totally different thing than similar data from another market.
It’s imperative that CPG brands looking to enter new local markets do their homework, and enter with as good an understanding of the citizenry of that market as possible. Partnerships can be a massive help here, as companies that have operated successfully in a given market will inevitably hold some level of understanding in this area.
How Covid Led to Demand for Customer-Centricity
The pandemic didn’t just change how people shopped, it changed how they lives. Priorities shifted, with more and more people focusing on their health and wellness. Self-care and healthy eating became a must for many, causing many brands to rapidly create new products that cater to healthier lifestyles. The plant-based food market was already exploding, growing by 28% between 2017 and 2019, and sugar-free, gluten-free and keto diets became more commonplace after the pandemic struck. This type of consciousness isn’t just personal, either—many consumers are placing a greater emphasis on how their consumption affects the environment, as well.
This puts many CPG brands in a tough spot, who may have never felt the need to present themselves as a healthy option. But the time is now for CPG brands to prove that they are able to deliver deeply relevant and meaningful experiences to their customers. People now seek out brands who they feel are dedicated to their overall health, and they’re willing to pay a premium for those brands. While the pandemic may have been the inciting incident for this trend, its eventual receding won’t take these new lifestyle choices with it. Many consumers will preserve the habits they have picked up during this time, and CPG brands must shift to address this need.
That doesn’t mean that certain brands should cease to exist. Brands can create different options for the health-conscious, and also focus on transparency around ingredients and the process of creating their product. The key is that CPG brands stay on top of these consumer habits and adjust accordingly, leveraging their growing data capabilities and targeted marketing to increase exposure, knowledge, and expertise around these issues.
Conclusion – A Brave New World for CPG Brands
All brands, no matter the circumstance, must leverage the emotional connection that they have with consumers into an engine for growth. Demand for consumer products is still there—it’s on CPG brands to renew the memorable experience that people have when they’re buying or using the product. Tapping into that emotion is what builds a long-lasting connection between brand and consumer. It’s what ultimately leads a person to not just buy a brand but buy into a brand. The post-Covid world may look and feel different, but it provides new and exciting opportunities for brands to connect with people.
Change isn’t easy, but it can often be what we need to better ourselves. CPG brands should look at the massive behavioral shifts brought about by Covid-19 in a similar vein. CPG brands need not look at the explosion of eCommerce, the rise in importance of sustainability and consciousness, and emphasis on wellness and healthy lifestyles as a radical shift, but a brave new world in which they can own if they adjust accordingly.