CPGs face double crisis: Economic conditions, marketing data gap
CPG marketing budgets are at risk in this economic climate, but a customer data platform can help prove marketing's value through the downturn and beyond.
Despite Goldman Sachs reducing the likelihood of a recession over the next year from 35% to 25%, CPG leaders can’t relax. They must work hard to keep up with emerging consumer packaged goods (CPG) trends if they want to remain competitive in 2023 and beyond.
Even if a recession doesn’t hit, consumers are still being conservative with their budgets, shifting their spending priorities, and looking for products that are worth stretching their dollars for.
5 CPG industry trends for 2023
The biggest challenge for consumer packaged goods brands is understanding how economic volatility impacts consumer spending, according to a McKinsey & Company report. Then, they must act swiftly.
“A look at past recessions makes one thing clear: companies can’t just sit and wait. Companies that outperformed their peers through and beyond the 2008 recession moved harder and faster on productivity, took action to preserve growth capacity, divested more heading into downturns, acquired more as the recovery started, and created operational and financial buffers.”
Here are the top CPG trends for 2023 that will help brands win sales and build loyalty today and for years to come:
- The private label threat increases as budget-conscious consumers look to cut costs.
- CPG companies must find a way around ongoing supply chain issues to earn loyalty.
- Reaching equal: More brands bring inclusive products to market.
- Sustainability becomes more than a buzzword.
- Online sales continue to climb, opening new marketing opportunities.
Adapting to adapting: Keeping up on changing consumer behavior
Real-time engagement is clutch for brands to be able to anticipate, adapt, and respond to ever-changing consumer behavior.
1. Price-sensitive consumers put CPG brands to the test
In the early days of COVID, consumers became accustomed to supply chain snags. Closed factories, closed ports, and closed stores meant they had to find alternative products or go without. But once lines to unload shipping containers finally returned to normal, inflation hit. Daily necessities seemed to get more expensive by the day.
CPG brands are already vulnerable to private labels and it’s especially acute when consumers are looking for ways to cut costs.
Deloitte found that 40% of global consumers say their finances have gotten worse over the past year. Saving a few dollars on store brand shampoo and conditioner goes a long way when groceries and gas are higher than they’ve been in years.
Almost 80% of adults polled a year ago said they’d bought or were willing to buy private-label goods. That trend has likely grown.
With 80% of consumer packaged goods (CPG) industry executives telling Deloitte they will raise prices again in 2023, manufacturers will need to strengthen their value propositions to be considered by budget-conscious consumers.
40-year ache: Inflation forcing consumers to make choices, cut back
"Hey Siri, find cheap food." Consumer spending is weakening as sky-high inflation forces shoppers to tighten their belts. How can brands keep customers?
2. 2023 CPG trend: Building trust in volatile times
Trusting a brand comes in many different forms. Trustworthy products are safe, work just as they’ve stated in advertising, and are on shelves when consumers want them.
No brand wants a class-action lawsuit that damages trust and sales. Or to be the target of a “de-influencing” video in which social media users strongly suggest their followers don’t purchase certain trendy products.
Go back to the basics: why do your customers love and trust your products? What are your unique value propositions that can keep them buying from you, even when a cheaper alternative comes to market?
The bad news for consumers is that supply chain issues might persist. Deloitte surveyed CPG industry executives and found 62% believe supply chain issues will be “quite or extremely challenging in 2023.”
Consumer packaged goods (CPG) companies will have to find a way around this because brands that are in stock will win loyalty and customer satisfaction.
Standing in line in the middle of nowhere: Inflation and supply chain
Inflation and supply chain disruption are wreaking worldwide havoc as cost-of-living prices soar and economies falter.
3. CPG brands put inclusivity front and center
Some brands have worked hard to bring their products to a larger group of people who have been left out historically.
For example, L’Oréal recently launched a motorized lipstick applicator to help beauty-enthusiasts with tremors and limited hand and arm mobility. Other brands like Rihanna’s Fenty have a much wider range of shades of foundation so that consumers of all skin colors can find their match.
The approach CPG brands take to inclusivity can differ: Fenty launched with inclusivity in mind, while L’Oréal was well established before they brought their new product to market thanks to their technology incubator.
This gives hope to both incumbent brands that can make the investments needed to bring more inclusive products to market. And CPG upstarts can start with them baked into their product and marketing strategy from day one.
Other brands are working toward inclusivity by launching gender neutral lines. In the past, packaging has been heavily gendered and a New York City Department of Consumer Affairs study found that personal care items targeting women were 13% more expensive than the equivalent advertised for men.
In 2023, even more consumer packaged goods brands will create products for people who want them and leave off the antiquated “for men” labels in blue and “for women” in pink. Producing good quality products that reach even more people is always a good strategy.
What is ESG: Definition, examples, benefits
Driven by consumer and investor demand, ESG has become a priority for businesses today. Learn what it means, and see examples of real-world benefits.
4. CPG sustainability trend gets real in 2023
Shoppers across all age ranges rated sustainability as more important in their purchasing decision than brand name according to a First Insight and Wharton study. The spread was widest for Gen Z, with brand name rated as 49% important and sustainability at 75% when making a purchase.
As demands for better products that help instead of hurt the planet intensify, the retailer side is joining the chorus as well, making sustainability a top CPG trend in 2023.
French retailer Carrefour announced during the COP 27 climate summit in late 2022 that its largest suppliers would have to be in alignment with the 2015 Paris Agreement’s mandate to reduce global warming by 2026 or they would no longer shelve their products. Other retailers are not likely to be quite as strict as Carrefour, but more sustainability requirements are on their way.
Deloitte found that 97% of what they call “profitable grower” CPGs “agree becoming more environmentally sustainable is a priority.”
But agreeing and acting are two different things. It’s best to get ahead of the sustainability wave to be seen as forward thinking, instead of scrambling once nice-to-haves become must-haves.
How to embed sustainability in your business – and bottom line
To achieve real benefits, companies need to embed sustainability into their business practices and processes. Learn three ways to do it.
5. Online CPG sales growth opens new opportunities
In-store CPG is strong as always, but online growth hit 30% in 2022 for the first time, showing that e-commerce sales for the category are here to stay.
This CPG trend can be especially beneficial for direct-to-consumer brands because it opens up an opportunity for first-party data. Not only can brands use it to create a direct relationship with consumers, they can also build upon it with attractive deals, cross-sells, and unique experiences that big box stores can’t offer.
First-party data has to be used cautiously. Consumers want brands to show up with relevant, personalized offers when it’s helpful, not to stalk them around the internet with constant ads for a product they already bought.
In 2023, consumer packaged goods brands will get closer to striking a balance and carefully putting their new-found access to data to work.
Benefits of first-party data: Spot-on marketing, fantastic results
With the rise of the privacy-first web, marketers need to focus on harnessing the power of first-party data for gaining competitive edge.
Consumer packaged goods: Setting the stage for success in 2023
CPG brands will tackle economic uncertainty by doubling down on being a trusted partner, attracting new buyers, and strengthening their value propositions.
With these three pillars in place, they can overcome consumers’ price sensitivity and build loyalty that drives growth now and for years to come.
