by Mohit Prajapati
Jun 28 2024 | 02 min read
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In an industry where costs are rising and supply chains are unpredictable, CPG companies are facing tough challenges. With commodity prices expected to stay high, between 20–40 percent above 2019 levels, until at least 2025 food commodities are especially at risk due to more frequent droughts, causing lower yields and more failures. CPG companies must embrace significant changes to stay competitive and win back investor trust.
Bain & Company estimates that global retail sales value (RSV) has grown by nearly 10%. This continues a similar rise from 2022 and is almost double the 10-year average growth rate. However, about three-quarters of the growth in 2023 likely came from price increases rather than volume gains, as companies passed higher input costs to consumers. In the US and Europe, price increases made up 95% of RSV growth. This imbalance isn’t sustainable.
Emerging markets saw most of the global growth in volume. India stood out with nearly 15% growth in RSV since 2022, thanks to consumers choosing bigger, international brands over local or unbranded ones. In China, both volume and pricing were hit by low consumer confidence.
These trends underscore the imperative for today’s CPG leaders to prioritize returning to profitable, volume-driven growth and accelerating next-generation capabilities to address such diverse market dynamics and seize opportunities. The key question is how to achieve these goals and what specific actions should be taken. Through our secondary research, we have identified the following strategies that CPG leaders are employing to drive sustainable growth.
Big Moves for a Big Impact
To stay ahead, each CPG company must make significant strides in at least one of six major areas:
- Innovative Premiumisation: Capitalise on consumer-centric product design and rapid market activation.
- Advanced Commercial Capabilities: Develop new market channels and excel in key account partnerships.
- Operational Efficiency: Apply automation to drive substantial savings across supply chain, back-office, and commercial functions.
- Digital Marketing Revolution: Embrace technology to optimize media campaigns and accelerate innovation.
- Sustainable Practices: Shift to climate-resilient growing practices and decarbonize operations without sacrificing consumer appeal.
- Global Expansion: Leverage low-cost hubs and remote collaboration tools to expand market presence efficiently.
In the future, successful CPG companies will be those that truly understand their consumers’ needs and use this understanding to make strategic decisions. This means not only choosing the right locations and sales channels but also focusing on product categories and offerings that resonate with their audience. The best brands will integrate this consumer knowledge into every aspect of their operations, ensuring memorable products, innovative ideas, and widespread availability.
In conclusion, the Consumer Packaged Goods (CPG) industry faces significant challenges with rising costs and unpredictable supply chains. Despite these obstacles, companies must make bold moves to stay competitive and regain investor confidence. By focusing on innovative premiumization, advanced commercial capabilities, operational efficiency, digital marketing, sustainable practices, and global expansion, CPG leaders can drive sustainable growth. Understanding and integrating consumer needs into strategic decisions is crucial for future success. Let’s leverage these insights to transform the CPG landscape and lead the charge in creating a resilient and thriving industry.
