The 9 Major CPG Industry Trends Of 2020
The consumer packaged goods industry is changing. New CPG competitors are emerging every day, and some incumbents are struggling to adapt to consumers’ changing tastes.
But new technologies and consumption habits are also creating new opportunities — for both stalwarts and startups.
Here are the top CPG industry trends this year. Including product personalization, direct-to-consumer upstarts, private label brands, sustainability and more.
1. Challenger DTC Brands
DTC online sales grew to an estimated $14.28 billion in the U.S. alone last year.
By removing the middleman, the direct-to-consumer model promises bigger margins, more nimbleness in product offerings, and valuable direct consumer relationships.
And right now, DTC startups are busy nibbling away at traditional CPG brands' profits.
Thanks to competitors like Dollar Shave Club and Harrys, Gillette's share of the US razor market fell from about 70% to under 50% in the course of a decade.
Like Dollar Shave Club, many DTC startups use a subscription model, bringing in a steady stream of recurring revenue.
Other subscription-based DTC brands include Blue Apron, GlossyBox and BarkBox.
BarkBox offers dog toys and treats via monthly subscription.
But without needing to compete for shelf space, DTC brands are also susceptible to competition.
Newer competitors like Walker & Company, HelloFresh and BeardBrand are threatening older challenger brands’ footholds.
Search interest in HelloFresh, a Blue Apron competitor, has been rising.
2. Industry Stalwarts Going DTC
Sometimes you have to fight fire with fire.
Incumbent CPG companies are joining the direct-to-consumer wave. And they’re doing it in 3 major ways.
The first is by acquiring (or investing in) competitors.
Unilever has been particularly aggressive.
Since 2015, Unilever has acquired dozens of companies — including many DTC brands.
But Procter & Gamble isn’t resting on its laurels, either. Its recent acquisitions include This is L for $100M, Walker & Company, First Aid Beauty and more.
The second way legacy CPG companies going DTC is by launching entirely new brands.
Procter & Gamble’s EC30 is one example of this increasingly common strategy.
EC30 is a DTC brand under Procter & Gamble.
And the third way the traditional CPG brands are fighting back is by selling their existing brands direct.
In May, PepsiCo announced two new websites to do exactly that: PantryShop.com and Snacks.com.
Snacks.com is PepsiCo’s direct-to-consumer ecommerce store for Frito-Lay products.
And Heinz recently followed suit with their “Heinz To Home” ecommerce websites, launched in the U.K. and Australia during the Coronavirus pandemic.
3. Private Label Brands
CPG companies are pushing their own ecommerce storefronts. But an even longer-trend term is the other side of the coin: retailers starting their own brands.
With better margins and direct control over product development, private label brands are attractive to retailers the same way DTC brands are attractive to CPG conglomerates.
Amazon's private label clothing brand Goodthreads is one major example.
Searches for Goodthreads over time.
And it's easy for customers to spot AmazonBasics and Amazon Essentials as two other brands from the company.
But beyond those, over the years Amazon has actually grown dozens of house brands.
4. Ecommerce and Faster Delivery
Ecommerce has been a massive CPG trend for decades now. But with the pandemic this year, it's gone into turbo mode.
And Walmart's online sales have almost doubled in the U.S. in that time (and more than doubled in China).
Walmart also recently announced a program called Walmart Plus, to compete with Amazon Prime and allow the retailer to offer faster free shipping to customers. Walmart Plus is expected to provide unlimited two-day shipping along with other perks for $98 per year.
But Amazon has been focusing on improving delivery times since long before the pandemic. In April 2019, it announced one-day shipping as the new standard for U.S. Amazon Prime members.
(It's estimated that as many as 82% of U.S. households subscribe to Amazon Prime.)
Global searches for Amazon Prime over time.
But for some purchases, even one-day shipping isn't fast enough.
That's why Amazon offers same-day delivery of many grocery items.
Still, dedicated fast-delivery retailers are growing rapidly to meet additional demand. One example of this is GoPuff, which is basically an ecommerce-only version of 7-Eleven. According to the company, they deliver in minutes -- not days or even hours.
Search interest in GoPuff has been rising for years, and spiked during the pandemic lockdowns.
Naturally, this increasing appetite for faster shipping spills over to DTC brands as well.
5. Omni-Channel Shopping
Another growing trend among CPG brands and retailers has been making omni-channel shopping experiences.
Meaning: purchasing is smooth and seamless across different devices, and even in-store vs. online. Often, these experiences are tied together.
For example, even before the pandemic, Walmart was quickly expanding its in-store pickup kiosks. (They increased the number by 8x in 2 years, to 1,700 stores.)
"Grocery pick-up" searches over time.
While Sephora uses online resources to enhance -- rather than replace -- the in-store experience. The retailer offers in-store tablets so that people can access their online "Loves" (shopping list) on large screens inside stores.
6. Multi-Channel Marketing
Companies are also taking a more omni-channel approach to their marketing.
TV ads, product placements and PR are still massively popular. (In fact, as of 2019 CPG was still the top-spending industry on up-front TV advertising.) Standard online marketing channels like SEO and pay-per-click advertising aren't going away, either.
But influencer marketing has been on a tear in recent years.
Skincare brand CeraVe (a division of L'Oreal) has demonstrated how powerful this can be, crediting TikTok influencer Hyram Yarbro with boosting their sales among Gen Z two years earlier than forecasted.
And not just with big-name celebrities. Even "micro" and "nano" influencers, who have as few as 1,000 social media followers, are delivering results for brands.
Searches for micro influencers have increased rapidly over the last 5 years.
7. Sustainability and Brand Values
Based on a January 2019 survey by Hotwire, 47% of internet users said they'd switched products or services after a company violated their personal values.
Specifically, the top reasons listed were protecting the environment, lack of transparency, and climate change.
(Image source: eMarketer)
According to Nielsen, sustainable-minded consumers are expected to spend up to $150 billion on sustainable products by 2021 in the US alone. The company says the top-growth subcategories of the sustainable movement include vegan, cruelty free, and B corporations.
Search interest in cruelty-free products and companies has increased dramatically over the past 10 years.
Some companies have also seen positive results by taking a public stance without necessarily changing the way their products are made.
For example, Nike's decision to continue sponsoring Colin Kaepernick after the NFL dropped him for "taking a knee" to protest police brutality during the national anthem. While opponents boycotted Nike for this choice, it ultimately led to an increase in sales.
8. Self-Care Products
Millennials spend more on self-care than any other generation before them: twice as much as Baby Boomers do.
And for the first time ever, skincare products are now outselling makeup.
Brands like CeraVe and DRMTLGY are taking full advantage, seeing interest in their brands spike dramatically.
Searches for direct-to-consumer startup skincare brand DRMTLGY are on the rise.
CBD products are another rapidly-growing part of the self-care category.
CBD products were not legal nationwide in the US until 2018. But now, they're already used by an estimated 28% of US consumers -- and 56% of Millennials. And sales are expected to continue growing very quickly: from about $5 billion in 2019 to over $16 billion in 2022.
9. Product Personalization
70% of the top DTC subscription brands use product quizzes to help personalize the customer experience. Usually during or before the signup process.
For example, monthly subscription box service BarkBox asks questions like: what's your dog's name? How big is it? As well as breed, date of birth and allergies.
According to Forbes, about 120,000 different variations of each BarkBox go out to a million dogs each month.
BarkBox's personalization process.
As a way to boost ecommerce conversion rates and customer retention, the beauty brand Tatcha also allows personalization, via its Ritual Finder tool.
Search volume for Tatcha over time.
Personalization is Color&Co's unique selling proposition.
There You Have It
From DTC to product personalization, those are this year’s top CPG industry trends.
Keep an eye on these trends for the biggest new opportunities — and risks — in consumer packaged goods.