5 Trends impacting CPG in 2021
You call it CPG (Consumer Packaged Goods), I call it FMCG (Fast Moving Consumer Goods), depending on which disparate geographies we belong to. Meanwhile, we all know and realise (hopefully) that the pandemic has accelerated the Digital Transformation of all those Indian FMCG companies which are not loathe to move, and can not risk being left behind. This article is for them too.
The trends that I write about below, are simple, visible, clearly actionable and not the long lists that analysts are publishing . These trends will likely impact your CPG company soon. The stimuli for these trends are varied, from consumer trends, to changing market places, to availability of technology among the important ones. This, of course, begs the questions in terms of which levers to pull and how to win. But, those are two topics for future posts; stay tuned.
1. The Changed Customer Persona
The first is completely people centric. The consumer personae are changing. We are in the cusp period, where millennials are being joined by Gen Z people as consumers. The millennials have a larger disposable income than earlier. The drop in overall disposable income caused by the pandemic was a blip in the overall scheme of things; and my crystal ball isn’t that pessimistic, hence it doesn’t consider the ‘impending’ global stock market crash and recession. The tastes, needs, consumption patterns, mechanism of reaching out to the product are all shifting.
2. Value and Price Sensitivity
The changing customer personae leads to higher consciousness around conscious eating and living, and higher value and price sensitivity. This sensitivity leads to an opportune window for discounters. This window of opportunity is being grabbed with the proliferation of discounters who find acceptance on the available retail channels by outsourcing many of their core functions. We can always choose to argue that this will not last, because this doesn’t hold to traditional economics of profit and loss. True, it doesn’t and exactly because this is a valuation game that people are playing; a game of revolving valuation based exits. Who is left stranded when the music stops, is a different question.
3. Rise of Small Brands
Another significant movement is the spurt of small brands, many of them with unique products, niche business models, clear understanding of their target market and challenges. There are many of this type. Making a specific small batch condiment, or a line of neutraceuticals for women (heaboosters) or the owning the entire supply chain between fisherman to table in case of Jalongi. In case of many of these producers, the existence of Flipkart, Amazon and other niche portals eases out the 3PL logistics requirements and hassles completely. It is almost as if, Distribution as a Service.
4. Partnerships and Consolidations
What many FMCG players, especially the smaller and medium sized are starting to realise is the importance of their eco-system. The need to partner. Not just with adjacent space players, but often in their own product space too. This is causing some consolidations and mergers too.
5. Digital First
Keeping the most visible one for the last. The above four trends, surely, underscore the need for Digital First, today. This trend, however, is the most complex and takes the longest to realise. All the way from deep analytics, to feeling the water with AI to certainly trying much harder to understand the customer and her needs and desires to tie the above four trends together.
Many of the changes that we saw implemented in 2020, catalyzed by the pandemic will carry over into 2021. Health and safety will continue to be FMCG / CPG and Retail players, and e-commerce growth will continue on its accelerated path. Players will need to quickly figure how to make shopping more enjoyable in the phygical scenario with better pricing, and shelved stocked with what the customers want.
Meanwhile, we would love to hear about your FMCG transformation journey and we can help accelerate it. Do write to us, or visit the 3nayan web site.
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