A strong consumer packaged goods (CPG) sector is essential for a healthy U.S. economy. Brad Cook and Steve Hewitt, partners at Wipfli, report, “Consumer spending accounts for nearly 70 percent of U.S. economic activity.”[1] They also note that the CPG sector has helped stave off what like looked like a certain deep recession. They note, “Shoppers buoyed the economy — or at least kept it from falling deeply into recession. However, they’re [feeling] the pinch from inflation and rising interest rates.” Changing consumer behavior is only one trend to which stakeholders in the CPG sector need to watch and respond. According to Juan Ramón (Jay) García, the executive in charge of Multicultural New Business Development at RB, “Success for any CPG brand in 2023 will depend on its ability to adapt to new market trends, provide inclusive and sustainable products, and prove its value in a world weary of inflation and economic uncertainty.”[2] Below are some of the CPG trends experts believe will continue to affect the CPG sector in 2023.

CPG Trends

According to Parag Jain, the Senior Vice President & Global Head of Sales Consumer for Retail & Logistic at Infosys, “[Recent] developments are creating important shifts in the consumer packaged goods and retailing sector, such as the emergence of ethical and conscious consumers; autonomous, adaptive and resilient supply chains; frictionless, highly personalized experiences; everywhere commerce; and algorithmic retail. To be in a position to capitalize on these shifts as they unfold — or avoid obsolescence — CPG and retailing companies need to make the right technology investments, starting now.”[3] Prominent trends in CPG sector include:

• Continued economic and political volatility. Garcia reports, “According to a McKinsey & Company report, the biggest challenge for CPG brands is understanding how economic volatility affects consumer spending and acting quickly to overcome inflation challenges.” Jain believes CPG stakeholders must expand their lens to see on an even larger picture. He writes, “The key trends to watch in the next few years are decarbonization to fight climate change, decoupling with China to de-risk supply chains, and dispersing centers of excellence across underserved areas by leveraging digital technologies.”

• Changing consumer behavior. Cook and Hewitt note, “Consumers have different priorities and shopping behaviors than they did before the COVID-19 pandemic. For one, they’re pickier about where they spend their dollars. Consumers are looking for higher quality foods and goods, more ESG-friendly options, and bigger values. Unfortunately, high-quality, sustainable and ‘cheap’ don’t usually go hand-in-hand, so retailers are navigating a number of competing purchasing priorities.” Dominic Dinardo, the CEO & cofounder at Aforza, adds, “Many companies fail to prioritize their customers based on profitability, resulting in lost revenues and missed opportunities.”[5]

• Increase in private label purchasing. The staff at PYMNTS.com notes, “As prices rise, many consumers have been seeking out lower-priced alternatives for the products that they need every day, but consumer packaged goods brands are pushing back on the idea that shoppers’ shift to private-label goods must hurt their own market share.”[4] François-Xavier Roger, the Chief Financial Officer at Nestlé, told the PYMNTS staff he believed large CPG firms were better equipped to deal with inflation than private label firms and that recent increases in private label purchasing “marks a return to pre-pandemic behaviors. He pointed out that private-label sales took a hit during the worst stages of the virus and asserted that the uptick in the category marks, in part, a ‘normalization of their supply chains’ in the aftermath of the early parts of the pandemic.”

• More inclusivity. Despite political backlash to so-called “woke” companies, Garcia reports an emerging trend is “the creation of inclusive products in the market.” He explains, “More consumer product companies are expected to bring inclusive products to the market this year. This is due to a shift in consumer mindset towards greater inclusion and diversity.”

• Pricing and trade promotion confusion. According to Dinardo, “Pricing and discounting practices in the field are proving to be difficult to manage and control, leading to further margin erosion.” To address these challenges, Enterra Solutions® developed the Enterra System of Intelligence™, a cutting-edge approach that combines the power of a human-like reasoning and trusted generative AI with glass-box machine learning and real-world optimization to drive intelligent decision-making and fuel business growth. This unique approach acts as an autonomous “brain” within an organization, enabling real-world optimization and decision-making across the value chain at market speed, with the subtle judgment and expertise of an organization’s best subject matter experts or data scientists.

• Greater sustainability. Garcia, as well as other experts, insist, “Consumers are increasingly concerned about the environmental impact of the products they buy. Brands must adapt to this trend and offer more sustainable products.” He adds, “Brands that address this issue and offer environmentally friendly products will be more successful in the future.”

• Better customer experience. Jain believes the most successful CPG brands and retailers will be those improving customer experiences both in-store and online. He notes that improved customer experiences don’t come easy or cheap. He explains, “Building agile, frictionless, and highly experiential stores will call for investments in infrastructure bandwidth, computer vision, and cloud capabilities linked to store systems. … Artificial intelligence, machine learning, and cloud computing are [also] required to create seamless, frictionless online-offline consumer experiences. To support the modern consumer who prefers self-service, retailers will need to invest in edge computing capabilities.”

• Improved supply chain performance. It’s no secret that the past few years have witnessed numerous supply chain challenges. Unfortunately, many of those challenges have been created by forces outside of CPG brands’ and retailers’ control. Nevertheless, Garcia insists, “Brands must find ways to solve these problems and maintain their stock to gain customer loyalty and satisfaction.” Dinardo believes one way to improve supply chain performance is through better decision-making. He writes, “I see a more strategic approach involving a focus on automation, optimization and data-driven decision-making.” Because the speed of today’s business is computer speed, many of those decisions must be made autonomously, which is why Enterra® is focusing on advancing Autonomous Decision Science™ (ADS®).

Concluding Thoughts

Cook and Hewitt are optimistic about the future. They write, “The supply chain outlook is rosier, but issues haven’t been fully resolved. Parts of the sector, like agriculture, are especially vulnerable to geopolitical uncertainties and higher energy costs. Retailers can use technology to protect their supply chains. Use digital twins or analytics to forecast different supply chain models. Investigate and plan for multiple scenarios so you know how to respond if prices, rates or availability changes.” I wholeheartedly agree. “What if” scenario planning can help companies better understand and confront emerging challenges. The Enterra Global Insights and Decision Superiority System™ (EGIDS™) was developed to help business leaders rapidly explore a multitude of options and scenarios. Cook and Hewitt conclude, “There’s never been a better time to abandon ‘the way it’s always been done.’ … There are many opportunities for retailers to disrupt the market and create new value streams.”

Footnotes
[1] Brad Cook and Steve Hewitt, “How Retailers and CPG Companies Can Prepare for 2023,” Total Retail, 21 December 2022.
[2] Juan Ramón (Jay) García, “CPG Trends for the Second Half of 2023,” Abasto Advice, May 2023.
[3] Parag Jain, “2023 trends, technologies in CPG and retailing,” Retail Customer Experience, 6 April 2023.
[4] Staff, “CPG Brands Push Back on Losing Share to Private Labels,” PYMNTS.com, 19 October 2022.
[5] Dominic Dinardo, “Three Trends Affecting Margins In The Consumer Packaged Goods Industry,” Forbes, 19 April 2023.