From toilet paper to bed sheets, fresh food items to cleaning products; the consumer packaged goods (CPG) industry has changed and will continue to do so. Today, the choice for CPG manufacturers and supply chains is clear: future-proof with digital manufacturing technologies that can meet the customer where they are or be left behind.
Not so long ago, the industry saw consumers swapping products they’d been loyal to for years to whichever brand was easiest to come by, and ditching in-store shopping for the convenience, selection and, in the era of COVID-19, the safety online options had to offer. Many pandemic-related challenges are subsiding, but the factors that were turning the CPG industry on its head beforehand are still at play and gaining momentum.
I discussed this topic in a recent article for Food Logistics, and wanted to share additional insights here. I understand that future-proofing is easier said than done for many businesses, but it truly is the key to success as consumer behavior continues to evolve.
CPG Trends to Watch in 2023 and Beyond
As the CPG industry puts COVID-19 in its rearview mirror (phew!), many businesses are left with a supply chain and manufacturing ecosystem that looks – and functions – a lot different than it used to. Companies are sourcing ingredients and components from different sources, have new logistics and supply partners, and are likely even serving a different end customer with new ideas about how they like to shop and what matters most to them.
Many of the trends driving CPG forward in 2023 aren’t new, but may have fallen to the wayside during the pandemic and are back with renewed power.
E-Commerce is Here to Stay, But so Are Brick-And-Mortar Stores
E-commerce has been booming since the early 1990s, which means many of today’s consumers don’t remember a time when they couldn’t hop online to order a product. Online shopping has been growing exponentially for years, but the pandemic took the activity to a whole new level.
Only 13% of US households had ordered groceries online pre-pandemic, compared to 31% by late March 2020. Mass retailers, meanwhile, saw a 93% jump in online sales from 2019 to 2020. Online sales show no sign of slowing down, but that doesn’t mean physical stores are on their way out.
In 2023 and beyond, CPG businesses can expect consumers to be looking for a boutique shopping experience. Instead of making a purchase online sight unseen, consumers want to visit brick-and-mortar stores to touch, look at and interact with a product before going home to shop pricing and customization options before making a final decision.
This has implications for retailers, manufacturers and distributors because stores will need to stock a greater variety of products at lower volumes.
Consumers are Thinking Differently and Shopping Smarter
E-commerce sales accounted for an estimated 20% of all retail sales worldwide in 2022 and that figure will likely climb to nearly 25% by 2026. Today, the shopping experience often begins online (and increasingly on social media) and it’s easy to see why.
Online shopping puts consumers in control of the buying process and they expect to have all of the information needed to make an informed decision at their fingertips. CPG brands should expect modern consumers to do their research before making a purchase, whether online or in-store, and need to make sure ample product information is available.
Today’s consumers are reading product descriptions online, then taking the process several steps further. They are looking at reviews, exploring (and caring about) product sourcing information and comparing prices. In stores, customers are using smart devices to look up products and SmartLabel technology is more important for manufacturers than ever before. Failing to use it could be costly in terms of lost sales.
Sustainability is a Business Imperative
The days of sustainability as a novel, “nice to have” concept are long gone. In 2021, more than one-third of retail brands had sustainability strategies in place and that figure is growing every year. Sustainability is also increasingly important to the customer, and 66% are willing to pay more for products that meet certain green criteria.
So, where do sustainable products come from? Manufacturers and their supply partners, of course. But it isn’t enough to simply say a product is sustainable; companies are also under growing public and regulatory pressure to verify such claims.
The CPG industry is moving toward sustainability at lightspeed and manufacturers have to keep up. Fortunately, sustainability is also about cutting waste and doing more with less, which can be beneficial from a business perspective and aligns with the principles of lean manufacturing.
Staying Ahead of the Curve with Digital Manufacturing
Most manufacturers are using digital manufacturing technologies in one form or another, but 2023 is the year to go big – and many businesses plan to do so. Eighty percent of CEOs are leaning into digital technologies to combat inflation, supply chain disruption and labor shortages.
The beauty of digital manufacturing is that related technologies make it possible to put away your crystal ball and rely on real-time data and open communication with partners throughout the value chain to respond to disruption with speed and agility.
You can’t be everywhere at once, but with a connected business ecosystem enabled by digital manufacturing technologies, you can get the right data to the right people at the right time and make smart decisions regarding sustainability, e-commerce, supply chain disruption and other trends.
QAD’s Digital Manufacturing solutions collect shop floor and production data in real time and use artificial intelligence, machine learning and internet of things (IoT) technologies to maximize productivity while minimizing waste and inefficiencies.
I’ve discussed my perception of trends shaping the CPG industry in 2023 but I have one more for you and it’s the most important of all: Manufacturers must evolve to remain competitive and the best way to do that now, and in the future, is with digital manufacturing technologies.
Disruption is only a problem when it interferes with an event or process, but that doesn’t have to be the case – not when you’re operating within a connected business ecosystem that’s built with the future in mind.
