Trust, Demand, Sustainability: What's Next for the CPG Industry?

Since the Covid-19 outbreak altered life for millions of Americans a year ago, business has been good for the consumer packaged goods (CPG) industry. More people working, eating, studying and exercising at home means more demand for household staples ranging from jars of mayonnaise to rolls of toilet paper. From March 2020 through February 2021, both in-store and online CPG sales rose 14% compared to the previous 12-month period, according to data from measurement firm NCSolutions. A new report from the Consumer Brands Association provides reason to believe industry sales will remain elevated. The trade group, which represents the interests of companies such as General Mills and Procter & Gamble, estimates that even though demand for packaged-food and household cleaners will decrease from 2020 highs, total purchases in 2021 will be between 7.4% and 8.5% higher than 2019. Part of the reason behind this sustained bump is the expectation that some temporary changes in consumer behavior will become permanent. Many office workers, for example, are likely to continue doing at least some aspect of their jobs from home indefinitely. “If only some consumers return to working outside of the home every day, that’s still fewer people who commute and stop at restaurants for morning meals, lunch, snacks and dinner,” Darren Seifer, food and beverage analyst at market research firm the NPD Group, told Adweek. Seifer added that because eating out tends to be more expensive than preparing food at home, people are also likely to gravitate toward the latter during a period of high unemployment caused by the pandemic. Plus, “many consumers are still anxious about being in crowded places and try to avoid them,” Seifer said. Indeed, research from the Consumer Brands Association found that one-third of Americans believe the threat of Covid-19 will never fully disappear. Another assumption espoused by insiders like Sean Connolly, CEO of Conagra Brands, is people will continue to eat at home more frequently, even after the vaccine arrives and restaurants open, because they want to get a return on the investment they’ve put into upgrading their kitchens, living rooms and backyards during lockdown. Trust and responsibility Another finding in the trade group’s report is because people relied on CPG companies during the public health crisis, their trust in the industry has grown. Last summer, surveys from both Morning Consult and the Harris Poll found plenty of the brands people admire and respect most fall within the CPG space. With trust, however, comes responsibility. More shoppers will count on CPG companies to lead on social and environmental issues. “Expect to see holistic changes,” Ellen Davis, evp of industry engagement at the Consumer Brands Association, said in the report. “Not just the product, not even just the company—change will extend to anywhere the business touches.” Seeing green More people buying more disposable plastic goods throughout 2020 has also highlighted the need for a better recycling system, according to the trade group. Plenty of toothbrushes, for example, are recyclable. Due to their small size, however, most facilities can’t process them. “What is recyclable doesn’t necessarily get recycled,” Kyle Tanger, managing director and U.S. sustainability consulting leader at Deloitte, told Adweek last month. As Meghan Stasz, vp of packaging sustainability at the Consumer Brands Association, put it in the report: “What good does it do if a CPG company invests in research to find a way to make flexible plastics that are easily recycled if there isn’t a system capable—or willing—to take them?” And the more shoppers are voting for environmentally friendly initiatives with their wallets, the more important this issue will become for the CPG industry’s bottom line. Recent research from New York University’s Stern Center for Sustainable Business shows that throughout the pandemic, sales of CPG goods labeled as sustainable stole market share from their conventional counterparts.