2020 has been a challenge to say the least, and a year that has drastically changed both our personal and professional lives.
The year started in our seemingly “normal” pre-covid world. COVID hit and we went through lockdowns globally fraught with panic, fear, and worst of all, uncertainty. Now we’re navigating life in the “new normal”, trying to find our feet in a different world.
It’s been no different for businesses across the world, especially the Consumer Packaged Goods (CPG) industry.
There are three pertinent questions to grapple with in the new normal:
- What’s going on in the minds of the end consumer?
- Where and how are consumers buying groceries?
- How should a manufacturer thrive in the new normal?
Here are our thoughts.
What’s going on in the minds of the end consumer?
Pretty sure we’ve all landed up at the store to panic buy sanitizer just to find that there’s none left. Yeah, toilet paper became more valuable than gold.
What’s for certain is that the new normal has resulted in us all having different priorities when we shop for groceries, as well as a change in tastes and preferences. This is a prime example of the drastic shift in the consumer mindset. Our budgets had and will to a large degree remain focused on essentials and hygiene. All while the propensity to spend on impulse, novelty, or more premium items has decreased.
This has implications for manufacturers to think about product portfolio, figuring out the right pack x price x channel strategy and when launching new products. To do so, CPGs will have to create agile supply chains, harness dynamic analytics for total operational visibility, and be closer to the consumer than ever before.
Where and how are consumers buying groceries?
The lockdowns had induced a big shift in our purchase patterns as well, and much of its effects linger on in the new normal. Three major channels existed for consumer goods: mom & pop traditional retail, e-commerce, and large-format modern trade. These three channels still exist, but their significance in consumers’ lives has been shaken up.
In developing markets, our neighborhood mom & pop stores have contributed to over 80% of retail. During the lockdowns, these stores have remained resilient and continue to make a strong return as cities open up. Even stronger growth in ex-metro geographies. Traditional trade provides the ultimate convenience with their omnipresence and is still the go-to destination for our more frequent top-ups of essentials.
E-commerce has undoubtedly grown rapidly and, after lockdowns ease, continues to be an important retail channel. Online groceries serve a slightly different use case. As consumers tend to purchase a different set of products and SKUs online than we do from traditional retail. The major contributing factor is that buying groceries serve us very well for more planned purchases and for the goods we buy in larger quantities.
Modern trade, or large format retail, as a channel is seeing a slow return in the new normal. Social distancing measures along with the safety precautions have prevented most of us from going back to these stores the same way we used to. Especially as our needs are being met so well with Traditional Trade and E-commerce.
For manufacturers, channel strategy is crucial and requires differentiated strategies. Ensuring that the right product assortment availability, in the right channels, for the right consumers is just the start. Investing in promotions resulting in ROI, optimal pricing strategies, and having a multi-channel ready supply chain will enable a stronger grip on the new normal for CPGs.
Transformation will determine success in the world of consumer goods. To do so, using the power of the latest developments in technology will enable great control during such turbulent times and unlock immense value.
How should manufacturers thrive in the new normal?
The north star for consumer goods manufacturers is to become exceptionally agile. This goes back to embracing technology in today’s day and age. Those who bring in the right technologies to become data and analytics-driven organizations will win.
Succeeding in times when consumers are behaving differently, and when the way consumers buy is shifting, technology solutions that solve mission-critical pain points will enable large organizations to act fast.
As stated by McKinsey in their “Perspective on Retail and Consumer Goods” report this year, the path to success is in embracing technology. Technology is no longer a “good to have”, now is the time to enable specific functions within the organization with the right set of tools beyond just setting up ERP systems or simple front line sales automation.
Business processes that seemed like herculean tasks can now be conquered through recent technology advancements in AI, Machine Learning, and Data Science to name a few. Dynamic pricing, customizing trade programs for individual stores and end-to-end supply chain visibility can now become reality.
Leveraging technology solutions, having an aligned vision with technology partners, with a clear business outcome is the answer. Transformation will ultimately lead to being nimble, decrease operations costs and/or uplift revenue.
2021 and Beyond
2021, will be a year for brands to take hold of the new normal, brands must avail of the right technology solutions that solve specific use cases for each function in the organization. These changing times beckon adaptability for the brands that we interact with over 80 times a day.
In the short term, such solutions should give visibility within existing systems. Getting rid of the blackbox of complex operations, especially in high growth markets, and ensuring the execution of powerpoint strategies into point of sale realities.
The mid to long-term adoption of transformation will give CPGs flexible supply chains, multi-channel efficiency, and near-perfect execution in the marketplace. Ultimately shaping more cost-efficient and revenue-maximizing companies.
The future remains bright for the consumer goods we’ve always loved. It’s just that the times are changing, and those who capitalize on the new normal will determine success.
Thank you for reading this. If you have any thoughts, different views, or just want to talk about the consumer goods industry, we’d love to talk to you. Feel free to reach out on LinkedIn and come check out Retail Pulse, a game changing AI powered computer vision solution for the CPG industry!