Our Insight & Thinking on Consumer Goods Industry
Consumer goods industry has never been the forefront of innovation. However, with the pressure coming from retailers, growth of private labels, penetration of E-commerce, emergence of the generation Z or Millennials are becoming mainstream, and the shifting consumer behavior, Incumbents are forced to transform in order to survive. They can no longer rely on traditional growth frameworks.
Global consumers good market size has already exceeded ten trillion dollars and research from Allied Market Research even predicted a 5.2% CAGR growth to 2025 and become a 15 trillion dollar industry. In this period, not only the center of commerce will take place in Asia, there will be more private brands and SMEs rising up due to the shifting consumer preference and lowering of barriers to entry.
What is driving the sector?
Back in 2010, consumer goods company take 23 spots out of 100 in the most valuable brands report but after ten years, that has dropped to only 7. Also, for the past 40 years up to 2010, the total return to shareholders had long been at around 15%, which is a few percentage higher than S&P average, but now that figure has dropped to 3% less than S&P.
The framework that has driven consumer brands accelerate in their growth journey is long dead and won’t be able to support continuous growth in the future. Brands have to embrace transformation in order to combat new problems and new challenges.
However, how can brands define their strategic path to growth? At OOSGA, we define nine trends in the industry for companies to be more aware and insight driven in their strategy.
From 1950 to 2006, people who are older than sixty years old has tripled to 700 millions and by 2050 that numbers will again triple to 2.1 billion. However despite this obvious trends, most brands aren’t will position to be relevant to their more senior customers. In United States only 34% of senior population feels retailers have them in mind when designing the customer experience
Rise of Millennials
The youngest of millennials has already graduated from college and entered the workforce and the eldest of them are even rising up to the senior position in companies across industries. Brands today have to understand what this generation, who cares a lot about experience, value, and are more willing to share personal data, is asking for and become relevant to them.
Emergence of Gen Z
Those that were born after 1997 are the so called Gen Z. After 2019 their numbers have officially surpassed that of Millennials and account for about 32% of population. For Gen Z, digital technology is almost an extension to their arm. They are digital native and cares deeply about sincerity, sustainability, and brand value. Even though they aren’t yet economically independents, they are also the main drivers in the race.
Better for You
Customers today are aware of the impact of foods especially Millennials. On research conducted by Neilson has found that 33% of millennials think eating healthy is critical for them and 30% are willing to pay premium for it.
Culture of Diversity
As the birth rate kept falling and the globalization intensified, most developed economies are lowering their bar for immigrants to attract global talents. US government even predicted that by 2045 51% of population will be minority.
According to a global survey conducted by Accenture, 63% of consumers are more inclined to buy from purpose driven brands and 62% of consumers want brands to stand for something. One company even found that purpose driven brands have a 175% higher value.
Not only better for you, consumers today want to know whether or not companies are doing something better for the world. One Neilsen report indicated that 66% of consumers are willing to pay premium to support sustainability.
Boom of Data
Data is booming. The volume is growing at a pace that are faster than that of analytics capacity and resources. Being a CPG company also mean there are data of abundance, however most companies are leveraging the power of data.
Because of rising of E-commerce, it is taking away the already razor thin margin from retailers, so retailers are fighting back with private-label. According to IRI, private label has a growth rate of 5.8% while CPG has only 0.8%.
Insight on Consumer goods
Let's see what we can accomplish together