Defining Consumer Packaged Goods (CPG)
- The definition of consumer packaged goods
- The types of CPGs
- What the CPG marketplace looks like
- Top trends in the CPG industry
Consumer packaged goods (CPG) describe merchandise that has to be reloaded frequently, as opposed to items that can be replenished after longer durations. Examples of these industries are rice factories, vegetable oil plants, dairies, and others. Items that fall in this category are chocolate, noodles, jam, ketchup, and peanut butter.
CPGs account for one in ten American jobs and the industry contributed $2 trillion to the United States gross domestic product (GDP) in 2019. CPGs are the largest manufacturing employers in the US as well.
Types of Consumer Goods
Consumer goods are items meant to be consumed every day. Food and non-food items fall into this category.
There are two types of consumer goods: fast-moving consumer goods (FMCG) and slow-moving consumer goods (SMCG). As the names suggest, the determining factor is the speed at which the products are sold to consumers. This, in turn, establishes the turnover of goods.
Fast-Moving Consumer Goods (FMCG)
Fast-moving consumer goods (FMCG) are merchandise that has a shelf life of less than a year, such as food and beverages, personal care, household and cleaning products, and pet food. These products are purchased quite often with running costs.
FMCGs are often:
- purchased frequently, causing high volume sales
- chosen effortlessly with low consumer engagement
- priced lower than SMCGs or durable goods
- have a short (less than a year) shelf life
- are consumed rapidly
- have extensive retail distribution and online presences
- are quickly replenished with a high inventory turnover
While most electronics have longer shelf lives, there are also fast-moving electronics, which include items such as cell phones, earbuds or headphones, and gaming consoles. These items regularly entice the consumer to upgrade to the latest version, occasionally even by using planned obsolescence.
Slow-Moving Consumer Goods (SMCG)
Slow-moving consumer goods (SMCG) products have a shelf-life of more than a year. This category includes items like home appliances, furniture, and furnishings. These items are not sold as frequently as FMCGs and do not have to be replenished as quickly.
SMCGs are often:
- purchased far less frequently
- chosen with extreme prejudice with price, quality, and features taken into consideration
- priced higher than FMCGs
- have a long shelf life, spanning years or decades
- are typically sold by specialty retailers or e-commerce websites
- have a low inventory turnover
This category includes durable goods that last a long time. Electronics such as TVs, DVD players, and cameras would also be considered SMCGs.
The CPG marketplace
Consumer packaged goods have come a long way since the digital age. Big box retailers, such as Walmart, have invented technology specifically to provide goods to consumers in a fast, consistent manner at the lowest prices.
Additionally, e-commerce sites, such as Amazon, have recently jumped on the CPG bandwagon. Online retailers now offer consumables on a subscription basis, allowing customers to receive these products at home on a schedule without ever having to go to a store.
Loyalty programs are also utilized by CPGs and retailers alike in order to encourage sales. For example, PetCo offers “points” for every dollar “Pet Pals” customers spend on FMCGs such as pet food or kitty litter, which they can then turn into savings. Coupons and sales are frequently used as well.
Who can be a CPG?
So, who can be a CPG? In the past, the CPG game was ruled by big companies such as Nestle and Pepsico, but now, CPG startups are beginning to take a bigger slice of the market. Emerging manufacturers from new, smaller companies rose to 19% of the market in 2018 and contributed $2 billion in sales.
A new trend is emerging for the CPG industry, and many experts argue that “Small is Big”. Smaller companies selling to retail markets are more nimble, more innovative. Social media and “influencers” are shaping today’s marketing tactics and consumers are responding positively.
Trends in today’s CPG market
These are some of the top brand trends in today’s CPG market:
Private label brands
Private label brands have begun to make a major market impact, with 51% of Millennials saying they don’t particularly prefer name brands over store brands. These goods are manufactured by a name brand company for a retailer to market as their own (e.g., Great Value or Always Save). Private labeling means that CPGs save a lot of money on marketing, as this aspect is taken on by the retailer.
Purpose-led brands help consumers feel good about the products they have purchased. These brands include environmentally sustainable products, perhaps with eco-friendly packaging; socially conscious brands that devote some percentage of their profits to a cause or charity; or brands that align with the consumer politically and donate to particular PACs (or, conversely, refuse to).
Representation matters and consumers are responding to more diversely owned brands. Considering that people of color purchased over half of all dry grains and vegetables in 2017, there is no downside to having a more diverse market. Additionally, businesses owned by women, veterans, disadvantaged people, and ethnic minorities can obtain diversity certifications, embracing their brand’s identity and helping consumers feel good about themselves.
There’s a big push to purchase locally sourced products lately, and studies have shown that for every $100 spent at a local business, $68 stays within the local economy, as opposed to $43 from a national or larger company. Whole Foods and other grocers often locally source their produce.
SupplyPike and CPGs
The CPG business is a fast-paced, ever-evolving industry, and CPGs need help navigating the retail world. SupplyPike is here to help. We love CPGs and want to help them succeed! To that end, our product helps to reduce revenue loss. Reach out to talk to a team member today!
Written by The SupplyPike Team
About The SupplyPike Team
SupplyPike builds software to help retail suppliers fight deductions, meet compliance standards, and dig down to root cause issues in their supply chain.Read More