What Are CPGs? Defining Consumer Packaged Goods

Learn about:

• The definition of consumer packaged goods

• The types of CPGs

• What the CPG marketplace looks like

• Top trends in the CPG industry

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Consumer packaged goods (CPG) are products that consumers frequently replace, such as food, beverages, toiletries, and other consumables. They describe merchandise that has to be reloaded frequently, as opposed to items that can be replenished after longer durations. Examples of CPG industries are food processing plants, personal care product manufacturers, and household goods and producers.

Economic Impact of Consumer Packaged Goods

CPGs account for 86.78 million American jobs, and the industry is projected to contribute $2.8 trillion to the United States' gross domestic product (GDP) in 2024. Consumer demand influences the economic impact of CPGs by driving market trends and shaping product development strategies.

Types of Consumer Goods

Consumer goods are items meant for everyday consumption and can be classified into two main categories: fast-moving consumer goods (FMCG) and slow-moving consumer goods (SMCG).

Consumer preferences play a crucial role in determining the types of consumer goods and their market dynamics. The primary differentiator is the speed at which these products are sold to consumers, which affects their turnover rate.

Fast-Moving Consumer Goods (FMCG)

Fast-moving consumer goods are products with a shelf life of less than a year. For example, these could include:

• Food and Beverages: snacks, dairy products, and beverages

• Personal Care Products: shampoos, soaps, and cosmetics

• Household and Cleaning Products: detergents, cleaners, and paper products

• Pet Food: treats, canned foods, dry food

CPG brands, both billion-dollar companies and smaller direct-to-consumer brands, compete fiercely in the FMCG sector. They must quickly adapt to changes in consumer preferences to stay ahead.

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 presence

• 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. For example, these could include:

• Home Appliances: refrigerators, washing machines, and microwaves

• Furniture and Furnishings: sofas, tables, and decor

• Durable Electronics: TVs, DVD players, and cameras

SMCGs are often:

• Purchased far less frequently

• Chosen with extreme prejudice for price, quality, and features

• 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

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 quickly, consistently, and at the lowest prices.

Additionally, e-commerce sites, such as Amazon, have 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 customers can then turn into savings. Coupons and sales are frequently used as well.

Who Can be a CPG?

Traditional and Emerging Players

The CPG industry has traditionally been dominated by large corporations such as Nestlé, Procter & Gamble, and PepsiCo. However, the landscape is evolving with the rise of smaller, agile companies and startups. These new entrants leverage innovative strategies, niche markets, and direct-to-consumer models to carve out significant market shares.

The Role of Startups

Startups in the CPG space have been gaining momentum, accounting for 19% of the market and contributing $2 billion in sales in recent years. These companies often focus on unique value propositions, such as organic ingredients, sustainable packaging, or socially responsible practices.

Advantages of Smaller Companies

Smaller CPG companies are often more nimble and can adapt quickly to market changes and consumer trends. They tend to be more innovative and able to experiment with new products and marketing strategies without the bureaucratic constraints that larger companies face. Social media and influencer marketing play a significant role in their growth, helping them reach targeted audiences more effectively.

Impact of Consumer Trends

Consumers today are increasingly looking for products that align with their values, such as sustainability, health, and social responsibility. This shift has opened doors for new brands that can meet these demands more effectively than traditional CPG giants.

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 seen a significant rise in popularity. A study found that 47% of US shoppers prefer store brands over national brands. This shift is driven by the cost savings passed on to consumers, as these brands save on marketing expenses typically undertaken by the retailer.

Purpose-Led Brands

Consumers are increasingly choosing brands that align with their values. For example, consumers want brands to help them make a difference. 66% of US consumers and 80% of young US adults are willing to pay more for sustainable goods. Brands that focus on eco-friendly packaging or donate to charitable causes are gaining a competitive edge.

Direct-to-Consumer (DTC) Growth

The DTC model is rapidly growing, with traditional CPG companies acquiring DTC startups or launching their own online stores. This model allows for a direct relationship with consumers, offering personalized experiences and insights into consumer behavior. In 2024, DTC sales are projected to reach $213 billion.

Subscription-Based Models

Subscription services are gaining traction, providing convenience and consistent revenue. In 2019, the global subscription e-commerce market was valued at $15 billion and is expected to grow 3000% by 2025.

Creating seamless shopping experiences across multiple platforms is crucial. The omnichannel retail market was valued at $7.8 billion in 2023 and is expected to expand at a CAGR of 14% from 2023 to 2030. Brands that effectively combine in-store and online experiences are meeting consumer demands for convenience and consistency.

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! Our product enables suppliers to get paid and get better with software that identifies, prevents, and auto-recovers deductions and compliance fines. SupplyPike assists CPGs in managing their supply chain to reduce revenue loss and improve efficiency. Reach out to talk to a team member today!