It’s unlikely for a day to go by in a person’s life when they haven’t interacted with a Consumer Packaged Goods (CPG) brand. In a lot of ways, they have become an indispensable and omnipresent aspect of our lives
This makes it all the more surprising that this industry saw a decline in 2018. A Kantar Worldpanel report says that the Indian FMCG industry declined 1% in 2018 as opposed to a 7.5% rise in the previous year. However, a strange anomaly is that despite the slowdown in pace, a lot of new companies are popping up in the space. These smaller, agile players are eating into the market share of behemothian CPG brands through a combination of digital-first sales strategy and innovative customer engagement practices.
The tussle between these new entrants and the traditional players has made it evident that no amount of marketing dollars and branding can replace customer-centricity. As a result, CPG companies have started leveraging technology to realign their sales, engagement and communication strategy in pursuit of customer-centricity.
Here are some emerging trends and opportunities that CPG companies can leverage to stay customer-ready:
Ecommerce growth of groceries is set to take off
With the prevalence of eCommerce, it makes groceries and other products much more accessible to the average user. They are presented with a hassle-free, quick and convenient way to access and purchase groceries for their household needs.
The relentless rise of Amazon
Amazon and other major e-commerce players are pressurizing traditional CPG companies because of the way they’re offering high quality goods at discounted rates. This, when coupled with excellent customer service and speedy redressal of consumer concerns, make Amazon a force to be reckoned with. Prime Now in India and Amazon Fresh are two growing services that have been rolled out in select few cities. The basic premise is that the app allows you to make a purchase of groceries such as eggs, fruits, vegetables, milk, etc, and also have it delivered to your desired address in an hour or so. A survey from Coresight research found that Amazon saw 59.5% of its users purchasing groceries through the portal.
The Future is Omnichannel
Customers are accustomed to buying CPG products in person, and most of them prefer to experience the look and feel of the product and test its freshness before making the purchase – it can be quite a leap to expect them to get accustomed to shopping for CPG online. In such cases, it helps greatly if a retailer has an omnichannel presence. The brand recognition will allow loyal customers to find the brand of their choice and preference and accordingly shop for the items at their comfort and convenience.
Smaller, agile brands will fight for market share
It may be tempting to think that big names like Amazon and Whole Foods are the future of consumption, but truth be told, they are one part of a large group of brands that are vying for the consumer’s attention. Many smaller companies are popping up with similar sales and engagement strategies as Amazon, however, these smaller players can afford to deliver a more personalised experience to their pool of customers. They also allow themselves the freedom, creativity and a nimbler approach to deliver a re-imagined consumer experience.
Subscription-based plans will increase
A report by e-marketer points out that only 16% of consumers buy their household needs and groceries on a subscription basis, but more than 1/3rd of them planned to take it up in the future. This is a rare case of a consumer segment presenting itself to the company to capture. However, this is a tricky one because only loyal and returning customers are the ones who are likely to take up the subscription plans – not the ones who are making a one-time purchase. According to a report by McKinsey, subscription based e-commerce is being led by startups like the Dollar Shave Club, Stitch Fix personal styling and Blue Apron meal kits. The McKinsey report also points out that 15% of online shoppers have signed up for one or more subscriptions that deliver products to them on a time-bound recurring basis. What these subscription services enable, is a convenient, personalised and most importantly, a low-cost way to buy what they want and need.
More mergers and acquisitions are likely to follow
According to the annual Global 50 report released by OC&C Strategy Consultants, New York, the number of M&A deals among the top 50 consumer goods brands had reached a 15 year high in 2017. This is a 45% increase from the year before that. The study was carried out in collaboration with The Grocer, a British magazine published by William Reed Business Media. The rise in M&A can be attributed to big FMCG companies responding to challenges related to driving growth in addition to mounting pressure from investors to increase margins. Thanks to the boom in these M&A deals, there was a dramatic recovery in revenue growth across the CPG and FMCG sector. It went from 0.5% in 2016 to 5.7% in 2017.
Growing focus on brand authenticity
Consumers these days are watching closely brands. They are more likely to buy from a brand and stay loyal to it if they believe that the brand’s values match up with theirs. In a recent survey carried out by Nielsen among 29,000 respondents, it was found that 50% of global consumers are more willing to pay more for goods and services from companies that have implemented programs to give back to society. Across age groups and genders, the percentage of consumers willing to pay a higher price has increased. Respondents under the age of 30 are most likely to say they would spend more for goods and services from companies that give back. “While cause-marketing programs seem to resonate most strongly among younger respondents, the rapid change in sentiment among middle-aged consumers expands the cause opportunity for brands,” said Nic Covey, vice president of corporate social responsibility at Nielsen. “Today, brands can confidently focus purpose messaging on both younger and older consumers,” the study quoted him as saying.
How is technology enabling the functioning of CPG companies?
Data is a big differentiator for companies and the ones that lead the way are those who invest in specific capabilities. On one side, the company must continue to invest in functional expertise (for example, in-store shopper insights) and on the other, they should also invest in securing exhaustive data from retailers.
Data in this context is an enabler. It enables most forward-looking CPG companies to better understand how they can expand into high-growth areas. Some of these high growth areas include specific channels (such as omnichannel retailing and regional grocery chains), demographic groups (such as millennials) and consumer segments (such as those customers who are particularly value-oriented)
A brand needs to make assertive moves when it comes to these high-growth areas. This is how winning companies strategize and blur the lines between sales and marketing. Some companies have taken the extra step of forming a commercial development team whose role is essentially to serve as an integrator to the function of sales and marketing.
Increasing CPG Sales using Artificial Intelligence
Thanks to the continuous development of the Artificial Intelligence sector, it has become a powerful technology to increase sales in the CPG industry. A survey carried out by the Promotion Optimization Institute (POI) detailed in its report that 16.7% of CPG manufacturers have invested in Artificial Intelligence solutions – a 5.7% increase from 2018. Based on the fact that a majority of companies are actively working on incorporating AI-based tools into their workings – this is a clear indicator of the growing cognizance of AI’s transformative power.
However, the question still remains – how will CPG players run a profitable trade promotion with the help of AI technologies? While AI-based trade promotions have been proven to be effective, it’s altogether possible that companies do not achieve satisfactory results if a solid implementation strategy is not present. There is no doubt that AI is a powerful technology tool, given the fact that it has higher cognitive and analytical capabilities than humans. However, the key is to combine AI with its respective, AI-compatible tools and human knowledge in order to develop a deep and thoroughly comprehensive sales strategy.
One thing we need to remember is that for decades, both sales and marketing domains have been entirely reliant on human efforts. Now thanks to AI, companies can leverage customer-generated data to gain insight on consumer behaviour, brand loyalty, and trends in the industry. We should also note here that AI has the innate ability to analyze data and churn out insights based on hidden information which a salesperson may not be able to recognize.
It’s not just sales opportunities that AI can recognize. AI can also play a vital role in devising an effective trade promotion strategy that can help bring down operational costs and increase profit margins. CPG companies also now have the choice of opting for AI-driven predictive customer analytics tools and use them to drive better outcomes and maximize the impact of their sales and marketing campaigns. This can result in higher levels of brand engagement and increased customer satisfaction.
It’s not just the sales practices themselves, advanced AI platforms are also capable of increasing the efficiency of sales professionals. AI chatbots can carry out customer interactions and conversations and AI can help provide valuable human insights on how to execute day-to-day tasks more efficiently. Another advantage that AI offers is that it can work 24×7 without breaks, adding further value to an organization operating in an industry that is so specifically customer centric, like CPG.