While certain consumer goods have seen triple-digit growth since early March, most discretionary categories are under pressure. Companies face a number of challenges that are likely to reshuffle their channel structure, market share and overall profit margin.
The industry’s relatively low online sales penetration, makes the closure of distribution points and the uncertain re-opening schedule a big challenge. For some segments of the industry that depend on restaurants and sporting events for sales, demand has come to a standstill. It is not clear how long it will take to come back in full.
Before pandemic, many CPG companies were successful at increasing pricing through different techniques, however, due to higher unemployment and uncertainty, consumers may be looking for deals, forcing companies to re-think their pricing strategy. This may result in consumers visiting value retailers more often and an increased interest in cheaper brands. As digital become more prevalent, expect Amazon to claim a larger share of CPG sales.
Consumers have become more aware of what they eat, seeking fresh products and spending more time at home with friends and family. COVID-19 and the stay-at-home mandates may result in an extension of this trend. The consumer decision journey has changed, and it is important for companies to understand and adjust their marketing and sales approach to align with those changes.
CPG companies may need to rethink the markets in which they play in, the categories that they deliver into those markets, and the customers that they work with. These adjustments will require updates to both strategy as well as operating processes and organization structure. All of this should be done in the relatively short term as the new normal will be here sooner that we imagine.
Contact us to learn more about how we can support you as you navigate these complex and uncertain times.