FMCG industry analysis

Traditionally, the consumer-packaged goods industry has been known to be a pillar of stability and certainty. However, for both consumers and CPG executives, the last four years have been nothing short of an unpredictable rollercoaster ride.  

Industry executives have had to ride business decisions on rising inflation, climate change concerns, rapid change in consumer consumption habits, supply chain shortages, logistical hurdles, and political instabilities.  

On the other hand, consumers have had to deal with lockdowns, layoffs, inflation resulting in rise in cost of living, and much more. 

Recently, Deloitte conducted a study with 150 CPG industry executives. In one of the studies, 8 out of 10 executives predict that the challenges (stated above) will spill over into 2023, and the year will continue to see rising inflation and cost of goods as geopolitical issues and current socio-economic conditions continue to persist.  

Having said that, the report also reveals another side of the story where despite the challenges, three in four executives are optimistic about their individual organisation’s performance and strategy this year.  

This brings us to the question; what can we expect from the global consumer packaged goods industry this year, and what can organisations do to remain competitive and profitable in these unprecedented times? 

According to the Market Statsville group, the global consumer packaged goods (CPG) industry is set to grow from USD 361.7 million in 2022 to 825.5 million in 2023, riding on the back of changing consumption patterns, and technology and innovation both offline and online. 

With that, let’s look at some key trends to watch out for this year. 

Bringing innovation into supply chain and procurement 

It’s a well-known fact that CPG relies heavily on the supply chain to gain access to commodities, raw materials and packaging materials to create their end products. But, given the developing political and socio-economic conditions, organisations are facing four key challenges;  

  • The cost of these commodities and the cost of sourcing them have been significantly rising, thus creating a dent on profit margins.  
  • Organisations are unable to gain clear visibility into the quality of their raw materials.  
  • Consumers are increasingly demanding products that are environmentally friendly, and companies need to ensure that their sourcing and procurement practices align with their sustainability goals. This can be challenging, especially when sourcing from regions with less stringent environmental regulations.  
  • In the absence of digital technologies, managing a global supplier network can be challenging, especially when dealing with multiple suppliers across different regions. Companies need to have effective supplier management processes in place to ensure that their suppliers are meeting their requirements and delivering products on time. 

In 2023, we can see organisations tackling these challenges by investing more in technology and innovation. For example, IoT, blockchain and machine learning technologies can provide complete visibility into the supply chain process, thus empowering organisations to quickly identify and address potential risks.  

Secondly, digital procurement platforms can streamline and make the process more efficient, reduce manual errors, and enable real-time collaboration between suppliers and buyers.  

Thirdly, technologies like the green supply chain management system can help organisations analyse and monitor their environmental impact and find opportunities to reduce their carbon footprint. 

Being ‘present’ online 

As more and more consumers turn to online shopping for ease of navigation and a wider selection of products, we can see CPG organisations embracing ecommerce more aggressively this year. For example, many organisations have already built a substantial standalone online presence to sell their products directly to the consumer. This has given them greater control over their customer experience and customer relationships. 

Some organisations are also partnering with ecommerce platforms like Amazon, Alibaba and Walmart to expand their online reach. The idea behind these partnerships being to access a wider range of consumers, and to benefit from the platforms’ marketing and logistical capabilities. 

A third way in which CPGs are building an online presence is by investing in digital marketing through targeted advertising, social media marketing and influencer marketing. We’re also seeing them investing more in data analytics capabilities to build more personalised experiences for consumers. 

Smart factory is gaining more importance  

Smart factory or Industry 4.0 is gaining significant traction in the global CPG sector. Smart factory uses technologies like IoT, AI and machine learning to improve the manufacturing process and make it more efficient.  

In the CPG industry, for example, smart factories are being used to automate production lines, reduce downtime and improve quality control. They’re also helping organisations reduce waste, optimise energy consumption and thus save costs and create a more sustainable manufacturing process.   

For example, sensors and ML algorithms predict when an equipment is likely to fail, and allow for proactive maintenance, thus reducing downtime. Similarly, robotics and automation processes streamline production lines, reduce labour costs, and increase overall efficiency.  

Journey to the cloud 

A Merit expert says, “One can say the cloud adoption in CPG is spread across functions; manufacturing, supply chain, procurement, marketing and operations. For example, CPG organisations are using cloud-based analytics to identify consumer browsing and purchase patterns, and pushing targeted, personalised marketing campaigns towards them. On the other hand, they’re using cloud-based supply chain platforms to track inventory levels, optimise logistics, and reduce costs.”  

Interestingly, CPGs are increasingly also using cloud-based innovation platforms to collaborate with startups and other third-party vendors to develop newer products and services. 

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