A recent Deloitte report has shed light on the strategic moves Consumer Packaged Goods (CPG) companies are making to ensure robust growth by 2025. With the traditional reliance on volume and price hikes becoming less effective, these firms are exploring innovative strategies to navigate an increasingly challenging market landscape. As inflation moderates, prices remain elevated compared to pre-2019 levels, leaving consumers discontented and wary of further price increases.
Diversifying Growth Strategies
Embracing New Product Launches
One of the most notable shifts in the approach of CPG companies is the increased focus on innovation through new product launches. Faced with the reality that further price hikes might push consumers towards cheaper alternatives or even lead to category avoidance, executives are turning to novel products to maintain and increase market share. By leveraging precision analytics and generative AI, companies are not only identifying potential new markets but also testing the market suitability of these new offerings before launching them.
This trend towards innovation is evident in the statistics: a significant 95% of CPG leaders are prioritizing the introduction of novel products over merely raising prices. This strategy caters to evolving consumer preferences and helps in differentiating brands in a crowded marketplace. Furthermore, new products can revitalize a brand’s image and attract interest from both loyal and new customers, potentially leading to increased sales volume and market penetration.
Introducing Premium Products
In tandem with launching new products, CPG companies are also concentrating on enhancing their product mix to include premium options. Despite economic pressures, two-thirds of executives are focusing on premium products to boost profitability. Interestingly, this shift towards premiumization comes at a time when even high-income consumers are increasingly seeking value-based options. This trend suggests that while consumers are open to spending more, they expect greater value in return.
By offering premium products, companies are creating opportunities for higher profit margins and tapping into a segment of the market willing to pay more for quality and differentiated offerings. Premium products also often benefit from a stronger brand perception and loyalty, further bolstering a company’s competitive edge. Strategic trimming of underperforming products and acquiring promising brands are additional moves executives are employing to streamline their offerings and ensure growth.
Leveraging Digital Platforms
Digital Marketing and Retail Media Platforms
The digital transformation wave has not spared the CPG sector, with around 79% of companies significantly increasing investments in digital marketing channels. Recognizing the invaluable role of data in understanding consumer behavior and preferences, firms are channeling their marketing efforts into retail media platforms. These platforms allow for more precise targeting and better measurement of return on investment.
Transitioning to digital marketing allows CPG companies to reach a wider audience and tailor their campaigns to specific consumer segments. This precision targeting is crucial in today’s competitive environment, where personalized marketing can significantly impact a brand’s success. Additionally, the shift to digital platforms provides real-time insights and analytics, enabling companies to adapt their strategies swiftly to changing market dynamics.
Optimizing Revenue Growth Management
To further bolster profitability, CPG companies are increasingly implementing revenue growth management (RGM) systems. These systems are crucial for understanding and predicting consumer behaviors and preferences, allowing firms to make informed decisions regarding pricing, promotions, and product assortments. By optimizing these elements, companies can ensure they remain competitive while maximizing their revenue potential.
Top CPG firms are also placing a strong emphasis on supply chain efficiency, recognizing that streamlined operations can significantly reduce costs and boost productivity. By investing in AI technology, 76% of executives are focusing on enhancing their operational processes. AI not only improves efficiency but also aids in predictive analytics, contributing to better decision-making and strategic planning.
Prioritizing Efficiency and AI Integration
Boosting Productivity and Reducing Costs
Efficiency remains a cornerstone of the growth strategies for many CPG companies, with 82% prioritizing productivity enhancements. By operationalizing efficiencies and streamlining processes, these companies can reduce costs and improve their bottom line. This emphasis on cost reduction is especially pertinent in an economic environment where every dollar saved can significantly impact profitability.
Investments in technology, particularly AI, play a vital role in achieving these efficiency goals. AI applications in the supply chain, for example, can forecast demand more accurately, reduce waste, and optimize resource allocation. These improvements not only cut costs but also enhance service levels, ensuring products reach consumers more efficiently and reliably.
Strategic AI Investments
CPG companies are focusing on understanding changing consumer behaviors and preferences, investing in technology, and exploring new market opportunities. By shifting their strategies and finding more sustainable approaches, CPG businesses aim to foster a more resilient and agile growth model. These innovative methods are expected to help them navigate the complexities of the contemporary marketplace and secure success well into the future.