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The real opportunity for the CPG sphere lies beyond Marketing.

Yes. There’s more than just blueprinting a great marketing strategy and optimizing your sales funnel. Let me start by answering a lead-in question, “What is CPG?”. The acronym CPG stands for Consumer Packaged Goods. It is an industry term for merchandise that customers use up and replace on a frequent basis. These types of goods are generally proportionately low-cost commodities. The vast majority of products that you find while flicking through a retail store aisle are consumer packaged goods — better known as the foundation to the modern consumer economy and one of the largest generators of gross domestic product.

Food and Beverage, Cosmetics, Houseware, Tobacco, Apparel, Cleaning Supplies, Paper Products, and Office Supplies are some of the few categories of Consumer Packaged Goods. CPG is very different from durable goods, which are meant to be used repeatedly before they are discarded. This includes all electronic items, automobiles etcetera.

I am going to consume the next 300–400 words to intricate more about the CPG Industry, its types, how it affects the economy and how it has grown in the last few years. Feel free to scroll to “The Essence” section if you’re too solicitude about spending your next 2 minutes.

 

 

CPGs are categorized into four types:

A. Convenience:

This type of consumer product is purchased routinely and involves very little thought: think candy bars, toothpaste, a hairbrush or soda. These types of CPG products often inspire brand loyalty. For example, someone who wants a Coke wouldn’t dream of buying a Pepsi and vice versa. Once the decision for a soda is made, it’s purchased quickly. The consumer already knows he is loyal to Coke and doesn’t ponder a Pepsi every time he’s in the convenience store.

B. Shopping:

A shopping product takes a bit more thought. This type of product requires a consumer to research and compare brands. There are two types of shopping products: homogeneous and heterogeneous. Homogeneous, if you recall from your high school social studies class, means two things that are alike. When trying to decide on a homogeneous product, such as a toilet cleaner or dishwasher, the price will be a big factor in your decision. Heterogeneous products can be quite different and require considerations other than price. The shampoo is a good example of this type of product. Head & Shoulders will have different unique selling proposition than a Garnier Fructis, for example.

C. Specialty:

This type of product has unique qualities and is brand specific. If you want a Rolex or an Audemars Piguet, that’s likely the only type of watch you want. You’re not just looking for any old timepiece; you want a high-quality, luxury item with a specific reputation.

D. Unsought:

This type of product is either one that a consumer doesn’t know exists or doesn’t even think about. A new face cleansing tool not yet on the market is an unsought product, as is a grave plot.

The most popular places for buying CPG products are grocery stores, drugstores and mass merchandisers. This industry is competitive and doesn’t show any sign of slowing down as long as we need small, everyday items that we can buy and dispose of quickly. This industry is very large and growing like crazy, mainly due to emerging markets, which have led to an increase in global consumption. U.S. consumers spent approximately $630 billion on CPGs in 2015. It’s projected to make about $721.8 billion in sales in 2020. Research shows that Baby Boomers and senior citizens buy more than half of the United States’ CPG products. This trend is now following in the Asian markets as well.

The consumer packaged goods industry is experiencing tremendous growth, as well as rapid changes. Demographic shifts and dynamic consumer preferences are forcing companies large and small to adapt quickly if they wish to survive. The following is a summary of the most influential factors shaping the CPG sector today.

As a young CPG company, you have a lot of concerns regarding the health of your business. Between your competitors, emerging technologies, and all the nuances that come with running a company, it’s easy to get overwhelmed. However, companies in the CPG industry can utilize success-driving strategies to maintain profitability and ultimately scale up.

Typically, CPG merchandise is sold by retailers in physical stores(brick and mortar style) and the packaging is designed to differentiate a product from its competitors on a pharmacy, grocery or big box store shelf. Because shelf space is a finite commodity, the CPG market is highly competitive. Until recently, it’s been difficult for manufacturers to take advantage of the internet and sell CPG through eCommerce channels.

The Essence:

If you are a CPG based company running your business online or formulating to build a channel online, the following fragments would help you play the game with a full deck.

Product Worth:

A product’s value to its makers and its consumers cannot be put into an equation to spit out a value score. Many organizations look at the sheer profitability of the product to measure its value. I wouldn’t say this is the wrong way of evaluating the product’s worth but it is purely focused on the benefit to the business, and not the consumer. Another common way of demonstrating product worth is by looking at the market position. Looking at the sheer volume of the market your product holds over competitors can give a real picture of the way consumers view the product.

While we can keep listing out a variety of approaches one thing to keep in mind is, your approach should be consumer-centric. Consumers stay loyal to products that they can apply in their life in a meaningful way. The utility of a product can be measured through a number of quantitative research methods and competitor comparative studies. the way customers view your product reflects how they view your company. Measuring customer perception of your product, as with measuring utility, gives you a good quantitative metric that can be measured over time and compared to your competitors.

Know your competitor:

Learn how to identify your competitor. Understand what they do and act on the information you obtain. Your competitor could be a new business offering a substitute or similar product that makes your own redundant.

Competition is not just another business that might take money away from you. It can be another product that’s being developed and which you ought to be selling or looking to license before somebody else takes it up. And don’t just research what’s already out there. You also need to be constantly on the lookout for possible new competition.

Speak to your competitors. Phone them to ask for a copy of their brochure or window-shop their website, social profiles or get one of your staff or a friend to drop by and pick up their marketing literature.

You could ask for a price list or enquire what an off-the-shelf item might cost and if there’s a discount for volume. This will give you an idea at which point a competitor will discount and at what volume.

Phone and face-to-face contacts will also give you an idea of the style of the company, the quality of their literature and the initial impressions they make on customers.

know your audience:

“Know your audience is a lie. But it still matters” — Benyamin Elias.

The more you know about your audience, the more powerful your marketing efforts will become.

When you want to know more about your target audience, you need to conduct good old-fashioned market research. The goal of market research is to get as many details as possible about the group you’re targeting, which you can later use to build personas.

If you ever wanted to read your customers’ minds, social media is the closest you will get. You can even identify trends in your audience’s interests and problems. Also, you can determine what social networks your target audience is the most active on, as well as the influencers in that space.

Authenticity and Brand Value:

Your brand sets you apart from competitors, promotes recognition, and represents your promise to the customer. Branding, by definition, is a marketing practice in which a company creates a name, symbol or design that is easily identifiable as belonging to the company.

The most important reason branding is important to a business is that it is how a company gets recognition and becomes known to the consumers. The logo is the most important element of branding, especially where this factor is concerned, as it is essentially the face of the company. This is why professional logo design should be powerful and easily memorable, making an impression on a person at first glance. Printed promotional products are a way of getting this across.

Branding increase business value, Branding pilots new customers, branding improves employees pride and satisfaction, Branding creates trust within the marketplace, Branding supports Advertising. So Branding is the key operator of a CPG business. I just tried to brand the term brand to help you understand how to brand a brand.

“Millennials and Generation Z are very concerned about issues that, incidentally the Consumer Goods Forum focuses on — that is the future of the planet and the people on it,” says Peter Freedman, Managing Director at The Consumer Goods Forum

Supply Chain:

Want to be a conquistador in the CPG industry? Sink money into Supply Chain. The shift towards the consumer-centric business model requires an optimized, Extremely fast End-To-End Supply chain solution.

For today’s CPG companies, operational efficiency through scale no longer provides the same supply chain advantage it once did. This makes the move to becoming a more modern and faster CPG manufacturer essential for capturing untapped market growth.

CPG leaders evaluate the success of their supply chain on only their ability to reduce the expenditures. But cost-reduction is only one key element; the enablement of growth and differentiation are just as essential in measuring supply chain effectiveness. While these two elements are not as readily quantifiable, the shift can be enormous and can advance the entire CPG organization. Unfortunately, most CPG companies are missing opportunities to use the supply chain to support this kind of profitable development.

Amazon Prime, which is noted for its “click and deliver” services, has implemented Prime Pantry, a CPG service that allows Amazon Prime members to purchase standard retail-size groceries and household products online and have them delivered to the member’s doorstep the next day. Amazon is also experimenting with Prime Now, a CPG service for urban customers that delivers consumer goods within two hours — and Amazon Dash, which allows connected devices such as smartphones, smart appliances and the Alexa digital assistant to order and reorder CPG merchandise through voice recognition and single-touch commands.

Changes in delivery models have affected how CPG merchandise is being marketed. Coupons and loyalty card programs are designed with mobile end-users in mind and marketing initiatives are omnichannel, providing the customer with a seamless shopping experience for frequently purchased products. A number of vendors, including Oracle, SAP and Siebel Systems provide marketers with software programs to facilitate CPG marketing. Generally, the software helps marketers federate data from multiple streams, improve geotargeting and personalization efforts and respond promptly to changing demographics.

Innovation & Strategy:

The projected sales for CPG industries by 2020 will be a little over $721B. As you might imagine, with those kinds of sales, it’s an incredibly crowded marketplace. No matter whether your company is just entering the CPG market or is a long-standing supplier in the CPG market, it’s important to use growth strategies to stay relevant.

And in recent years, innovation has become a critical element in all areas of the industry in order to yield high consumer satisfaction results and to accrue brand-loyal customers.

Whether it’s your product or business model, you should always look for ways to innovate in the CPG market. In the business world, when you stand still or become complacent, you will soon lose out to a competitor who is always looking for the next step forward. AB InBev, Procter & Gamble, Philip Morris International are all fantastic examples of CPG companies that are constantly innovating to keep up with what their customers want. For example, AB InBev is brewing the future with ZX ventures for their global growth and innovation.

In terms of your product, utilize those direct lines of communication you have with your customers. Test out products, collect feedback and generate ideas to improve your existing products or create new ones. For your business model, always keep an eye out for new ways to improve your internal processes or for new channels in which you can sell your product.

Making it big in the CPG market requires a healthy mix of data, innovation, feedback, and strategic partnerships. Consumer tastes, retailer dynamics, and competition are constantly shifting in any consumer-based industry, meaning there’s no rest for the weary. But that’s part of the excitement of the CPG industry. It’s a market meant for those with drive, creativity, and an entrepreneurial mindset.

Cash Flow:

Cash is also important because it later becomes a payment for things that make your business run: expenses like stock or raw materials, employees, rent and other operating expenses. Naturally, positive cash flow is preferred. Positive cash flow means your business is running smoothly. High positive cash flow is even better and will allow you to make new investments (hire employees, open another location) and further grow your business. Conversely, there’s negative cash flow: more money paying out than is coming in. Negative cash flow means the business is receiving less cash than it is spending. It may struggle to pay immediate bills and need to borrow money to cover the shortfall.

Controlling cash is essential and business owners deal with a range of cash issues:

  • ensuring that sufficient cash is available for investment by not tying up cash in stock unnecessarily
  • putting procedures in place for chasing up outstanding debts
  • controlling different levels of cash outflows in relation to the size of the business.

Cash inflow is the lifeblood of your business and comes from sources like payments from customers, receipt of a loan, a cash injection from an investor, or interest on savings or investments.

The cash flow forecast is vital for the business can look for ways to improve cash flow and manage credit:

  • Making better use of assets — empty warehouse space or unused transport could be hired for other businesses.
  • Making sure as little interest as possible is being paid on borrowing — pay debts early if possible and consolidate debts into one long term, low-interest rate, package.
  • Negotiate payment dates with suppliers, perhaps paying later, or in installments.
  • Avoid offering discounts for early payment (an effective but expensive way to get more cash in sooner).

Conclusion:

The CPG industry is all about execution. Great ideas can become top-notch products, but without a customer base, an entrepreneur’s hard work might never amount to anything. Half the battle is being nimble enough to adapt to the ever-evolving retail landscape. Companies that equip themselves with dedicated team members, creative marketing initiatives, an aggressive sales strategy, Optimized Supply Chain, and competent managers will be well on their way to competing with the P&G’s of the world. Always keep in mind that, People love great products at any cost. As a business owner, fit innovation in place, build a great product and sprightly deliver them to your consumers on time or else you will lose the spot.

 


 

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