A new playbook is needed to navigate today’s fast-evolving CPG landscape in which geo-political tensions and a constricting economy are reshaping how consumers shop and budget for groceries and how manufacturers source supplies and price products.
Fearful that tariffs will drive up prices or limit access to goods, consumers are either stockpiling products before they become more expensive or difficult to find, or they are pulling back on discretionary spending to ensure their budgets can cover the basics. Both strategies are complicating projections and marketing strategies for companies, many of which are suffering slowdowns in sales and units while simultaneously navigating supply chain snarls and higher input costs.
Against this backdrop, Circana’s recently released 13th annual CPG Growth Leaders report reveals how macroeconomic trends are impacting the packaged goods industry and offers a much-needed framework for reversing the sagging sales, plummeting profits and minimal margins that have emerged as top themes in the current quarterly earnings season.
In this episode of FoodNavigator-USA’s Soup-To-Nuts Podcast, Circana Global Executive VP and Chief Advisor Sally Lyons Wyatt shares how shifting dynamics are opening doors for smaller companies and private label. She also highlights successful strategies by large CPG companies to maintain and build market share and sales in an increasingly competitive environment. Circana boiled down lessons from all three groups into an actionable, flexible new framework that it dubbed “the 5 Cs of success,” which includes comprehensive value, community connections, collaborative growth, catering to multi-prong wellness and company culture.
Explore past episodes of Soup-To-Nuts podcast
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Catch up on past episodes of Soup-To-Nuts:
- Where is the line for ingredient bans and when should companies comply vs pushback? – FDA’s sweeping plan to eliminate synthetic colors from the US food system announced last week marks a turning point in the war on food dyes that has long been fought at the state level and which before that pitted big food against outspoken consumer advocates who often relied on passion and fearmongering more than science
- Better tasting better-for-you beverages: Bold flavors and improved mouthfeel drive growth of functional drink sales – Consumers increasingly are unwilling to compromise taste or health when buying beverages – opening the door for innovative brands that deliver both functional benefits and refreshing experiences
- 5 trends reshaping chocolate: From clean label to flavor innovation to cost containment – Up and coming chocolate brands are rethinking how they make – and package – chocolate to meet rising consumer demand for better-for-you and clean-label options, while simultaneously navigating rising costs
- Flavor trends: How to balance authenticity and access when introducing global dishes - Consumers say they want adventurous new flavors and international cuisine, but many are hesitant to try something unfamiliar - creating a ‘conundrum’ for manufacturers and marketers introducing global flavors
- What is driving consumer interest in regenerative agriculture? – Consumer awareness and interest in regenerative agriculture is exponentially increasing - placing pressure on farmers, manufacturers and retailers to work together to boost supply
Private label and small brands gain share by offering ‘comprehensive value’
To identify the “most successful” CPG companies, which Circana defined in part based on volume share growth, Lyons Wyatt explained the market research firm analyzed the performance of more than 700 CPG manufacturers that have more than $100 million in sales, including how their sales and share were influenced by distribution, pricing, productivity, media promotion, AI automation and other factors.
Based on this, Lyons Wyatt said one of the biggest “a-ha” findings in the report was that smaller companies and private label brands are taking more share in part because they are able to adapt quickly to evolving and diverse consumer needs and offer comprehensive value – the first of the five Cs.
“Value is perceived differently to different people. These companies zeroed in on that,” Lyons Wyatt said.
While competitive pricing is important, comprehensive value is about more than money – it is about offering physical and emotional value.
This could mean connecting to consumers values, such as sustainability, social responsibility, community support or ethical sourcing, she explained.
For example, Vital Farms is able to command a higher price point for its pasture-raised eggs by explaining the value it delivers with a QR code that allow consumers to see the pasture where the eggs are laid and learn more about its organic and regenerative agricultural practices, said Lyons Wyatt.
Other ways to deliver comprehensive value include delivering multiple benefits or offering an elevated eating experience, Lyons Wyatt added.
Community connections endear consumers to brands
Another common theme among the CPG companies with the most volume share growth was their ability to create “community connections,” and bring together increasingly fragmented consumer groups through social media and personalized experiences based on real-time feedback.
Lyons Wyatt said this is the second “a-ha” from Circana’s research and the second ‘C’ in its framework.
“There are a lot of companies out there doing a lot of really good outreach to consumers, whether that is through social, digital or whether it is through their packaging” or advertising, she said.
“But what set these leaders apart was really meeting and engaging with consumers across a proliferation of touchpoints through their purchasing journey,” she added.
One example is how King Arthur Baking is able to entice and educate consumers to bake more by sharing recipes and educating consumers about the properties and value of different types of flour.
Collaborative growth underscores how team work makes the dream work
The third ‘C’ in Circana’s framework is ‘collaborative growth,’ which Lyons Wyatt said is based on the finding that unexpected partnerships and co-branding often generated an outsized benefit – whether it was driving adoption by new users, increasing distribution or inspiring innovation that surprised and delighted consumers.
Some of the best collaborations are ones that are unexpected and therefore bring together disparate consumer bases with little overlap – such as when canned water brand Liquid Death created a limited edition makeup kit with e.l.f. The partnership generated almost 14 million views on TikTok and sold out in 45 minutes.
Collaborations with retailers are also impactful and can go beyond end-caps. For example, Liquid IV created an exclusive Popsicle Firecracker flavor to sell at Costco for the Fourth of July holiday. Exclusive arrangements like this create buzz for brands and foot traffic for retailer.
Culture that continues beyond the company to consumers drives engagement
A strong company culture is another growth driver identified by Circana. But as Lyon’s Wyatt notes, successful cultural engagement expands beyond the walls of the business to include not just employees but also consumers.
“I had the honor and pleasure of talking to some of these companies, and for some of them, their culture was palpable,” said Lyon’s Wyatt. “It was absolutely ingrained in how they were getting their own organizations to rally behind the products, their consumers, embracing their communities and embracing all aspects of what it took to make their product successful.”
Closely related to company culture is ‘catering to multi-pronged wellness,’ which Lyons Wyatt described as harmonizing the physical, mental and social well-being of consumers and communities and which is the fifth ‘C’ in the growth framework.
Innovation must move beyond new products
Notably missing from the framework is innovation – which has long been a lynchpin for driving growth but which has taken a backseat in recent years in terms of breakout product development. But Lyons Wyatt explains innovation is still essential to growth and is taking on different forms beyond splashy new products. Indeed, she notes, innovation is woven into each of the five ‘C’s in Circana’s framework.
“Innovation isn’t always product innovation, and that is probably one of hardest mental exercises to really do, because innovation can be the product, it can be the packaging, it can be a social experience, it can be these communities” companies foster, she said.
As Lyons Wyatt noted, adopting a more open mind about what innovation can be and its impact on business likely will be more important in the coming years during which companies likely will face more challenges bringing new products to market. For example, between higher inputs and unpredictable supply chains due to the threat of tariffs and tighter budgets based on reduced consumer spending, many company won’t have capacity to create products that blur or redefine categories. But that doesn’t mean they can sit on their laurels or remain static.
Companies interested in learning more about how to innovate in the current climate as well as grow their share, can check out Circana’s full 2024 US CPG Growth Leaders Report.