2021 Outlook for CPG : Elevated, but Return to Slow Growth

We have a solid handle now on the true baseline ‘lift’ caused in the CPG sector by the COVID-19 pandemic. And it looks nothing like the massive YoY $ surges we saw as the CPG tsunami crested in March. It’s roughly around 8-12%, obviously higher in some niche market segments that were already growing fast due to distribution ramp-ups (e.g., rfg. plant-based meats).

But, where is this headed? In September, I gave my first stab at a 2021 Outlook. It’s a free webinar on demand BTW.

Well, overall, CPG was growing around 0% YoY before the pandemic. And the premium sector was growing around 4%. There is no particular reason to assume that both sectors won’t simply return to these YoY trajectories in 2021. In fact, I would bank on it.

The reason? There’s nothing likely to happen in 2021 to cause us to consume more CPG at home (food/beverage, and supplements specifically) because the biggest location-based behavioral shifts have already occurred and will lessen if anything.

We’re also a year older, and collectively prone to eating fewer calories, not more.

Yet, we know that larger premium-priced businesses saw some unusual market share gains. But this was largely due to the fact they are premium-priced, and when current users upped their volumes, the $ volume they added would be larger than the $ volume of mainstream buyers buying much cheaper products at equally higher unit volumes. It’s not clear yet that HH penetration for premium CPG has actually grown.

In 2021, you should expect continued elevated CPG sales, the concentration of shopping in Club and supermarket channels, suppressed sales in specialty retailers (e.g., Whole Foods). Mood-altering experiences and immunity and hygiene brands will outperform everyone else and be able to accelerate through the pandemic.

But, the reality is that 2021 will be more competitive, not less competitive, for the average early-stage CPG startup, and that’s because out-of-store techniques for sampling/field marketing remain largely impossible. This takes away a major best practice for Skate Ramp brands.

Meanwhile, the oversupplied situation in most categories remains, despite assortment reduction. I haven’t seen evidence of premium brand assortment reduction other than that caused by folks going out of business. Legacy brand market leaders add facings and have reduced available shelf space to grow into, putting you ever more in competition with your premium peers.

You have to work harder to get samples in your hands and get a trial during the pandemic. Although retaining and increasing HH-level sales remains your top priority until this is over, 2021 is definitely the time to get back at generating trial and nudging folks into your conversion funnel of love. This is especially true if you want HH penetrations to grow in your key regions.

But, it has to be a pandemic-adapted playbook.

If you’re still finishing your idea, I would strongly encourage you to focus on the demand drivers whose growth was already strong but now has accelerated: stress-alleviation/mood alteration, hygiene, and immunity-boosting. That’s where I’d put my own money if I had any to invest. 🙂

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Dr. James Richardson

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