CPG Companies Encountered Big Forces Of Change In 2018

Campbell Soup Headquarters Credit: Campbell Soup Company
Campbell Soup Headquarters Credit: Campbell Soup Company

The consumer packaged-goods industry remained in the midst of a revolution in 2018 as companies big and small, legacy and startup enterprises alike, responded to changes in consumer demand and preferences, as well as to technological disruption and new business imperatives.

Here are 10 stories and trends that defined 2018 for the CPG industry and will to influence heavily how 2019 unfolds:

Rebooting at the top: The unprecedented forces of change in the CPG industry continued to put CEOs in the hot seat — or out the door. Emblematic of the pressures was the ouster of Campbell Soup CEO Denise Morrison and the subsequent dismantling of her attempts to build a fresh-food empire before the company hired processed-foods veteran Mark Clouse as its new CEO in December. On the other hand, the exit of long-time PepsiCo CEO Indra Nooyi drew kudos for her ability to walk the company into the better-for-you era.

Raising prices: The strong U.S. economy, employment levels and income increases finally afforded CPG companies some latitude to raise prices broadly after many years of fighting a “new normal” of sluggish top-line movement. At the same time, brands were conscious to ad innovations such as new sizes and flavors to provide extra value to consumers along with higher price tags.

Stripping labels: CPG brands kept removing ingredients — especially artificial ones — from their formulations in efforts to provide consumers with the “cleanest” labels possible, in large part a play for millennial moms who’ve become missional about feeding their kids only pristine foods and beverages.

Sniffing marijuana: The rapid mainstreaming of legal cannabis consumption took root in the CPG industry with news of Canadian distiller Constellation’s investment in a marijuana company and of Coca-Cola’s investigating its own possibilities for beverages based on CBD, the non-psychoactive component of marijuana.

Growing plant proteins: Plant-based “meats,” “milks” and other analogs for animal proteins kept booming, with CPG giants expanding their plant-based offerings, while accomplished startups were cashing in, such as Beyond Meat, which filed for a $100-million IPO.

Going private: Supermarkets’ private labels continued to take share from established CPG suppliers as store brands broadened their appeal with more organic and frozen selections, among other extensions, and by positioning their own lines as on-trend with millennial consumers who care about price and quality over fancy branding.

Rejiggering delivery: Food-delivery startups continued to proliferate, and grocery chains came up with more delivery options for their consumers, including at home and curbside at the store. But some early home-delivery pioneers such as Blue Apron and Chef’d struggled with customer defections and consumers’ rethinking of the subscription model for mealtime.

Learning big-to-small: Nearly every CPG worth its salt now either has acquired smaller companies in better-for-you categories or has launched incubator or accelerator programs that are helping the big companies learn about ingredient innovation, digital marketing and other new-age pursuits from the fast-growing small fry – and also giving the big companies leads on potential acquisitions.

Focusing on food waste: PepsiCo’s decision to acquire SodaStream for $3.2 billion underscored the slow abandonment of the carbonated soft-drink platform by beverage giants — but also was the most telling sign yet that big CPG companies are buying into the notion of a growing “circular economy” in which consumers hope to cut food waste and use of plastic packaging.

Thawing frozen foods: A surprising uptick in sales of frozen foods over the last couple of years has given legacy CPG companies an unexpected avenue to pursue millennial consumers in categories they understand well. ConAgra’s big $10.9-billion purchase of frozen-foods giant Pinnacle Foods underscores the rise of this strategy, though it now appears that ConAgra overestimated the immediate benefits of its acquisition.

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