Unveiling Growth Opportunities in the Consumer Packaged Goods Market

November 8, 2023

The Consumer Packaged Goods Market: Exploring Size, Scope, and Global Significance

Private equity firms are increasingly recognizing the growth and profitability potential in the Consumer Packaged Goods (CPG) market, leading to their increased engagement in this sector. Spanning a wide array of products, including food, beverages, personal care items, and household goods, the global CPG market boasts a staggering worth of over $2T in 2022.

Projections indicate a CAGR of 2.9% from 2022 to 2030. The CPG market's significance surpasses its economic value as it supplies essential products used by consumers daily. It also plays a pivotal role in job creation and contributes to economic growth—exemplified by the employment of over 2 million individuals and a GDP contribution of over $2T in the U.S. alone.

The CPG industry is characterized by intense competition. In order to maintain their market position, companies strive to innovate, differentiate their offering, and adapt to changing consumer preferences.

CPG Industry: Market Tailwinds

The CPG industry enjoys several market tailwinds that contribute to its growth and opportunities.

E-commerce and Digital Transformation

The rapid growth of e-commerce and digital platforms has revolutionized the way consumers shop for CPG products. This shift provides CPG companies with opportunities to reach a broader consumer base, improve customer experiences, and gather valuable data for personalized marketing and product development.
Growing Popularity of Private Label Brands

Private label brands are becoming increasingly popular, as consumers are looking for more affordable and convenient options. Private label brands are often sold at a lower price than national brands, and they can be just as good in terms of quality.
Increasing Urbanization

The world is becoming increasingly urbanized, and this is having a major impact on the CPG market. Consumers in urban areas are more likely to live in smaller households and have less time to cook, which is driving demand for convenient and pre-packaged food and beverage products.
Sustainability and Environmental Consciousness

The growing awareness and concern for environmental sustainability has led to increased demand for eco-friendly and sustainable products. CPG companies that prioritize sustainability, recycling, and reducing carbon footprints can appeal to environmentally conscious consumers and gain a competitive edge.

CPG Industry: Market Headwinds

The CPG industry also faces several market headwinds that pose challenges and potential obstacles to its growth.

Regulatory and Compliance Challenges

CPG companies face the ongoing challenge of balancing competitive pricing and profitability due to price sensitivity among consumers, promotional activities, retailer negotiations, and the rising cost of raw materials such as oil, sugar, and corn. This combination puts pressure on pricing and erodes profit margins, making it challenging for companies to maintain their financial performance in the industry.
Changing Consumer Preferences and Trends

CPG companies face the challenge of adapting to evolving consumer preferences and trends, such as the increasing demand for healthier and more natural products like organic and non-GMO foods and beverages. Staying ahead and meeting these changing needs requires continuous market research, agility, and product innovation.
Pricing and Margin Pressures

CPG companies face the ongoing challenge of balancing competitive pricing and profitability due to price sensitivity among consumers, promotional activities, retailer negotiations, and the rising cost of raw materials such as oil, sugar, and corn. This combination puts pressure on pricing and erodes profit margins, making it challenging for companies to maintain their financial performance in the industry.

The Market Implications of Covid and Geopolitical Risks

Covid caused significant shifts in consumer demand, supply chain disruptions, accelerated e-commerce growth, and an increased focus on health and safety in the CPG market. Essential items experienced a surge in demand while non-essential categories declined. Supply chains faced challenges due to restrictions and transportation disruptions.

E-commerce witnessed substantial growth as consumers turned to online shopping. Health, hygiene, and safety became top priorities— driving increased demand for products with health benefits, immunity-boosting properties, and sustainable packaging.

Recently, current geopolitical conflicts have brought about several impacts on the CPG market, including significant trade and supply chain disruptions. This has led to challenges in the movement of goods, increased costs, and delays in the supply of CPG products. Geopolitical uncertainty affects investor confidence and decision-making, potentially impacting foreign investments, partnerships, and expansion strategies in the CPG market.

Additionally, consumer sentiment can be influenced by geopolitical conflicts, causing shifts in purchasing behavior and preferences. Consumers may display patriotic sentiments, preferring locally produced goods or avoiding products associated with specific regions or countries involved in the conflict.

Investment Trends in CPG Industry

Private equity investments in the CPG industry have been on the rise in recent years due to the increasing size and growth potential of the CPG industry−the attractive valuations of many CPG companies, and the increasing expertise of private equity firms in the CPG sector. Some of the major recent deals are:

In February 2023, Apollo Global Management acquired Krave Jerky, a maker of beef jerky. The deal was valued at $200M.
In March 2023, TPG Growth acquired RXBar, a maker of protein bars. The deal was valued at $600M.

Overall, the CPG sector is an attractive investment for private equity. Firms are investing in CPG companies for a variety of reasons, including the size and stability of the market, the relative ease of management, and the opportunities for growth.

Emerging and Future Trends for the CPG Industry

The CPG industry is poised to experience several key tailwinds in the coming years. Some of the future trends that are expected to shape the industry include:

Digital Transformation

The digital transformation of the CPG industry will accelerate—driven by advancements in technology, e-commerce, and data analytics. Companies will need to embrace digital marketing strategies, optimize online shopping experiences, and leverage data-driven insights to personalize offerings and enhance customer engagement.
Direct-to-Consumer (D2C) Channels

CPG companies will increasingly explore direct-to-consumer channels to establish a closer relationship with consumers, gather valuable data, and bypass traditional retail channels. This trend allows for better control over branding, customer experience, and the ability to offer tailored products and services.
Rise of Private Labels

Also known as store brands, private labels are gaining momentum in the CPG industry as retailers invest in developing their own quality products. This trend is driven by retailers diversifying their offerings, improving product quality, and emphasizing value and price competitiveness. Collaboration with manufacturers, innovation, and differentiation are key strategies employed by retailers to strengthen their private label presence.
Adoption of Artificial Intelligence

AI is revolutionizing the CPG industry by enabling demand forecasting and inventory management, personalized marketing, supply chain optimization, product development, quality control, chatbot support, pricing optimization, and fraud detection.

Sources

“Growth in an uncertain economy: three key considerations for CPG companies.” PWC, May 2023.
“Global Consumer Packaged Goods (CPG) Market Size By Type (Food and Beverage, Personal Care and Cosmetics), By Distribution Channel (Off-line, Online), By Geographic Scope And Forecast.” Verified Market Research, Sep. 2022.
“More than half of all CPG companies on track to grow below the market by 2027.” KEARNEY, Jun. 2022.
“Global Consumer Packaged Goods (CPG) Market [2023-2030] | Expected to Reach USD 2418700 Million and Growth Rate is 3.1%.” Market Watch, Apr. 2023.
“Consumer Packaged Goods (CPG) Market Worth USD 2502710 million by 2028 | Share, Rapid Growth, Technologies, Development Strategy, Business Prospect, Development Strategy | Key Players, Top Countries, Types, and Applications.” Globe Newswire, Apr. 2022.
“COVID-19’s impact on demand and costs in the CPG industry.” McKinsey, Mar. 2022.
“COVID-19: 10 consumer trends impacting CPGs.” Accenture, Jun. 2020.
“Impact of Russia-Ukraine Conflict in Consumer Goods.” Global Data, May 2022.
“RUSSIA-UKRAINE WAR: GLOBAL IMPACT ON LOGISTICS.” GEP, Sep. 2022.
“Economic headwinds: Consumer products, Inflation and shifting buying habits hit businesses.” RSM, Sep. 2022.
“Here’s how CPGs are bracing for more volatility in 2023.” Food Dive, Jan. 2023.
“How private equity investment in CPG brands can boost value.” E&Y, Mar. 2023.
“PE deals on CPG industry.” Pitchbook: Stax analysis, May 2023.
“9 Important CPG Industry Trends 2023-2026.” Exploding Topics, Jan. 2023
“How AI in CPG Gets Products to Market Faster.” Starmind, May 2023.
“CPG industry contributes $2 trillion to U.S. GDP.” Institute of Food Technologies, Aug. 2019.

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Unveiling Growth Opportunities in the Consumer Packaged Goods Market