We all know this past year has been nothing if not unusual. But this isn’t just another article about “unprecedented” change or pandemic-related trends in the CPG industry.
Nope. This is about trends that are actually pretty darn strange — trends that took everyone in the industry by surprise.
We’ve got household names going out of business, products flipping the script for an entire category, acronyms that make you cringe, and much more.
So without further ado, here are some of the unexpected and most captivating trends we’ve seen in the CPG industry as of late:
1. The demise of the Lipstick Index (and Revlon)
Image credit: CNBC
In past downturns, the cosmetics and beauty industry has proven to be reliably resilient. In fact, the so-called Lipstick Index, coined by Leonard Lauder after the 2001 recession, refers to the phenomenon of lipstick sales going up when the economy goes down.
Essentially, lipstick is viewed as an affordable luxury. So during times of trouble, women would buy it as a little pick-me-up or inexpensive treat. But like so many other things, Covid-19 flipped the Lipstick Index upside down.
Amazon sales of “lip care and color,” for example, saw the steepest decline in retail sales of any segment in the four weeks leading up to April 11, 2020, with sales falling 15% and prices 28%.
After all, who needs lipstick when you’re stuck at home or wearing a mask? A year in, we’re seeing that the same goes for many other beauty products, with a 55% decline in overall cosmetics purchases and a 75% decline for fragrances. Add in the fact that many consumers prefer buying cosmetics in person, and you have a recipe for disaster.
A disaster that nearly took long-time industry stalwart Revlon down with it. Coming dangerously close to bankruptcy, Revlon has reportedly been able to close a $1.8 billion refinancing package that would restructure most of its debt.
What this means for CPG brands:
To survive this downturn, brands in the cosmetics industry are pivoting to hot categories including at-home self-care products like skincare, nail polish, spa tools, and hair dye.
Eye makeup is another area of high growth with sales up 204% year-over-year for the three-month period ending on June 28. And this makes sense since it’s the only part of your face that people can really see when you’re wearing a mask.
How-to guides for applying “mask makeup” are popping up everywhere among beauty influencers on social media. On TikTok alone, the hashtag #MaskMakeup has amassed nearly 62 million views.
Brands can use these influencers and how-to videos to engage with consumers at home, replicating the part of the in-store experience that is so crucial to beauty products.
2. Healthy… ice cream?
Image credit: Halo Top
Long considered an indulgence by most consumers, ice cream was traditionally purchased only on occasion. Then Halo Top came along and flipped the script.
With nutrition information displayed proudly on its label and full pints coming in at 360 calories or less, they offered consumers a better-for-you version of the iconic treat. And shoppers responded with gusto — buying a pint for any night of the week instead of every once in a while.
"Halo Top is one of the most disruptive stories I've seen in my 10 years in the industry," says Wayne Wu, managing director and partner at VMG, an investor in food and beverage startups. "They turned an energy bar into an ice cream."
Now, nearly all the major players in the ice cream market are creating low calorie varieties to compete with Halo Top. You have Ben & Jerry’s Moophoria, Breyer’s Delights, and Haagen-Dazs Heaven, to name a few.
What this means for CPG brands:
“Better-for-you” snack products can drive incremental sales by increasing consumption frequency. You can follow in Halo Top’s footsteps by incorporating trends such as:
- Adding sources of protein.
- Reducing sugar and/or calories.
- Using plant-based and clean ingredients.
- Featuring nutrition facts prominently on packaging.
3. Amazon’s dreaded CRaP list
Image credit: Amazon
If you haven’t heard of the CRaP list yet, you probably think we’re making this one up. But we’re not...
Amazon’s stunningly adept, if not cruel, acronym, CRaP, stands for “Can’t Realize a Profit”. It refers to products that are structurally unprofitable for Amazon to sell, usually due to low per-unit prices and high shipping costs.
CPG products, especially fast-moving consumables, are by nature at high risk for ending up on this list. Especially because Amazon considers profitability on a product level, not at the brand level that most grocery stores and retailers consider. This means that each and every product that you sell on Amazon needs to be profitable — no loss leaders allowed.
And while the CRaP list has been a thing for years now, many CPG brands that just made the leap to e-commerce during the pandemic are likely encountering it for the first time.
Once a product is on the CRaP list, Amazon begins the process of pushing it off the platform. First they cut off free marketing and other seller benefits like subscribe and save, and eventually they’ll stop ordering your product altogether.
What this means for CPG brands
There are many ways to end up on the CRaP list but two major issues for CPG products are pricing and package sizes.
With pricing, the problem is that if Amazon’s automated price matching system finds a lower price for your product anywhere, it’s going to match it — gutting your margins.
Your third party vendors or partners are often the biggest problem and it’s up to you to investigate them. Another strategy is to create products that are slightly different, with different SKU’s, to sell only on Amazon. Then price matching won’t apply.
As for package sizes, brands need to remember that offline and online channels require different approaches. It’s not worth it for Amazon (or any online retailer) to ship a single-serve package of Oreos, for example. To fix this, you can create larger package sizes specifically for Amazon or you can bundle related products together.
And if you’re still running into trouble with the CRaP list, you can switch to Amazon Pantry or Fulfilled by Amazon instead.
4. Rise in DTC and non-Amazon marketplaces
Image credit: PepsiCo
If the CRaP list wasn’t enough to drive CPG brands away from Amazon, the pandemic was the final straw — inspiring many brands to create their own direct-to-consumer channels or invest in non-Amazon marketplaces like Walmart, Target, or Instacart.
And while this trend is, perhaps, not surprising, almost no one expected it to happen with such speed. PepsiCo, for example, rolled out two full DTC websites in just 30 days! Their sites, Snacks.com and Pantryshop.com are framed categorically, almost like a retailer.
On Snacks.com consumers can buy a wide array of Pepsi’s snack products, from Flamin’ Hot Cheetos to Bare Baked Apple Chips. Likewise, on PantryShop.com, products are grouped into customer-centric categories like workout and recovery, rise and shine, and family favorites.
Other brands, like Kind Snacks, were already in the DTC channel but ramped up sales during the pandemic using a subscription model.
What this means for CPG brands:
Amazon is clearly not the only option for CPG brands when it comes to online sales. In fact, with the rapid rise in online grocery shopping, it’s best for brands to have a diversified approach using multiple marketplaces and channels.
Plus, brands need to provide value to customers online that they can’t get in brick and mortar stores. A common way to do this is to provide more options and varieties, along with customizable products or subscription-based ordering.
Kind Snacks, for example, differentiates its D2C channel through their “Build Your Own Box” subscription service. In-store, customers may only see a handful of SKUs. Online, however, customers have access to a full selection of KIND’s 80+ varieties.
“We wanted to give our consumers the opportunity to mix and match all of the products we have without having to buy 12 of just one bar,” said Freddie Roseman, Kind’s director of ecommerce technology.
“We really wanted to give our consumers that extra choice. The subscription box is one of our highest selling SKUs on our site. That validates all of the efforts and justifies future investments in the program as well.”
5. Food and beverage becomes the top selling online CPG category 
Image credit: Mike Haupt on Unsplash
We all know that online shopping skyrocketed during COVID-19. What’s surprising, however, is the shift in categorical growth.
According to NielsenIQ, food and beverages have become the largest online CPG category, accounting for 44% of sales last year. That compares with 38% for health and beauty, 8% for home and kitchen, 8% for pet supplies, and 2% for baby care.
“This is an incredible acceleration of the online food and beverage space. It shattered all of our projections,” said Elizabeth Buchanan, head of consumer intelligence for North America at NielsenIQ.
“Something unusual happened to the industry with the impact of COVID-19 in bringing more digitally engaged food shoppers into the mix,” she explained, adding that the upsurge accelerated online food and beverage market growth “by multiple years.”
What this means for CPG brands:
Both FMI and Nielsen believe that CPG brands have a $58 billion opportunity to have online shoppers spend as much on food as they do on nonfood items.
To take full advantage, CPG brands should focus on the following:
- Developing direct-to-consumer channels like PepsiCo’s Snacks.com.
- Working with retailers to improve click and collect and BOPIS logistics.
- Partnering with Instacart and online retailers to improve digital shelf space.
- Investing in smart supply chains like Proctor & Gamble.
- Pivoting to digital marketing using mobile coupons and promotions.
6. Dairy industry bankruptcies and a “milk empire”
Image credit: Borden Dairy
The dairy industry has been declining for years, losing over half of its licensed dairy operations since 2003. But the bankruptcies of two huge brands still came as a shock to an already precarious system battling rising raw milk prices and plant-based alternatives.
Borden Dairy, one of the largest and oldest dairy producers in the U.S., filed for Chapter 11 bankruptcy after more than 160 years in business. And Dallas-based milk processor Dean Foods also filed for bankruptcy, ultimately selling the majority of its assets to the Dairy Farmers of America.
Critics of this acquisition worry that the DFA will now have the power to control prices and supply, calling the merger of the nation's largest dairy cooperative with the top milk processor the creation of a "milk empire.”
What this means for CPG brands
Dairy brands are in a tricky spot right now with changing consumer preferences. And only time will tell how the so-called milk empire will affect the bottom line. But there’s still hope.
As McKinsey says, “while the [dairy] market is facing some headwinds, growth is possible but will rely on finding the right pockets of demand, domestically and internationally, and having the right agility and operating model.”
To find these pockets of demand, dairy brands can do the following to improve sales of household products:
- Identify growth areas through data analytics and machine learning.
- Invest in new channels like e-commerce and convenience.
- Tap into consumers’ desire to know more about products, improving the customer experience.
- Follow trends in health and wellness by offering natural, organic, and green products.
- Make many quick, small investments versus a few big bets.
- Invest in new, smart supply-chain capabilities.
- Look at international growth opportunities.
7. Bud Light … Seltzer?
After White Claw’s coming-out party in the summer of 2019, the entire hard seltzer category exploded. Our data shows 146% year-over-year growth in the convenience store channel alone, with the number of products on the market skyrocketing from 24 to 97.
One of those new products to hit the market was Bud Light Seltzer. And it’s safe to say, it was met with quite a bit of skepticism at first. (Remember those early commercials with Post Malone?)
MarketWatch asked the question many of us were thinking back then — why go the hard-seltzer route with a brand so identified with beer? Apparently, that’s the point, says Bud Light’s marketing vice-president Andy Goeler. “Many people may have never tried a hard seltzer, so by placing the Bud Light name on it, it brings with it the quality credentials of our beer,” he explains.
As it turns out, Bud Light (and Post Malone) were right and all of us were wrong. As you can see in the chart above, Bud Light Seltzer went from literally not existing to comfortably sitting in third place, right behind White Claw and Truly.
What this means for CPG brands
What’s happening with hard seltzer is essentially the inverse of the craft beer market. Instead of small players trying to chip away at the big names, you have industry stalwarts like Anheuser-Busch and Molson Coors hoping to snag some market share from relative noobs.
And the big brands all approached it differently, many in multiple ways. Some, like Bud Light and Corona, decided to lean on their brand recognition, putting their names on the seltzer. Others, like Molson Coors’ Vizzy, went with a new identity instead.
Bud Light’s quick success, however, goes to show that brand names are powerful. And they can be leveraged to help capture market share in new categories. If you’re anywhere in the beverage world, hard seltzer is a hotspot to consider.
Conclusion
For sure, the COVID-19 pandemic has upended the consumer goods industry. But other forces are at play too, leading to weird trends that even the most astute marketers didn’t see coming.
From the downfall of the Lipstick Index to ending up on the CRaP list, strange things are happening to consumer packaged goods brands.
Here’s a roundup of takeaways consumer brands can use in the coming year:
- Pivot quickly with new products and hot trends.
- Master pricing and packaging on Amazon.
- Develop a value proposition for DTC channels.
- Invest in business models featuring data analytics and smart supply-chain management.
- Use brand loyalty and recognition to your advantage when entering new markets.
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