Disruptive Trends in Consumer Goods Industry

(6 minute read)

The global consumer goods industry has thrived for several decades using a tried and tested successful business model. The model has as its components some key elements: mass brand equity, parallel growth with grocers, and driving operating efficiencies.

In the past decade however, this historically successful model has been severely challenged by several trends, and the Covid-19 pandemic has only served to accelerate this crisis. Brands in particular have been faltering in capturing the love of younger, millennial consumers, resulting in critical challenges for their hegemony in the marketplace.

Let us examine some key trends that have disrupted the traditional consumer goods industry.

  1. Digital technologies and their ubiquity have challenged brand and market engagement with consumers and how they learn about and engage with one another.
  2. The rise of the e-marketplace, growth of general and specialist online grocers, and the entry of online giants like Amazon has threatened the traditional position of consumer goods brands.
  3. Mass market retailers are squeezing brand margins. In European markets, the retail growth value of mass market merchants far outpaces those of consumer goods firms.
  4. The steady rise of discounters like Aldi and Lidl impact on consumer price perceptions and intensify competition.
  5. With disposable incomes under pressure, many consumers are increasingly developing price-value sensitivity and are questioning brand premiums.
  6. The explosion of small brands not only challenge established brand hegemony but are able to offer better price-value propositions to consumers.
  7. Asian and emerging markets offer some of the toughest marketplace challenges with unique trading and competing conditions.
  8. Millennials and Gen-Z customers are likely to be less loyal to established brands than the boomer generation.
  9. Younger customers are also driving the ‘conscious’ eating and living trend, which sometimes directly challenge established brands and their marketing practices.
  10. The dynamic changes felt in the food service industry, growing consolidation, mand its economic impacts is offering more challenges for consumer goods.
  11. There is growing pressure from activist investors for profits and changes to corporate practices.
  12. Growing competition for deals and M&A activities is impacting industry.

Some suggestions offered to revitalise the industry include:

  1. Investing in mass market brand building and product innovation.
  2. Partnering with grocers to gain broad distribution.
  3. Building brands and distribution capabilities in developing markets.
  4. Reducing costs in the operating model through centralisation.
  5. Using M&A and divestments to consolidate markets and enable organic growth.