One year on: how CPG companies have evolved their responses to the pandemic

Date : 10 March 2021

Stewart Samuel

Program Director - Canada

As most markets in Europe and the Americas continue to operate in a pandemic environment, characterised by lockdowns and travel restrictions, we look at how five of the initial strategies adopted by suppliers have evolved over the last 12 months.

1. From retaining new households to building deeper connections

The pandemic created a product trial event unlike any other. Many major suppliers have reported the gain of millions of new households and significant increases in household penetration and market share. While initial strategies were focused on retention, most suppliers are now shifting their efforts to drive repeat usage and deepening their engagement with shoppers, with a digital-first approach.

2. From pausing NPD to re-shaping portfolios

Most suppliers are actively reshaping their product portfolios in line with new consumer behaviours. These include elevated at-home eating, a preference for better-for-you ranges and products which reflect their values. For many suppliers, the last few months have provided an opportunity to re-start innovation pipelines and launch new products into stores, which were delayed at the start of the pandemic. The challenge will be to get a fair share of voice with so many new products coming into the market.

3. From digital trading to building advanced digital capabilities

While ecommerce growth has slowed, compared to the initial stages of the pandemic, it remains elevated. Although suppliers were at different stages of digital maturity, with sales penetration ranging from 3% to 15%, even the most advanced are focusing on enhancing their capabilities and forming new partnerships in this area. Increasingly the battle is becoming one for talent, with digital skillsets in high demand.

Source: IGD Research

4. From securing supply to making permanent catalogue changes

To support the initial surge in demand, most companies prioritised the production of high volume SKUs, with many items temporarily delisted. The efficiency benefits gained from this had led to most suppliers undertaking some form of long-term SKU rationalisation, ranging from 10% to 50% of items and/or brands. This is reshaping many categories in-store, while also creating space for new innovations to land.

5. From bearing additional costs to driving operational efficiencies

With many companies initially experiencing a rapid run-up in costs at the start of the pandemic, the focus shifted quickly to productivity and efficiency programmes. Many suppliers have adopted more formal projects, often centred on a zero-based budgeting approach. The aim is to unlock savings for investments in the product portfolio and marketing. Cost inflation is also a rising issue for many.

Retail Analysis subscribers: our latest two-part report series, How consumer packaged goods companies will win in 2021, unpacks these themes in more detail and looks at the changing strategic priorities of suppliers and the capabilities they are building this year.