When was the last time you bought boxed food, soap, or toothpaste? If you’re like many consumers, you purchase these things several times a month. These products—prepared foods, toiletries, and the like—are consumer packaged goods (CPG), and they are part of a multitrillion-dollar industry.
Consumer packaged goods are stalwarts of brick-and-mortar retail, and they’ve become a major part of the ecommerce economy. Here’s an overview of CPG, including major trends in the industry.
What are consumer packaged goods (CPG)?
Consumer packaged goods (CPG) are nondurable products people purchase and consume quickly. You can typically find them in grocery stores, pharmacies, and convenience stores. Three things define a CPG: a high turnover rate, a necessity to everyday life, and consistent consumer demand. Examples of consumer packaged goods include:
- Food. Snacks, cereals, frozen meals, and beverages.
- Household items. Cleaning supplies, toilet paper, and batteries.
- Personal care items. Cosmetics, toiletries, hygiene products, and over-the-counter medications.
Consumer packaged goods are not the same as durable goods, a different type of consumer goods that last for years, if not decades. The CPG sector is highly competitive, with manufacturers and retailers focusing on brand loyalty, advertising, packaging, pricing strategies, and distribution networks to capture market share.
CPG vs. FMCG: What’s the difference?
FMCG, or fast-moving consumer goods, is a subset of CPG that refers to products with particularly fast turnover rates. These items fly off the store shelves, constituting daily or weekly purchases. Examples of FMCG include basic necessities like bread, milk, eggs, and toilet paper, and highly consumable items like coffee, snacks, and soda.
CPG is the broader category encompassing all these frequently purchased items, while FMCG specifically focuses on the fastest-selling ones. CPGs can vary widely in cost and packaging size; FMCGs typically have a lower cost per unit and are sold in higher volumes. FMCGs are often perishable, but this is not always the case. For instance, milk is an FMCG, but so is Coca-Cola.
Trends in the CPG industry
Valued at roughly $2 trillion, the North American CPG industry is experiencing significant growth and transformation. Driven by factors like population shifts and evolving consumer preferences, the industry will likely undergo major changes in the coming years.
CPG growth
Consumer spending on CPG products may approach $2.8 trillion by 2029, fueled by several key factors:
- Rising disposable income. Increasing incomes in emerging markets have driven consumer spending on CPG brands in recent years.
- Population growth. A growing global population will create a larger consumer base for CPG, as part of an overall growth in demand for goods and services.
- Evolving consumer preferences. Consumers increasingly seek healthier, sustainable, and personalized products.
Market potential
Three forces shape the market potential for CPG:
1. New international markets. Emerging markets like China, India, and Southeast Asia offer immense potential for CPG growth due to their large and rapidly growing populations.
2. Ecommerce. The rise of CPG ecommerce and omnichannel shopping creates new opportunities for brands to reach consumers directly and offer personalized shopping experiences.
3. New technologies. Technological advancements like artificial intelligence and data analytics can help CPG companies optimize their global supply chain, while CPG marketers better personalize their outreach.
CPG industry changes
Over the past several years, the CPG industry has shown a significant shift toward:
- Health and wellness. Customers increasingly prioritize healthy ingredients in their food and personal care products, and retail stores are dedicating more shelf space to these items in response.
- Health care. Diving deeper into the wellness sector, the CPG market is showing growth in non-prescription medications and over-the-counter health supplies, such as pain relievers, cold remedies, vitamins, and home remedies.
- Sustainability. Consumers are demanding eco-friendly packaging and sustainable production practices from CPG brands. Investments in this sector may lead to a stronger brand reputation and more revenue down the line.
- Direct-to-consumer (D2C) models. More CPG companies are bypassing traditional retail stores and selling directly to consumers online, offering greater control and data insights.
- Private-label brands. Retailers are increasingly developing private-label brands, offering high-quality products at a competitive price.
An example of a CPG company
When Heyday Canning launched its line of canned beans, cofounders Kat Kavner and Jaime Lynne Tulley believed they could sell consumer packaged goods that stood out from the standard offerings of competitors. “Canned food is this massive industry, but it’s just not something that’s top of mind, because the food that fills those shelves is, you know, pretty boring—a lot of cheap commodity stuff,” Kat says on the Shopify Masters podcast. “There’s nothing particularly innovative or exciting or flavorful.” That changed when Heyday rolled out canned beans made for consumers who value flavor and premium quality—but still like the convenience of just grabbing a can from their pantry.
Breaking into the CPG market can be particularly challenging. After all, CPG products tend to be easily interchangeable, and consumers often purchase from established brands out of habit. “The key metric in CPG is velocity,” Kat says. “How many units in a given store in a given week for each item are you selling?” For Heyday, an extensive marketing push helped keep its products top of mind for consumers—and keep sales volume at a sustainable level. Free in-store samples, coupons, and well-funded viral marketing campaigns all helped establish the Heyday brand.
CPG FAQ
What does CPG mean?
CPG stands for “consumer packaged goods.”
How is CPG different from retail?
CPG, or consumer packaged goods, can be purchased at retail stores and on ecommerce websites. CPG is one sector in the broader retail industry.
What are the challenges facing the CPG industry?
The CPG industry faces challenges such as rapidly changing consumer preferences, intense competition, supply chain disruptions, and the need for continual innovation and sustainability initiatives.
