CPGs Will Look Beyond Volume and Price to Power Growth: Deloitte
CPGs have weathered the volatile economy since the beginning of the COVID-19 pandemic by raising prices to compensate for increased costs and seeking to boost volume through advertising and promotional discounts.
However, a Deloitte report — based on a global survey of executives from food and beverage, household goods, personal care and beauty, and apparel companies — combined with analysis of the world’s top 100 CPGs, suggests that those strategies won’t be enough to sustain growth in 2025.
While inflation has declined, prices remain significantly higher than they were in 2019 and consumers aren’t happy about it. Most of the executives surveyed agreed that they could not count on raising prices to boost revenue this year, with 47% predicting that retailers would push back on the tactic.
Only 30% of respondents thought they would increase their prices by more than 3% without meaningfully impacting consumer demand, with other executives concerned that consumers would respond by trading down, finding substitutes, or even avoiding category purchases altogether.
The percentage of executives who are primarily leaning on increasing the volume of their sales to drive growth dropped 14% from last year to just 22%. Instead, 95% of executives say they plan to prioritize launching new products with the goal of re-engaging consumers, committing to creating truly novel products instead of just making minor tweaks.
These plans involve using precision analytics to find opportunities for growth and increasingly also use generative AI to test how well a product is likely to fit the market.
Also read: Gartner Shows Dymanic Pricing May Be Reducing Consumer Trust
An Innovation and Marketing Shift
Innovation is happening across the price spectrum, with two-thirds of executives saying they are adding premium products to make their product mix more profitable even as half of respondents agreed that even high-income shoppers have started looking for value when choosing what to buy and where to shop.
Companies are looking to trim their existing portfolios of underperformers, but are also seeking to buy strong brands to boost their growth.
Companies are also rethinking their marketing strategies, with 79% upping investment in digital channels and platforms. Most CPGs increased their advertising spending in 2024 and will go even further this year, along with offering more discounts and promotions. The shift to digital marketing, particularly the shift to retail media platforms, is partially driven by the desire for data that can prove a return on investment.
Revenue growth management systems are increasing in prominence as a way to monitor consumer preferences and behaviors. Top companies are also seeking to gather more data about their own supply chains as they seek to boost efficiency across operations.
The survey found that 82% of executives plan to invest most in boosting productivity, while 64% plan to focus more on decreasing business costs. Most executives see AI as a way to increase efficiency, with 76% of the respondents saying their companies are increasing investment in the technology.
