Elevated CPG Demand Will Continue: Consumer Brands

Elevated demand for CPG will continue in the coming months, while costs are expected to moderate slightly.  

That’s according to the Consumer Brands Association’s analysis of data from the Bureau of Labor Statistics, as reported in its “CPG Economic Pulse: Q3 and Cost Forecast.”

Third-quarter CPG demand grew 8.3% year over year, the trade associated said, with demand ticking up 1.8% over Q2 and surpassing March 2020 levels.

But while retail shelves emptied during the beginning of the pandemic, the same can’t be said today, noted Geoff Freeman, Consumer Brands president and CEO.

“For 19 months, demand has steadily increased, rising beyond levels not seen since the shelf-clearing panic at the start of the pandemic,” Freeman said in a statement. “Today, however, the shelves aren’t empty. Despite a supply chain in crisis, a labor shortage and historic inflation, the CPG industry has learned, adapted and gone to incredible lengths to meet consumer demand.”

[See also: Biden Supply Chain Strain Initiatives Include Better Data Sharing]

Consumer Brands forecasts that demand will remain elevated through the fourth quarter of 2021, with an anticipated growth rate of 10-11.5%, driven by today’s new consumer consumption habits.

A slight slowdown in wholesale costs for food manufacturing is expected, though still 10.5-12% higher than the year before. This is in part prompted by some of the most common CPG inputs experiencing price increase, including wheat (up 64% year over year), corn (up 38%), aluminum (up 88%) and ethyl alcohol (up 62%).

Today’s labor shortages and transportation issues are also adding to food manufacturing costs and stressing companies’ bottom lines, the trade group noted, with the CPG industry adding just 6,400 jobs in October — little comfort for the industry’s 130,000-plus job openings.

“How fast and how much those costs moderate will be based on supply chain bottlenecks easing and the labor force growing,” said Freeman. “Only then will companies — and consumers — see price relief.”