As we approach the new year, the consumer packaged goods (CPG) sector is adapting to changing consumer preferences and technological advancements. Investors keen on navigating this evolving market must be aware of its key trends.
Here’s a closer look at five prominent CPG trends for 2024 that are poised to impact the industry. These trends also represent opportunities for investors seeking insight into the market's future trajectory.
Direct-to-consumer (DTC)
Direct-to-consumer (DTC) refers to manufacturers or brands selling their products directly to consumers, bypassing traditional retail channels. It has gained momentum due to technological advancements and corresponding shifts in consumer behavior. Brands will continue to pursue this more direct and personalized relationship with their customers in 2024.
Cutting out the middleman does more than save costs. Direct sales enable brands to collect valuable data directly from consumers, including purchase history, preferences, and feedback. This data can be leveraged to personalize marketing efforts, product recommendations, and overall customer experience. Ultimately, this information can go a long way toward encouraging brand loyalty.
Hyper-personalized subscriptions
Hyper-personalization uses data analytics, AI, and other technologies to tailor products, marketing messages, and overall brand experiences to individual consumers. This trend is a response to the growing demand for personalized and relevant consumer interactions. DTC brands are using hyper-personalization to reinvent their subscription offerings.
Product quizzes help brands as diverse as Barkbox and Dollar Shave Club learn more about the customers and build their subscription base with customized content. Barkbox gets the name, breed, and size of their customers’ pets. Meanwhile, Dollar Shave is turning the mundane task of daily shaving into an experience through personalized podcasts that keep customers productively distracted while they shave.
Sustainable packaging
Sustainability continues to trend in CPG. Environmentally and socially responsible practices are being pushed throughout the entire lifecycle of products, from sourcing raw materials to production, distribution, and disposal. This trend is driven by increasing consumer awareness and government regulation.
Sustainable packaging is a crucial focus for 2024. Companies are exploring alternative materials, such as biodegradable and compostable options, and minimalist packaging designs to reduce excess material. Some brands are also transitioning to packaging-free or refillable options.
Many CPG companies are embracing the concept of a circular economy by designing products with materials that can be recycled or repurposed. They are incorporating recycled materials into their packaging and designing products with consideration for the end of their lifecycle.
Private-label brand popularity
Private-label brands, or store brands, are products retailers develop and sell under their own name rather than that of the original manufacturers. They have become an integral part of the CPG landscape. The retailers control the entire production process, allowing them to tailor products to their consumer base. Their influence over costs often makes private labels cheaper than their branded counterparts. Simultaneously, the retailer makes a larger profit margin and gains an advantage over its competitors.
In 2023, inflation and the cost-of-living crisis increased the popularity of store brands. Expect their popularity to continue in 2024—inflation may have eased, but goods are still priced higher than they were pre-pandemic, and consumers want good value. The landscape of private-label brands has changed in the past few years, too. Before, retailers were mostly interested in cloning other brands; their private-label goods were therefore restricted to products with less differentiation, like milk, soda, paper towels, and so on. Now, however, retailers are creating private labels for a broad range of CPG categories and building these labels around consumer concerns like organic foods, gluten-free products, and sustainability.
Self-care products booming
The self-care trend in CPG reflects a shift in consumer priorities toward holistic well-being. Millennial consumers spend twice as much as Boomers on self-care products that prioritize their physical and mental health. CPG companies are responding to this self-care ethos with health-focused products that offer transparency regarding ingredients, sources, and environmental impact. These include organic and plant-based alternatives.
Brandwatch reports that sun care products are mentioned most in skincare consumer conversations. Consumers are focusing mainly on those with high sun protection factors (SPF). There is an opportunity for personalization concerning skin type, local conditions, and application preference.
Home fitness equipment, which reached a high during the pandemic, is still trending. Social media conversations about home gyms rose 7% from August 2022 to August 2023, according to Brandwatch. People like exercising at home because of the convenience—the equipment is available anytime.
Brandwatch also reports that yoga, cardio, and strength training are the top three most popular home workouts, while interest in Pilates is growing. Therefore, equipment such as mats, treadmills, and weights are in significant demand.
The Road Ahead
The CPG industry is undergoing a profound transformation to meet consumers' evolving needs and preferences. The direct-to-consumer trend allows brands to connect directly to their customers, which fuels hyper-personalization efforts. Packaging is becoming a critical contributor to sustainability. Meanwhile, the cost-of-living crisis—though less acute—still underscores the case for private-label brands. Lastly, the booming market for self-care products underscores a broader societal shift towards holistic well-being. Investors who navigate these trends with strategic insight stand to capitalize on the changing dynamics of the CPG market in 2024 and beyond.