What is CPG? A Guide to Consumer Packaged Goods

Ever found yourself wondering what exactly falls under consumer packaged goods (CPG) while you're out shopping? CPGs are the everyday items you buy and replenish regularly—think food, drinks, toiletries, and cleaning supplies. These products are usually inexpensive, widely available both in stores and online, and are integral to our daily routines.

In this blog, we'll dive deeper into what makes consumer packaged goods tick—from what these products are, to how they're marketed and the trends shaping their future. Whether you're a shopper curious about the products you use every day, or a retailer looking to better understand this dynamic industry, join us as we explore the intricate world of consumer packaged goods.

Key takeaways

1. CPGs, or consumer packaged goods, are items we use daily, including food, beverages, toiletries, and cleaning supplies, necessitating frequent replenishment.
2. The consumer packaged goods industry is not just vast, with a valuation exceeding USD 674 billion, but it's also poised for consistent growth, reflecting its crucial role in everyday life.
3. Both consumers and industry players benefit from understanding the dynamics of the CPG market, including product demands and consumer behavior trends, which can influence shopping habits and business strategies.
4. The CPG sector is continuously evolving, shaped by factors such as sustainability, digital marketing, and consumer preferences towards healthy and convenient products.

Understanding consumer packaged goods

Definition and scope

Consumer packaged goods (CPG) are products that are consumed by the average consumer daily.

These products are typically low-cost items that need to be replenished frequently, such as food, drinks, household products, makeup, and clothing. CPG is a broad term that encompasses both durable and non-durable goods.

These products are typically sold in retail stores and are often marketed to a wide range of consumers. CPG products are an essential part of the retail industry and account for a significant portion of overall sales revenue.

Durable vs. non-durable goods

CPG products are different from durable goods, which are products that are designed to last for a long time.

Durable goods include items like appliances, cars, and furniture. While consumer packaged goods products are typically low-cost and need to be replenished frequently, durable goods are more expensive and are designed to last for a longer period.

The rule of thumb for this is, that if it's supposed to last longer than 3 years, it is a durable good, and if it's supposed to last less than 3 years, it is a non-durable good.

FMCG products

Fast-moving consumer goods (FMCG) is another term used to describe CPG products. FMCG refers to products that are sold quickly and at a high volume. FMCG is a subset of consumer packaged goods, as it includes products that are consumed on a daily basis and need to be purchased frequently.

FMCG products are typically broken down into three categories of consumer packaged goods:

• food and beverages (for example: groceries like milk, bread, and carbonated drinks)
• home care (for example: cleaning supplies, toilet paper, laundry detergent)
• and personal care (for example: cosmetics, toothpaste, or deodorant).

Product categories

Food and beverages

The food and beverage sector covers a wide range of consumer packaged goods that touch every part of our daily lives. This category is the largest within the CPG space, featuring everything from fresh vegetables and dairy products to a wide selection of snacks, including non-perishable items like sauces and canned foods.

Beverages also form a significant part of this category, ranging from sparkling drinks and bottled water to teas and even alcoholic beverages—yes, even your favorite beer or wine is considered a CPG product!

Personal care

The personal care sector is a significant component of the CPG industry, covering an extensive range of products designed to enhance daily hygiene and beauty routines.

This sector includes everything from basic toiletries and cosmetics to essential hygiene products such as soaps, shampoos, perfumes, and skincare items. It also encompasses specialized categories like baby care products, sexual health items, and feminine health products, catering to specific consumer needs and life stages.

As consumer preferences evolve towards healthier and more sustainable lifestyles, brands in the personal care space are adapting. There's a growing trend toward products that are not only safe for personal use but are also environmentally friendly. This shift has significantly increased the development and availability of natural and organic personal care products.

Household items

Spanning a diverse array of everyday items, household CPG products are those that help keep our homes organized, clean, and running smoothly.

This broad category includes essential cleaning supplies such as laundry detergents, dish soaps, and a variety of cleaning tools like brushes and sponges. In this category are also everyday items like toilet paper, diapers, and batteries that power a multitude of household gadgets.

As consumers increasingly prioritize sustainability, there has been a noticeable expansion in the availability of eco-friendly alternatives across these categories.

From biodegradable wipes to phosphate-free detergents and rechargeable batteries, consumer packaged goods companies are innovating to meet the rising demand for products that support environmentally responsible lifestyles while delivering the effectiveness that consumers expect.

Clothing and apparel

In the realm of consumer packaged goods, clothing and apparel items are central examples that highlight the short lifespan and frequent replenishment characteristic of CPGs.

This category encompasses a wide array of everyday items such as t-shirts, jeans, sneakers, and hats, which often see high turnover due to changing fashion trends and wear and tear.

Additionally, essentials like socks, underwear, and tights are quintessential CPGs in apparel, requiring regular replacement as they are worn regularly and subjected to the stress of daily use. These items are not only fundamental to our daily dressing routine but also reflect quick shifts in consumer preferences and seasonal styles, making them perfect examples of fast-moving consumer goods.

Consumer demand

Understanding consumer behavior is crucial for anticipating and responding to new consumer needs and preferences. The digital transformation is radically changing how consumers shop and how brands advertise their products in the CPG sector, impacting both purchasing patterns and brand interactions.

Purchasing patterns

Purchasing patterns are influenced by various factors such as price, convenience, and quality. For instance, if a product is priced too high, consumers may opt for a cheaper alternative. Similarly, if a product is not readily available, consumers may switch to a substitute product.

Another factor that influences purchasing patterns is customer loyalty. Loyal customers tend to purchase the same brand repeatedly. Therefore, companies often focus on building customer loyalty by providing high-quality products and excellent customer service.

Brand loyalty

Brand loyalty is an essential aspect of consumer behavior. It refers to the tendency of consumers to recognize and want to repeatedly purchase products from a particular brand. Consumers develop brand loyalty when they trust a brand's products and have positive experiences with them.

Brand loyalty is essential for companies as it helps them retain customers and increase their market share. Companies can build brand loyalty by providing high-quality products, excellent customer service, and engaging marketing campaigns.

Retail and distribution

Brick-and-mortar stores

Brick-and-mortar retailers continue to be vital and irreplacable channel for CPG product distribution. These physical locations not only allow for product display and direct consumer interaction but also play a crucial role in brand presence in the competitive retail landscape.

Online retailers

The rise of ecommerce has transformed how CPG products are sold. Online marketplaces like Amazon and Instacart offer new avenues for CPG companies to reach consumers directly. The digital platform provides valuable data that helps brands understand and adjust their strategies to meet consumer demand accordingly.

White label CPG

In the competitive world of consumer packaged goods, white label branding is emerging as a key strategy for brands looking to expand their market share while maintaining cost efficiency. Here’s how it works: one company produces the goods, and another company brands and sells them as their own.

This setup differs from private labeling, which ties products exclusively to one retailer. White label products, on the other hand, are controlled and distributed by the branding company itself, allowing them to reach a wider audience.

This approach lets brands capitalize on their established reputation to fetch higher prices than what the manufacturer might command, leveraging their marketing prowess and distribution networks to full effect.

Navigating retail challenges with white label solutions

White label branding can be particularly effective in today’s market, where speed and efficiency in product development and distribution are crucial. This solution allows CPG brands to quickly adapt to market changes without the overhead of manufacturing, thus enhancing their ability to compete with both national and private label brands in retail settings.

For businesses looking to enter the CPG space without extensive production overhead, Supliful offers white label solutions that allow companies to market tested products under their own brand. This can be especially effective for startups wanting to capitalize on established manufacturing processes and consumer trust.

Consumer packaged goods industry overview

Consumer spending in the CPG sector is heavily influenced by specific behaviors related to health and wellness purchases, a preference for clinically proven products, and the impact of economic downturns on spending habits for both consumer packaged goods and durable goods.

These goods are typically sold in retail stores, supermarkets, and online marketplaces. The way consumers shop for CPG products has significantly evolved due to advancements in technology and changing consumer preferences, leading to a shift towards ecommerce and the rise of direct-to-consumer brands.

Market dynamics

The CPG industry is a significant contributor to the global economy, with a market value of $3.18 trillion in 2024, according to Exploding Topics.

In the United States, the CPG industry is expected to add $821 billion in value in 2024. The industry is projected to grow at a Compound Annual Growth Rate (CAGR) of 5.1% from 2022 to 2031, reaching a value of $18.94 trillion by 2031.

The CPG industry is heavily influenced by the overall market dynamics, including GDP growth, consumer behavior, and economic recession.

During a recession, consumers tend to purchase fewer non-essential items, which can impact the sales of CPG companies. However, CPGs are generally considered to be recession-resistant because consumers will continue to purchase everyday items regardless of the economic situation.

Biggest CPG brands

A few CPG brands dominate the industry, including Unilever, Nestle, PepsiCo, and Coca-Cola. These companies have a significant market share and are involved in pretty much all of the segments of the CPG industry.

Retailers also play a crucial role in the CPG industry, as they are responsible for selling CPG products to consumers directly. Major retailers such as Walmart, Target, and Amazon have a significant impact on the industry as they directly affect consumers by their pricing and sales trends.

The future of CPG

As technology continues to advance, the future of consumer packaged goods looks bright. CPG companies, including well-known CPG brands like Liquid Death and Care/of, are increasingly relying on artificial intelligence (AI) and data to predict consumer trends and create products that meet their needs. These brands exemplify how innovation is key for a CPG brand to stay relevant and anticipate future consumer expectations.

Technological advancements

One major technological advancement that is already being used by CPG companies is AI. AI is helping companies analyze consumer data and predict trends, allowing them to create products that are more likely to be successful.

This technology is also helping companies to streamline their operations and reduce costs. For example, AI can be used to optimize supply chain management, reducing waste and increasing efficiency.

Another technological advancement that is likely to have a big impact on the future of CPG is the Internet of Things (IoT). IoT devices can be used to collect data on consumer behavior, allowing companies to create more personalized products. For example, a smart refrigerator could track the items that a consumer frequently purchases and automatically order them when they run out.

FAQs

How does the CPG industry differ from FMCG?

CPG stands for consumer packaged goods, while FMCG stands for fast-moving consumer goods. The difference lies in the frequency of purchase and the shelf life of the products. CPGs are products that are used daily and have to be replenished frequently, such as food, beverages, personal care items, and household products. FMCGs, on the other hand, are products that are sold quickly at a low cost, such as soft drinks, toiletries, and snack foods.

What are some common examples of CPG items?

CPG items are products that consumers use daily and have to be replenished frequently. Some common examples of CPG items include household products, makeup, drinks, food, toilet paper, and clothes.

What role does CPG play in the retail sector?

CPG is a mayor space as products are sold in a variety of retail channels, including supermarkets, convenience stores, drug stores, or online. Retailers rely on CPG companies to provide products that consumers require regularly. CPG companies, in turn, rely on retailers to distribute their products to consumers.

What characteristics define a company as a CPG company?

A company is considered a CPG company if it produces and sells consumer packaged goods, which are products that consumers use daily and have to be replenished frequently. CPG companies typically have a large portfolio of products, which are sold at a low cost to consumers.