As the COVID-19 situation unfolds across the globe, it presents new operational and leadership challenges for CPG companies. As a result of the crisis, there is a seismic shift in the way consumers shop and what they shop for, creating new CPG industry challenges. The US has seen an exponential increase in the coronavirus cases over the last fortnight. This has left players grappling with new CPG industry challenges relating to how to manage the demand-supply inadequacies, formulate an action plan to turbocharge logistics flexibility, and to adjust the existing commercial strategy to suit the new norms. To address the crisis head-on and ensure business continuity, companies must respond to these new CPG industry challenges by quickly rolling out contingency plans while doing their part to minimize the spread of the virus.
Lessons for US CPG companies from other infected countries
A common CPG industry tre18nd and the coronavirus spreads is that consumers are increasingly stocking up essentials and grocery items, while the demand for non-essentials have drastically declined, posing new CPG industry challenges. US consumer goods companies can learn from the mistakes of other countries and better prepare themselves to face this black swan event. Based on the analysis of our CPG industry experts on the impact of COVID-19 in countries like China and Italy, four main category archetypes have emerged and are most likely to show a similar trend in the US:
- There is a huge spike in the demand for categories such as health and hygiene (hand sanitizers and disinfectant masks), instant meals, and medical supplies. These items are being rapidly undersupplied across channels which in turn results in rigid turnover and frequent out-of-stock situations.
- CPG categories such as shelf-stable groceries, daily hygiene products, and bottled water face constrained supply and reduced stock-levels.
- Decline in non-essential CPG product demand in categories including snacks and savories, soft drinks, personal care products, and pet food.
- Steep decline in luxury product sales including cosmetics, alcoholic beverages, and confectionery.
As more consumers are shifting to online channels for purchases, this creates new CPG industry challenges for players in terms of adapting their logistics and supply chain to this new trend. Furthermore, these spikes and dips in demand have created intense stress for CPG companies and require them to rapidly adapt their strategies for production, transportation and distribution, key account management, and marketing.
During times of crisis like this, it is critical for companies in the CPG industry to take calculative and well-executed measures to ensure business continuity in the long run. Request a free proposal to know how industry experts at Infiniti Research can help you plan your next steps during the COVID-19 situation.
Action plan to combat CPG industry challenges due to COVID-19
In countries like China and the UK, CPG companies have faced intensified challenges due to the short-term nature of their contingency plans. To exacerbate the situation, travel restrictions across countries have created logistical bottlenecks, further worsening the existing inbound and outbound supply chain challenges. Here are some strategies for players in the US to effectively combat CPG industry challenges due to the COVID-19 crisis and react effectively to this unprecedented business shock.
Review production plan and inventory management
The need of the hour for CPG companies is to define a contingency plan to ensure supply continuity. Companies in the CPG industry must determine the weakest links in their supply chain including raw materials, packaging, or workforce and build strategies to address these issues in the order of priority.
Build logistics flexibility
Working with local authorities to understand the COVID-19 hotspots and lockdown areas will help companies to better plan the logistics and delivery to these territories. A major revamp would be required for the existing transportation and logistics plan to improve logistics flexibility. Furthermore, steps can be taken to stop or limit the logistics of the non-essential category.
Enable frequent and real-time customer communications
Making account managers constantly available to address customer conversations, especially in critical channels, is vital for companies in the CPG industry during the coronavirus crisis. Working with multi-functional teams to quickly resolve pain points and bottlenecks are essential to provide proactive and quick responses to the customers. CPG companies must also consider creating agreements with manufacturing teams to produce larger batches of specific SKUs in order to increase product availability.
For more insights, get in touch with an industry expert.