CPG Trends 26 May 2022

Exploring CPG Trends with Futures Platform

What is the future of CPG? Here are 5 trends we've been exploring in partnership with the Futures Platform.

As part of our partnership with Futures Platform, we collaborated with the team to provide a look into some of the most interesting Consumer Packaged Goods trends on the horizon. Sevendots Partner Colin McAllister was on hand in the session to speak with Dr. Juha Mattsson, CEO of Futures Platform and explain our most compelling future trends. In this piece, we focus on five of our favorite CPG industry trends to give you a taste of what is offered with the Futures Platform membership and through our collaboration with the team.

The future of physical retail stores and malls

E-commerce has been impacting retail for a long time already, but with the coronavirus pandemic there was a clear uptick in consumer interest. Dr Juha Mattsson says, ‘My personal view is that people still want to go out, even despite COVID. People want to be social… I’m advocating for the physical existence of physical stores.’ The nature of the customer experience in store may change, however, and this proves an exciting area for development.

With the proliferation of digital screens, Juha says, ‘You will be able to display a huge amount of inventory in a very small showroom and so stores will get smaller. But then you have technology where people can go in and experience products in digital ways – holograms are an example of this.’ There is also the increasing interest in instant delivery services, which might enable a consumer to choose a new product, and have it shipped as they return home. Colin adds, ‘It’s the experience of the store that consumers are now looking for… there are retailers acting as community centers where you go in there and you spend some time to connect with others.’ Offline experiences need to offer more.

Trust is a must

Consumer trust is declining across many industries, impacting brand loyalty. However, major CPG companies are some of the few that seemed to benefit from the pandemic – half of US consumers trust major CPG companies more now than pre-pandemic. Consumers expect companies to be purposeful and lead on important and relevant social and environmental issues. This expectation is particularly true and important for younger consumers who prioritize purpose-led brands.

Colin comments on the surge in small brands who fulfill this remit, ‘One of the major reasons so many smaller brands have developed is because they are more trusted.’ He gives the rise in craft beer as an example, ‘They may not be better quality beers. But the fact that you feel it’s been produced somewhere close to you, and you can imagine a real human being producing the beer for you rather than a factory – that establishes an empathy and a trust with the brand.’

To grow consistently, companies and brands must continue to innovate, focusing not only on the short but also the long term. They must do so by keeping in equilibrium all the elements that contribute to enduring consumer trust. The Sevendots trust framework indicates four pillars through which trust can be established: Societal Contribution (being active); Affinity (being close to the consumer), Reliability (being consistent); Performance (being proven).

To be perceived as authentic, CPG brands need to match their storytelling and marketing efforts to consumer needs and expectations by also leveraging consumer-generated content in developing appealing and relevant communications.

The value of intangibles

In an increasingly dematerialized world, companies are moving their emphasis from consumer products to services and therefore rethinking their intangible assets. There are many ways to consider what these intangible offerings include, but standard definitions include goodwill, intellectual property or software. These ideas are increasingly considered too narrow, as we also come to consider innovation, leveraging digital and analytics offerings as well as human and brand capital.

Colin cites Starbucks as an example, ‘If you buy Starbucks coffee, you spend $6 for it. You’re spending far more than you should spend for your coffee. So why buy it? Because it means something to you. [Starbucks] was one of the first places where you could actually sit down and nobody would kick you out after an hour… You can stay there for six hours in an armchair [and they] give you an internet connection. Those things are quite common now. But when Starbucks started, they were creating an intangible value of the brand that goes way beyond the actual coffee that you’re consuming.’ The intangible element is essential to the brand’s success.

The investment share of intangibles in both the US and the EU has increased by 29% over the past 25 years, showing that – despite issues with definitions – intangibles are steadily on the rise. In the retail industry top growing companies invested 7.8 times more in intangibles than others. Consumers demand more intelligent and better-connected solutions that are more than the mere sum of a company’s products. The emphasis is on brands to utilize advanced analytics to personalize their consumers’ experiences, build meaningful relationships with customers and elevate their brand value.

Societal contributions

Corporate Social Responsibility has been relevant for a long time, integrating social and environmental concerns with the business operations and stakeholder interactions of businesses. The combination of CSR, focusing on why a company is in business, and sustainability (or, how it manages its operations) has aimed to achieve a balance of economic, environmental, and social imperatives (the “Triple-Bottom-Line Approach”).

Colin mentions that 40% of consumers seek purposeful brands and trust in brands to act in the best interest of society. In addition, 69% of decision-makers now report that their organizations have generated increased sales as a result of CSR initiatives making CSR no longer a trade-off but an important business growth driver. And finally, 33% of businesses have defined and committed to official sustainable policies and targets. Social and ethical priorities are close behind but still lagging.

The nature of these commitments is also changing. Sustainability has certainly shifted the focus – consumer demand is for companies to go beyond claims to become more sustainable and rather through to regeneration, and other more active commitments: ‘[Companies have been] making commitments about going from having a number of negative impacts to having a neutral impact but consumers are no longer satisfied… they want [a company] to have a positive impact. One way of having a positive impact is not simply to say, “I will compensate my carbon footprint by buying carbon credits” [or] “I planted more trees to compensate.” That’s kidding the consumer…’ Read more about this in our piece on Regenerative Agriculture.

The metaverse

Furthering the question of digital versus physical consumption, as well as the prospect of new kinds of intangibles, the Metaverse has been a noisy arrival in our trend-watching. While companies and individuals buying ‘land’ in the Metaverse has had a lot of attention in recent months, there remains a big question for the CPG industry in terms of its credible use of the Metaverse. Juha takes Coca-Cola as an example, ‘How should we represent Coca-Cola in the Metaverse? Would there actually be a digital or virtual market for Coca-Cola products?’

While it is still hard to imagine what this offering might look like and how it might impact consumer behavior, there have been interesting experiments in other industries – such as in fashion, where consumers are already being encouraged to create their own Metaverse ‘stores’ to showcase their favorite product offerings. This use of the technology speaks to the urge for convenience and demand for relevance that a consumer may desire from their brands. Colin says, ‘I think when we enter a store, we were looking for convenience or experience or maybe both.’ What role could the Metaverse have in expanding the options and how should CPG brands prepare for this new frontier?

While it is still hard to imagine what this offering might look like, there have been interesting experiments in other industries – such as in fashion, where consumers are already being encouraged to create their own Metaverse ‘stores’ to showcase their favorite product offerings. This use of the technology speaks to the urge for convenience and demand for relevance that a consumer may desire from their brands. Colin says, ‘I think when we enter a store, we were looking for convenience or experience or maybe both.’ What role could the Metaverse have in providing alternatives?

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What is your take on these trends? We’d love to know your view on LinkedIn. Learn more about our partnership with Futures Platform here.