The Supply Side: Top CPG industry predictions for 2020

Industry analysts expect several changes for the consumer packaged goods industry in 2020. Top predictions include increased demand for pet products, further integration of the in-store and online shopping experiences and accelerated disruption from nontraditional forms of retail.

“We expect to see continued growth in many of the categories that took off in 2019 such as self-care, CBD and plant-based food,” said Colin Stewart, executive vice president of business intelligence at marketing and analytics firm Acosta.

Acosta estimates the increased focus on self-care will be a win for manufacturers as the $9.9 billion category remains hot. Disruptive brands in the space will continue to seek out retail opportunities, like the recent SmileDirectClub oral care brand that got its products into 4,700 Walmart stores, or Target’s partnership with shaving product brand Harry’s. Those two direct-to-consumer brands are now in big-box retailers as well as competing directly on shelves with the likes of Crest and Gillette, brands owned by Procter & Gamble.

Acosta said the cannabidiol (CBD) category is also likely to go mainstream in 2020 as 28% of consumers already use CBD oil and another 54% of consumers are open to trying it. Acosta said CBD sales are projected to grow from just under $2 billion in 2018 to $20 billion by 2024.

The sales of plant-based foods are also poised to have a blowout year. Acosta said the category saw double-digit growth in 2019, which was five times the rate of total sales in the past year.

Tyson Foods continues to invest in alternative-meat proteins sold at retail and in foodservice. Impossible Foods had plans to roll out a pork-less meat substitute for sausage that will be sold in foodservice later this year. Food retailers from Aldi to Walmart continue to add more plant-based foods to their store inventories as more consumers are adopting flexitarian lifestyles, which are predominantly plant-based with occasional meat and dairy. Acosta also expects further expansion in good-for-you foods and beverages in 2020.

“Healthfulness is becoming increasingly important to consumers as nearly two-thirds of U.S. adults agree it has a significant impact on their food and beverage purchase decisions,” Stewart said.

Sales of food and beverages with added nutritional benefits like electrolytes, minerals, adaptogens and prebiotics are expected to reach $275 billion by 2025, according to the Acosta report.

The pet category is also expected to have a strong 2020 on the heels of 50% growth in 2019. Walmart continues to add new brands of pet food in its stores, adding Blue Buffalo and Rachael Ray to the pet food aisles in 2019. Those are higher protein brands with little to no grain fillers and priced at a premium to traditional pet food.

Industry source Dave Carney said consumers want pet food to look more like human food as pets are more often considered family members. He said pet food follows broader human food trends because it must appeal to pet owners who buy it, and consumers expect the same high standards for their pet’s food as their own. Consumers are looking for convenience, quality, authenticity and transparency.

Acosta also expects the rise of private brands to continue in 2020. In 2019, private brands represented one in five CPG dollars sold, according to Acosta.

Carol Spieckerman, CEO of Spieckerman Retail, said the private brands bulge may have hit an inflection point. She said in the past couple of years, retailers have been piling up brands across every conceivable category.

“The balance between private brands and national brands has historically ebbed and flowed, yet we’ve not seen private brand development hit these levels in the past,” she said. “Amazon, in particular, has taken private brand development to an unprecedented level both in terms of category reach and brand creation. 2020 may well represent a saturation point, or more accurately, an inflection point. Consumers may either fully embrace private brands as a primary choice, further degrading the impact of national brands or we could see retailers retreat and re-embrace national brands as a sea of private brands proliferates.”

Spieckerman also expects retailers and brands to digest and divest in 2020.

“On the buy front, many retailers and brand houses have been on an acquisition tear over the last few years, with Walmart serving as the boldest example,” she said. “Acquisitions have helped retail companies quickly ramp-up capabilities, build up brand portfolios and conquer new categories and markets.”

Big brands have also been actively shopping in recent years. For example, ConAgra purchased Pinnacle Foods in 2018, and Hershey’s acquired One Brands health bars in 2019 for $397 million.

Spieckerman said in 2020, she expects to see a slow-down in acquisition and in some cases, a retraction from previous purchases as a means of bringing greater focus to the business.

“Walmart has already sheared off Modcloth and has pared Bonobos down to bare bones,” she said. “Kroger just sold its stake in Lucky’s markets. Kellogg’s has shed several food categories and associated brands. Acquisitions don’t have to last forever in order to make an impact, and sell-offs aren’t always a sign of failure.”

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