The consumer products sector witnessed remarkable growth throughout 2023, with the retail sales value (RSV) surging globally by nearly 10 per cent year over year, as revealed by a survey report conducted by Bain & Company.
However, this growth was predominantly driven by price increases rather than volume gains, with price hikes accounting for approximately three-quarters of the RSV growth. The report underscores the pressing need for sustainable, volume-driven growth, especially amidst escalating price pressures.
According to Bain & Company’s first annual consumer products report, rising input costs significantly contributed to the widening gap between price and volume growth. Inflation emerged as a major concern for industry executives, with 82 per cent of respondents acknowledging its substantial impact on business operations throughout the previous year.
Richard Webster, head of Bain & Company’s global consumer products practice, highlighted the paradoxical situation faced by consumer companies, where soaring prices strain consumer spending while failing to offset increasing costs and pressures from retailers. Webster emphasised the necessity for a fundamental restructuring of value propositions, portfolios and business models to drive future growth sustainably.
Despite the overall sector growth of around 10 per cent, top consumer packaged goods (CPG) experienced a more modest average growth rate of approximately four per cent, reflecting consumers’ shifting preferences towards more affordable private-label brands or premium insurgent brands offering enhanced value.
To alleviate mounting pressures, half of the top CPGs resorted to significant headcount reductions or hiring freezes in the previous year, alongside other cost-reduction measures. However, with limited scope for further price increases, a return to volume-driven growth becomes imperative for sustainable progress.
Additionally, the report stated that emerging markets present a promising avenue for such growth, with India notably demonstrating balanced growth due to consumers’ transition towards international brands. Further, digitalisation emerges as a critical imperative, enabling CPGs to capitalise on data-driven insights and AI technologies for revenue enhancement and cost efficiency.
Moreover, the growing consumer inclination towards sustainability underscores the importance of environmental, social and governance (ESG) initiatives. While consumer demands for sustainable products rise, only a third of CPGs are on track to meet their decarbonisation commitments, indicating the need for greater urgency in addressing ESG concerns.
