The consumer packaged goods (CPG) market is a dynamic sector that encompasses a wide range of everyday products used by consumers. From food and beverages to personal care items and household products, CPGs are essential to modern daily life.
This sector is extremely sensitive to consumer demands and perceptions. For many years, that meant the space was dominated by billion-dollar companies (like Procter & Gamble). But in recent years, smaller direct-to-consumer CPG brands have been gaining momentum.
The CPG marketplace is also in the midst of a digital transformation that is radically changing how consumers shop and how brands deliver their products.
In this report, you’ll get a comprehensive overview of the CPG market that highlights the fundamental characteristics of the space as well as the key players and market trends of today.
Consumer packaged goods (often shortened to “CPG”) are products that consumers use frequently and eventually need to replenish or replace. Common CPG product categories include food, drinks, cleaning supplies, and makeup.
In total, the U.S. CPG market makes up 10% of the national GDP.
The vast majority of CPG sales (45.9%) come from grocery stores.
And, the brands that dominate the CPG market are billion-dollar brands that nearly every American knows: Nestle, Procter & Gamble, Pepsi, Tyson, and L’Oreal just to name a few.
But small DTC brands have been pulling customers away from the CPG giants during the past few years.
Advertising is where the competition between brands gets very heated.
In fact, the CPG industry spends more on advertising than any other sector in the United States.
The grocery store industry alone spends $1.8 billion on advertising each year.
The beauty segment is another ultra-competitive sector of the CPG market.
L’Oreal spent more than $200 million advertising just one of its brands (L'Oreal Paris) in the United States in 2021.
In particular, as the number of shoppers buying online grows, the amount that CPG brands spend on digital advertising has been growing.
As of September 2022, CPG e-commerce sales were up more than 26% year-over-year. That includes a 35% jump for e-commerce beverage sales.
And, brands spent an estimated $36.03 billion on digital ads in 2022. That number is expected to grow to $41.69 billion by the end of 2023.
Food and beverage drives the highest sales in the CPG market.
In May 2023, monthly food sales in the United States topped $1.3 tillion. That’s up from $1 trillion in May 2019.
Center-store food and beverage sales were up more than 9% year-over-year in 2023 and perimeter sales were up 6.1%.
In particular, sales of plant-based foods are surging.
The plant-based food market in the U.S. is worth $8 billion, according to the Good Food Institute.
In particular, beef replacement brands grew 14% in the last six months of 2022.
Jack & Annie’s is a food producer that’s using jackfruit to create meat-replacement products.
The brand released three new frozen food products in late 2022: Buffalo Jack Patties, Crispy Jack Patties, and Crispy Gluten-Free Jack Tenders.
Another category of CPG products that’s showing rapid growth is the self-care market, which has bloomed into a $450 billion space.
One popular segment is vitamins and supplements.
The percentage of U.S. adults taking vitamins and supplements has grown by 17 points since 2013.
Nearly two-fifths of vitamins and supplements are purchased within the retail pharmacy segment, but online sales in this space are expected to grow at a CAGR of more than 8% through 2030.
The OTC medicine space is growing, as well.
In 2022, Reckitt (the parent company of several hygiene, health, and nutrition brands) came in as the second-ranked growth leader among large companies in the CPG space.
Sales of the company’s Mucinex brand added $410 million of growth to the bottom line.
There are also several smaller brands in the at-home medicine space that are revitalizing CPG sales at big-box retailers.
For example, Wonderbelly’s antacid tablets will soon be stocked in 650 Target stores.
The startup raised $3.375 million of funding in a 2022 seed round.
In another example, KinderMed has launched a line of children’s pain relief medicine that’s now being sold at major retailers like Walmart and Walgreens.
With a net revenue of $95.701 billion, Nestle ranked as the top CPG brand of 2022.
The company’s pet care brand, Purina, has recorded significant growth in the past year.
Revenue hit $19.385 billion in fiscal year 2022. That was up from $16.659 billion in fiscal year 2021.
That made the brand one of the largest contributors to Nestle’s organic growth in 2022.
In addition, Nestle continues to invest in e-commerce and saw online sales amount to 14.3% of total group sales in 2022.
The company has also been acquiring additional brands in the past few months.
In February 2022, Nestle purchased a majority stake in Orgain and in October 2022, the company acquired Seattle's Best Coffee.
When it comes to mid-sized CPG companies, several fitness/energy drink brands are making headlines. Celsius sits at the top.
Between 2021 and 2022, the brand experienced more than 50% sales growth.
Total revenue in 2022 was $654 million.
In 2023, Celsius has continued to achieve record-high sales.
The brand’s revenue was up more than 1,700% in the past five years, hitting an annualized growth rate of 79%.
Liquid Death is a canned water brand that’s also experienced a dramatic rise in popularity in recent years.
Thanks to viral marketing, the brand has quickly built a $700 million valuation.
Liquid Death’s 2022 revenue hit $130 million. That was a dramatic increase from $45 million in 2021.
It was also ranked third on Instacart’s fastest-growing emerging brands of 2022.
The pandemic prompted many consumers to change their shopping behavior.
Buying store brands (also called “private labels”) is one of those habits that’s taken root in the lives of consumers.
A 2022 survey reports that 70% of shoppers in the United States have purchased a new or different brand than they had prior to the pandemic.
And, nearly 90% of shoppers now say they trust private labels just as much or more than national brands.
Insider Intelligence reports that nearly 80% of shoppers say they’re willing to purchase private-label products when it comes to pantry staples, personal care items, and other CPG items.
Lower cost is the main driver of the private-label trend, but now that many shoppers have switched, data suggests they may never switch back to national brands.
More than 70% of shoppers in the U.S. say they’ll stick with private-label products even after inflation eases.
Only 9% say they’ll go back to national brands.
Small grocery stores are the most likely to bring in private-label shoppers.
More than 75% of products sold at Aldi are private-label goods and nearly 60% of items sold at Trader Joe’s are private-label.
Two of Target’s private-label brands are showing strong growth too.
Target launched Good & Gather as a private-label food brand in 2019, and it’s already a $3 billion brand. Another food brand launched by Target, Favorite Day, came out in 2021 and is now growing by double digits.
A 2022 survey from IRI and the NYU Stern Center for Sustainable Business reported that 77% of consumers believe sustainability is an important factor to consider when making a purchase. That was an 8% increase over 2021.
Their research also found that products marketed as sustainable were responsible for more than 30% of total growth in the CPG space between 2015 and 2021.
Sustainability-marketed products also posted a higher CAGR over that time period.
The CAGR for conventionally-marketed products was 2.7% but that number jumped to 7.34% for sustainability-marketed items.
These products now represent 17% of the total sales in the CPG market.
Consumers are expecting CPG brands to continue to emphasize sustainability.
According to data from Neilsen, 46% of consumers expect brands to take on the most responsibility when it comes to making progress on sustainability.
Most consumers want brands to reduce their carbon footprint and offer products that are sustainably produced.
In the CPG industry, a large part of sustainability comes down to packaging.
For example, candy is usually wrapped in plastic, but Hershey’s is committed to changing that packaging to a more sustainable option.
The company has set a goal saying that 100% of their plastic packaging will be recyclable, reusable or compostable by 2030.
Between 2015 and 2020, the company reduced the weight of their packaging by 25 million pounds and has plans to take it down another 25 million pounds by 2030. This effort is aimed at reducing the cost and environmental impact of transporting the product.
Packaging has also become a hot-button issue in the cleaning products segment.
There are a few zero-packaging CPG brands in the market today.
Take Dropps, for example.
Many of the company’s cleaning products and toiletry items come packaged as super–concentrated pods. Consumers drop a pod into the bottle and fill with water to refill their product.
All of the products are shipped to the consumer’s door in a recyclable cardboard box that’s sealed with recyclable kraft paper tape.
Today’s CPG shoppers want to get their items quickly and conveniently.
For many, that can be achieved by shopping online.
Overall, the online grocery shopping segment is expected to grow at a CAGR of 19.97% to reach more than $2 trillion by 2030.
More than 150 million people in the U.S. made at least one online grocery purchase in 2022 and in the next two years, that number could reach 163 million.
Younger generations are especially interested in shopping for CPG products online.
In one survey, Gen Z adults (those 18-24 years old) said in-store and online shopping ranked nearly the same in terms of convenience and finding the items they need.
The survey also reported that Millennials (those 25-40 years old) who are parents make 23% of their packaged food and beverage purchases online.
Consumers’ needs are driving change in the delivery of CPG products, as well.
Instacart is the clear leader of the delivery segment with 13.7 million active users and $2.5 billion in annual revenue.
By 2024, experts predict Instacart will hit $40.54 billion in sales.
But there are a few other players in the space.
DoorDash began delivering for grocery stores and other retailers in 2020 and is still seeing sizable growth in the service.
In 2022, the grocery delivery segment of DoorDash grew 80% year-over-year.
Still, some retailers are taking control of the delivery of their products.
Heinen’s, a supermarket chain in Ohio and Illinois, recently announced they would no longer partner with Instacart and instead, would offer their own branded grocery delivery service.
That wraps up our overview of the CPG market and the trends expected to impact the space in the months to come.
The CPG market is poised for continued growth and innovation. The rise of e-commerce, DTC brands, and enhanced delivery options shows that consumers value convenience and a personalized experience.
Certain segments like plant-based foods, energy drinks, and pet care are driving growth right now. But that could change. As consumers search out private-label products and pay more attention to sustainability measures, CPG companies will need to be quick to adapt.
With a customer-centric approach and a digital-first attitude, CPG brands can thrive in the ever-evolving market.