After a year of shockwaves—and reverberations—related to COVID-19, some aspects of life are starting to settle. Value pools are being redrawn, and they may not be where we expected them. A year spent under various restrictions has forced consumers to adapt the way they live, work and socialize, and this has set major shifts into motion.
Accenture finds that $2 trillion in value (75% of which is retail and food service/restaurants) is expected to migrate closer to home to areas such as home improvement, digital entertainment and e-commerce. However, many large global consumer packaged goods (CPG) companies aren’t prepared to capitalize on this new opportunity. CPGs must evaluate what, where and through whom they sell to capture the value that has shifted.
Historically, CPGs haven’t been imaginative about the home (and the areas around it), but now it is one of the biggest opportunities. Home is no longer just a physical location; it has become the epicenter of life and of consumption.
Consumers continue to work from home and show ongoing interest in remote work models. Nearly half of workers (46%) intend to make remote working a regular part of their routine and increasing numbers of those who never worked from home before now wish to in the future.
As people work at home and spend more leisure time there, they’re making their residences functional and comfortable spaces in which to spend time. One in four consumers has recently, or plans to, renovate their existing home.
Human behaviors have permanently changed
Shifting lifestyles have influenced what people need and want to spend money on, and shifts in priorities and needs are having impact on demand across categories.
Those who are now working at home are 32% more likely to be making big ticket purchases of large, one-off items as a result of money saved on their commuting costs.
More than half of people are worried about their financial situation, and 46% are reducing spend on non-essentials.
Those with kids at home are 1.5x more likely to now describe lunch as a “chore.” Those working from home (68%) say that convenience, such as access to food and drink options, is important to them.
Localized consumption hubs
Consequently, spend has been redirected away from urban centers to residential areas. Targeting these emerging localized consumption hubs will require revised route to market strategies and channel approaches to quickly meet consumers’ wants profitably and at scale. CPG leaders who report top-quartile growth have an insight-led, strategic approach to route to market.
With people recentering consumption closer to home and within local neighborhoods, local outlets such as mom-n-pop shops, bars and restaurants present an attractive channel that offers greater intimacy with consumers while capitalizing on the increased demand.
The experiences of the future
Consumers of all generations have proven that they are open to new products, services and experiences. Increased ecommerce penetration has acted as a gateway for other types of digital business models to flourish, as consumers get more comfortable and familiar with digital transactions. Our research indicates that likely adoption of new business models has increased by up to 75% globally.
Innovation today should also address more than just offerings. It must be about managing cost-to-serve, making digital commerce profitable and increasing the company’s competitiveness. This will require diverse thinking, distinguished capabilities and disruptive technologies across the full value chain. As such, CPG companies need to look beyond existing industry boundaries and outside of traditional partners.
Blazing new paths to growth
CPGs need to rethink what they sell, through whom, and where. They need to dramatically accelerate the pace of innovation in their core portfolio, capture data on real-time meaningful trends and seize those opportunities with the help of consumer advocates.
Create innovations powered by data: To understand evolving consumption patterns, CPGs must combine real-time local data with consumer insight (e.g. through voice apps, smart devices) in an integrated, unified data platform.
Re-evaluate priority channels: CPGs need to redefine their customer segmentation and service strategy to reflect localized needs and new value potential. Increase Revenue Growth Management capabilities to optimize category assortment at outlet level.
Where and how?
Build agile operating models and supply chains: CPGs need to create agile operating models – processes, capabilities, teams and culture, that can intelligently flex to accommodate the shifts and unlock new value pools.