CPG

CPG Demand Tops March 2020 Levels

Consumer Brands Association says demand in August and September beat early-pandemic highs
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Photograph: Shutterstock

With consumers still spending more time at home—and eating more of their meals and snacks at home—than they did before the pandemic, CPG demand remains sky-high and, in fact, hit new heights in August and September, the Consumer Brands Association said Friday. 

Late this summer, CPG demand surged past the spike seen in March 2020, when initial lockdowns prompted panic-buying, according to Consumer Brands. Consumer demand for packaged goods climbed 8.3% in the third quarter of 2021 over the year-ago period and 1.8% over the prior quarter, hitting more than $1.7 billion worth of demand in August and September. Consumer Brands, in its latest "CPG Economic Pulse" report and forecast, projects that demand will remain elevated through the end of 2021, with an expected growth rate for the year of 10% to 11.5%. 

That soaring consumer demand, coupled with retailers' and suppliers' challenges sourcing and moving products and labor shortages throughout the supply chain, is helping drive up costs for what CPG manufacturers and stores are able to get their hands on. 

Consumer prices rose 6.2% year over year in October, a 30-year high, the Bureau of Labor Statistics (BLS) reported last week, and producer prices were up 8.6% vs. the year-ago period. And while consumers have noticed the upward creep in prices, overall demand has yet to wane. In a Consumer Brands/Ipsos poll conducted in late October, half of around 1,000 respondents said they had experienced grocery product shortages in the past few months, and 55% said they were concerned about finding the food and beverage products they want. 

"For 19 months, demand has steadily increased, rising beyond levels not seen since the shelf-clearing panic at the start of the pandemic," Consumer Brands President and CEO Geoff Freeman said in a statement Friday. "How fast and how much those costs moderate will be based on supply-chain bottlenecks easing and the labor force growing."

In its report, Consumer Brands cited recent comment on CNN from Jon Nudi, General Mills' North American retail president, that whereas General Mills would typically see around 50 supply-chain issues a month before the pandemic, it's now seeing 500 to 600 such problems and delays monthly.

On the matter of easing supply-chain bottlenecks, Freeman and Consumer Brands again called for action to change trucking regulations by increasing truck weight limits (which California Gov. Gavin Newsom did in his state this week) and keeping pandemic-prompted adjustments to hours-of-service rules for drivers. "We need solutions that get trucks filled and moving if we want to see our problems ease," Freeman said. 

A slight reprieve may be ahead on the supplier side; Consumer Brands said that its modeling, derived from BLS and Bureau of Economic Analysis data, "forecasts a slight slowdown in wholesale costs for food manufacturing, but one that is still 10.5% to 12% higher than the year before."

 

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