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Last year, big CPGs from PepsiCo to P&G continued to institute price hikes, sending sales volumes dipping as many consumers cut back on spending or sought more value-priced items. Looking to the year ahead, many CPG execs are recognizing their pricing strategies may have to change, according to a new report from Deloitte, which predicts 2025 “could be a pivotal year” for the CPG industry.
In a survey of 250 CPG executives across food and beverage, household goods, personal care products, and fashion and apparel, 51% of respondents agreed they cannot rely on price hikes for revenue growth this year, with the highest volume of execs who hold this belief coming from household goods companies (62%). Just 30% said they could boost prices over 3% without impacting sales volumes. Nearly half of execs also agreed that retailers will oppose more price hikes from CPGs. Deloitte also found that 64% of execs agreed that consumers are still negatively comparing today’s inflated prices to lower, pre-Covid prices.
CPGs, instead, will largely focus on portfolio and product mix to drive profitable growth this year, per Deloitte. For most (95%), that means innovation will be a priority, with 80% saying they’re upping spend in that area. Those innovations won’t necessarily center around value, as 66% of execs (and 76% of those at personal care product makers) said their company would be executing a premiumization strategy, which CPGs like L’Oréal and Unilever have recently been implementing within the mass segment.
Companies will also drive profits through portfolio management, with 60% of execs anticipating more M&A this year. (Some CPGs have already gotten started; Wonder Bread owner Flowers Foods this week announced plans to buy snack brand Simple Mills for $795 million).
To boost consumer demand, many said they’d look to digital shopping channels and boosting marketing and ad spend, with 65% planning to allocate more of their resources to retail media (82% within household goods). They’ll also turn to precision analytics to inform promotion strategies, though 48% are concerned competitors could undermine their pricing power with too many discounts and promotions.
Aaand to get all of this done, these companies will need some $$, so they’ll try to focus on efficiency; 68% said they plan to do this through simplification, digitalization, and automation and AI, particularly turning to AI across marketing and sales, where execs foresee the highest ROI.