CPG Manufacturing and Industry Trends 2021 - Can It Get Any Crazier?

By Stephen Dombroski, Director Consumer, Food & Beverage Markets; QAD, Inc.

This time last year, I was sitting in this same spot composing my blog on my thoughts on what could be in store for the Consumer Products and Food & Beverage industries in 2020. As I think back, what would the reaction have been if I wrote the following? 

"2020 will be unlike any other year for the entire CPG industry and for the world in general. The food supply chain will be on the brink of collapse. Restaurants, corporate cafeterias and schools globally will close for months at a time, devastating the foodservice industry. Consumers will not only revert to shelf-stable foods but will hoard as much as they can. The global wine business will be ravaged by fires and the pandemic, which will redefine the market. And finally, if you are in the toilet paper business, start hiring extra workers, you are about to have a very big year."

I think back to the lyrics from a song from the 1960s, "They are coming to take me away haha, they are coming to take me away." Without question, there would have been a straitjacket waiting with my name on it.

So as I sit here doing the same exercise for 2021, I begin with a question, can it get any crazier? 

From my perspective, the roller-coaster ride might not be slowing down. The pandemic continues to rage. Vaccines are being distributed but the success rate has not yet been determined and it will take months before they can be administered to the entire population. Many workers are still working from home. Many students are still learning from home. In the United States we are dealing with Presidential election chaos and in the U.K. and Europe, Brexit is still a mess. So as the ball drops in an empty Times Square on new year's eve, keep your seat belts on.

So for 2021, should I go off the rails or keep it somewhat sane? Let's start with a risky prediction:

The luggage industry will have a tough first quarter, if not an entirely bad year.

There you go; I went out on a limb.

All joking aside, the effects of the disruptions of 2020 will linger for years and quite possibly generations to come. However, there have been some very good lessons that can be learned that can translate into benefits and innovations moving into 2021. Here are a few thoughts of areas sure to be hot topics.

Online Shopping - This is not a stretch as online shopping for consumer products has been steadily increasing over the last several years and online shopping for food went up over 60% in 2020. The on-going battle with Covid-19, shutdown orders from government agencies, fear of consumers along with the now comfortable routine and ease of not shopping in person, will continue to grow this market.

Manufacturers' E-commerce Businesses - As online sales explode for most consumer and food companies, many manufacturers are asking the question, "why not us?" when it comes to the e-commerce windfall. Many manufacturers are starting their own online sales businesses, skipping the retail channel altogether and selling their products independently. This will take a tremendous infrastructure, new processes and new systems but could be extremely profitable. It would add another level to the value chain and further emphasize the need for a complete Sales and Operations Planning process (S&OP) if one is not already in place.

In-store Promotions - Once the pandemic subsides and consumers feel safe going back to in-person shopping, the retail industry will attempt to bring back shoppers and save the brick and mortar businesses. Promotions for in-store purchases have been emerging over the last several years, and you will see a huge increase as people start leaving the nest again. These promotions will most likely extend to the manufacturers of products, which will complicate the supply chain and force CPG manufacturers to continue to be agile and nimble.

Digital Transformation - The manufacturer that competes successfully in 2021 and beyond will be the one that embraces digital transformation and advanced technology such as IoT, smart automation, Industry 4.0, and 3D printing to stay ahead of market demand, meet the needs of consumers and provide safe, healthy and affordable options. Manufacturers will need to implement flexible processes and systems to allow for the quick adaptation to disruptions and the changing marketplace. The rapid, agile and effective manufacturers will be the ones that combine advanced digital technologies and proven industry best practices to stay ahead of the competition.

Food & Beverage Manufacturers Investments in Technology - Food & Beverage manufacturers are typically not as quick as other manufacturing segments when adopting technologies that do not directly impact operations. There are some new terms emerging in the industry to describe the technology used in Food & Beverage manufacturing. Direct Technology refers to equipment that is part of the manufacturing process; a mixer, packaging line, shrink wrap machine, etc. These are the capital expenditures that have a direct impact on the production process and can improve throughput. Indirect Technology refers to things like; Internet of things (IoT), software systems (ERP, Demand and Supply Chain Planning, Quality) that can impact the business and profits but do so outside of the plant floor. Food manufacturers are realizing that from top to bottom, agility is critical and these indirect technologies can impact the bottom line and efficiencies as much as a new packing line.

Sustainability and New Agricultural Practices - Sustainability is one of the hottest topics in all areas of manufacturing. Food & Beverage manufacturing is no exception. Feeding the world's population is getting tougher and tougher with climate change and other disruptions. Covid-19 just amplified the issue even more. To be sustainable and to ensure that everyone can be fed in the future, new initiatives call for practices that maintain or improve soil conservation and improve the overall health of soil. Two processes, regenerative agriculture and precision agriculture, working in conjunction, may actually provide a long-term solution by combining environmental and farm science with technology. Regenerative agriculture is a process that looks to reverse the effects of climate change. The regenerative process focuses on restoring soil health, solving water issues, reversing carbon cycles and creating new growing environments. Precision agriculture focuses on increasing the amount of land used for farming and increasing the productivity of that land. It utilizes newly available IoT devices like GPS services, guidance systems, mapping tools and variable rate technologies (VRT) to optimize crop yields.

Many of us cannot wait to turn the page on 2020. I hope that 2021 is less disruptive and that some sense of normalcy can return to all areas of life. These thoughts on the CPG industry are just thoughts. As we have just seen, it can all change in an instant, so who knows what the future holds. If 2021 is anything close to what 2020 was, don't put those straitjackets away just yet.

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