Consumer packaged goods (CPG) refer to items used daily by average consumers that require frequent replacement or replenishment. These include essentials such as food, beverages, clothing, makeup, toilet paper, and various household products.
The sector remains highly competitive due to market saturation and the minimal cost for consumers to switch brands, whether driven by price changes or perceived quality.
Key Takeaways
- Consumer packaged goods (CPG) are daily-use items that need regular replacement, like food, toilet paper, or cosmetics.
- It is one of the largest sectors in the U.S. economy, valued approximately at $2 trillion, and dominated by companies like Coca-Cola, Procter & Gamble, and L’Oréal.
- CPGs differ from durable goods, which have higher prices and longer lifespans, such as computers, cars, and washing machines.
Understanding Consumer Packaged Goods (CPG)
Despite recent slow growth, the CPG industry remains a cornerstone of the North American economy, contributing around $2 trillion to the U.S. GDP. It boasts industry leaders like Coca-Cola, Procter & Gamble, and L’Oréal.
Companies in this sector enjoy strong margins and healthy balance sheets but must continually compete for retail shelf space. Investment in advertising is crucial for maintaining and expanding brand recognition and driving sales.
When evaluating potential investments in the CPG sector, it’s crucial to assess key financial data points, such as accounts receivable and inventory turnover.
Characteristics and Examples
Consumer packaged goods have short shelf lives and are designed for quick consumption. Their packaging is distinct and recognizable, helping consumers identify them easily on store shelves.
For example, cosmetics deteriorate quickly if exposed to temperature swings, and are sold in various packages reflecting the brand’s market positioning. After use, the emptied packages are discarded or recycled.
Similarly, frozen dinners represent another segment of CPGs. These perishable items are available globally and are often bought for immediate consumption, prompting regular restocking upon subsequent visits to grocery stores.
Consumer Packaged Goods vs. Durable Goods
CPG items are affordable and frequently replaced, whereas durable goods are costly and designed for prolonged use. Purchasing durable goods necessitates substantial thought and comparison due to their higher costs, unlike the impulsive purchasing patterns of CPGs.
Economic slowdowns lead to reduced sales of durable goods as consumers prefer holding onto cash. However, sales of essential CPG items like bread, milk, and toothpaste are less affected because of their necessity. Sometimes, consumers spend slightly more on CPGs as small luxuries during economic hardships. A classic example is the 2008 recession when nail polish sales surged despite a decline in overall cosmetic sales, indicating consumer preference for affordable, feel-good purchases.
What Are Examples of Consumer Packaged Goods?
Examples of CPGs encompass food, beverages, tobacco products, cosmetics, toilet paper, shampoo, cleaning supplies, and various household items. They are quickly bought, consumed, and replenished.
What Is Another Name for Consumer Packaged Goods?
Consumer packaged goods are often referred to as fast-moving consumer goods (FMCGs) due to their high turnover rate. They also fall under non-durable goods, which have lifespans less than three years.
Where Are Consumer Packaged Goods Sold?
Traditionally available in brick-and-mortar retailers like grocery stores and pharmacies, consumers now increasingly purchase CPGs online via platforms like Amazon. Services like InstaCart enable digital shopping where items are collected in-store and delivered by someone else.
The Bottom Line
Consumer packaged goods are essentials used daily by consumers, requiring frequent replacement and encompassing everything from food and beverages to personal care items. Unlike durable goods, which are expensive and long-lasting, CPGs are more susceptible to retail turnover. Even during economic downturns, consumer packaged goods tend to maintain steady sales, whereas durable goods witness a slowdown.
Related Terms: non-durable goods, fast-moving consumer goods, FMCG, economic downturn, brand recognition.
References
- Congress.gov. “Statement By Consumer Brands Association Submitted to House Oversight Subcommittee on Health Care and Financial Services”.
- Kline & Company. “Neither Lipstick, Nor Face Makeup, This Time Women Turned to Nail Polish During the Recession”.
