Industry
HIGHLIGHTS
- In 2025, health, convenience, personalization, and sustainability are likely to be the primary considerations in the purchasing decisions of consumers.
- To respond to these needs and stay competitive, CPG organizations will focus on disruptive innovations; capabilities to offer ‘anywhere, anytime, any channel’ shopping; effective pricing strategies; and ESG practices that aid sustainability
- They will also strive to create new revenue streams through the ecosystem play to drive greater customer engagement, thus giving rise to fresh business models and partnerships for sharing infrastructures and creating product adjacencies.
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Overview
In 2025, consumers will focus on health, convenience, personalization, and sustainability while making a purchasing decision.
Consumer packaged goods (CPG) companies will have to align their strategies with these consumer priorities and leverage technology and innovative practices to stay competitive. Here are the top trends set to gain further traction in 2025 and beyond.
Disruptive innovations
Disruptive innovation is going to fuel consumer preferences and personalized offerings.
Innovation in CPG industry is critical to drive growth, create differentiation, and meet evolving consumer demands. Markets have become more segmented, and broad-stoke approaches no longer work. Large CPG companies are driving speed to market and focused targeting to counter the threat of digital-native brands as different age groups and lifestyles demand products tailored to specific needs – health conscious, eco-friendly, tech-savvy or ethically sourced.
CPG companies are leveraging artificial intelligence (AI) to understand consumer behavior and offer personalized products. Digital-first brands like Ravel offer bespoke haircare products based on individual needs, while Nestle introduced ‘Vital Pursuit’, a new line of food intended to be a companion of GLP-1 medication users. More and more, CPG companies are expected to meet diverse consumer needs while also tapping into significant demographic opportunities. CPG companies will embody perpetual adaptability, fostering rapid innovation and faster product development. They are expected to move to mass personalization and mass formulation given that the one-size-fits-all strategy is already obsolete.
Zero consumers
Convenience-driven buying habits are now driving demand patterns.
The concept of ‘anytime, anywhere, any channel’ shopping is becoming the norm to cater to the needs of the ‘zero consumer’ with zero boundaries, loyalty, and patience. Consumers expect to be able to place an order online, pick it up in a store, or have it delivered via multiple channels. This demand for flexibility requires businesses to ensure on-shelf availability across channels by establishing a balance between resilience and efficiency in the supply chain. To strike this balance and ensure competitiveness, companies strategize to place their inventories at multiple geographies and locations to increase supply chain resiliency. Subsequently, companies are leveraging large distribution centers to have economies of scale. With this dual strategy of balancing resilience and efficiency in the supply chain, along with cognitive demand-sensing, CPG companies are differentiating themselves be being able to fulfill consumer demand across all the channels.
Also, CPG companies are investing in digital twin to provide virtual replicas of processes and physical objects to identify manufacturing and supply chain disruptions in advance. For example, Mars used a digital twin by feeding manufacturing machinery sensor data into a predictive analytics model to reduce instances of over-filling packages. Unilever launched its AI-powered customer connectivity model with Walmart for collaborative planning, forecasting, and replenishment that increased product availability at the POS to 98%.
Countering inflationary pressures with AI
Factors such as tariff wars, supply chain disruptions, and fluctuating commodity prices are resulting in high inflation.
When inflation is high, consumers become highly sensitive to prices. Hence, CPG companies will require effective pricing strategies to maintain their topline growth.
Sensing consumers’ uneasiness with price increases, brands will have no choice but to shift from pricing-led to volume-led revenue growth. To find the next level of efficiency and optimization, companies will increasingly rely on advanced AI, machine learning (ML), and predictive modeling to derive insights on commodity pricing to optimize procurement by forecasting demand and secure alternative supply sources. Also, AI and data-led insights will help CPG companies understand consumers and the competition to make informed, timely, and dynamic decisions on pricing, promotions, assortment, and price pack architecture, while balancing topline growth with cost management.
Embedding sustainability in business strategy
As global environmental concerns mount, sustainability no longer remains just a buzzword for the CPG industry.
Several international regulations such as the EUDR, which targets raw materials like coffee, cocoa, soy, and palm oil, and Science-Based Targets Initiative (SBTi) demand rapid reductions in greenhouse gas (GHG) emissions to achieve the Paris Agreement’s target of limiting the increase in global warming to 1.5°C. They are mounting pressure on CPG companies to be more transparent about ESG impacts. The Corporate Sustainability Reporting Directive (CSRD) requires companies to disclose the impact they have on environmental, social, and governance (ESG) aspects, while the European Sustainability Reporting Standards (ESRS), offers a framework for these disclosures. All these regulations are intended to ensure transparency at each step of the supply chain.
The road ahead is long, but major CPG companies are already making large strides in their sustainability journey. For example, Nestle launched circular solutions for coffee capsules using 80% recycled aluminum for their Nespresso product range. Nomad Foods analyzes materiality to determine the ESG factors that could have a significant impact on their long-term sustainability performance. Kimberly-Clark aims to source 90% of tissue fiber from environmentally preferred sources by 2025. PepsiCo is striving to achieve net-zero emissions by 2040 and is focusing on regenerative agriculture to sustainably source crops.
These efforts underline the shift that is happening in the industry towards adopting sustainable principles in business strategies, ensuring that companies not just comply with regulations but are also at the forefront in incorporating responsible and sustainable business practices.
Data-driven insights for hyper-localization
The CPG industry is poised to leverage granular, geography-specific insights to deliver products for all consumption occasions at the right place, pack size, and price.
Companies are increasingly leveraging AI-ML to better understand localized consumer behavior, helping them select the right product for the right target segment. For example, Hindustan Unilever Limited democratized e-commerce by integrating B2B ordering app, Shikar, and multi-branded D2C platform, UShop, with Open Network for Digital Commerce (ONDC) for connecting 1.3 million retailers with consumers for hyper-local personalization.
New innovative business models
While companies fight to keep prices stable, they will be looking to create new revenue streams by driving consumer engagement through ecosystem play.
2025 will witness a wave of fresh business models and partnerships to share infrastructures or create product adjacencies. For example, Chobani is leveraging the robust cold distribution network of PepsiCo to distribute its yogurt drinks to bring better-for-you offerings which helps PepsiCo further expand its push into healthier offerings. Similarly, Coca‑Cola and OREO have partnered together where Coca-Cola launched Coca‑Cola® Zero Sugar OREO™ Limited Edition Creations® and OREO launched OREO® Coca‑Cola™ Sandwich Cookie, cross leveraging their existing portfolios to create adjacent products appealing to the next-gen consumers.
