Until recent years, store-based retailers could count on steady sales of consumer packaged goods (CPGs)—frequently replenished consumables like paper towels and laundry detergent used daily by consumers—even as online shopping grew into a near-existential threat.
Now, more consumers buy these everyday products online from leading CPG manufacturers, established retail chains and web-focused merchants, making ecommerce the fastest-grow in sales channel for CPGs.
Based on analysis from Internet Retailer’s just-released 2019 Online Consumer Packaged Goods Report, CPG manufacturers are building their ecommerce businesses using strategies that include working with online retailers, selectively selling directly to consumers and collectively spending billions of dollars on strategic acquisitions of upstart brands.
Among the 34 CPG companies in the 2019 Internet Retailer Top 1000, 18 are in the Food/Beverage product category, 14 sell Health/Beauty products and two are specialty retailers. By merchant type, 19 are consumer brand manufacturers, five are in the Catalog/Call Center category, one (Hickory Farms LLC) is a retail chain, and nine are web-only retailers.
Online U.S. CPG sales rose 35.4% in 2018, according to a report released in early 2019 by consumer goods data-collection firm Information Resources Inc. (IRI). That’s a lot faster than the 3.4% growth in sales at food and beverage stores, including the supermarkets that sell most CPG products, according to the U.S. Department of Commerce. The overall U.S. CPG market (online and offline) grew about 2.0% in 2018 to reach approximately $815.0 billion in 2018, according to Boston Consulting Group (BCG).
Based on data from IRI’s E-Market Insights, online sales measurement and analysis service, online CPG sales in the United States totaled $58.6 billion last year. That accounted for 11% of total U.S. CPG retail sales in 2018—but 64% of the growth.
Brands are following consumers to the web, leading to significant changes to the way they approach distribution. But they have moved slowly, creating opportunities for disruptive startups that focused on selling online and were not limited by established relationships with store-based retailers. The new, web-only brands have left the giants—like Procter & Gamble Co., Nestle S.A. and The Kraft Heinz Co.—scrambling to catch up in the digital marketplace.
Major CPG companies are heavily dependent on stores, so they can’t catch up by simply imitating their smaller, web-only rivals by selling large quantities of goods directly to consumers. The CPG manufacturers can, however, do things like set up websites that sell specialty or personalized products not available in stores or redirect online shoppers to the websites of online retailers that sell their goods.
When the CPG giants decide to open direct-to-consumer (D2C) operations, they usually do so in ways that don’t jeopardize their relations with the big store operators that control access to retail shelf space. For example, two big players, Mondelēz International Inc. (maker of Nabisco products and other brands) and The Coca-Cola Co. have built D2C operations that sell exclusive specialty products, such as gift boxes or other items consumers can personalize. Also included are brand-related gear such as apparel, water bottles and toys.
Among the five fastest-growing CPG manufacturers in the Internet Retailer Top 1000, four are web-only brands. Larger CPG companies took note of the high-growth of web-only brands and have acquired many of these startups—sometimes for $1 billion or more. For example, In May 2019, Edgewell Personal Care Co., best known for the Schick shaving brand, acquired the Harry’s shaving brand for $1.37 billion in cash and stock.
That same month, the British-Dutch CPG giant Unilever—which in 2016 bought online-only shaving brand Dollar Shave Club in a deal reported to be about $1 billion—closed on its acquisition of the Graze snack food brand. Terms of the Graze deal were not disclosed, but media reports put it at about 150 million British pounds ($190.1 million). In addition to Graze and Dollar Shave Club, Unilever owns brands including Breyers ice cream, Vaseline skin-care products and Lever 2000 body-care products.
The 64-page 2019 Online Consumer Packaged Goods Report examines the ways CPG manufacturers are building their ecommerce businesses using strategies that include working with online retailers, selling selected products directly to consumers and spending billions of dollars collectively on strategic acquisitions of startup brands like Harry’s and Graze. The report also includes the results of an exclusive survey of online shoppers about their purchasing behavior of CPG goods, category favorites and reasons for selecting the online channel over stores.
The 2019 Online Consumer Packaged Goods Report includes:
- Total ecommerce sales and sales growth estimates of 14 major CPG manufacturers
- Ecommerce sales and growth of the 34 retailers in the Top 1000 that make and sell CPG goods
- Survey results: 510 CPG buyers reveal their purchasing behavior
- 20-plus charts and tables
- Why Amazon is essential to the online CPG market
- Why shoppers buy CPGs online and the top destinations for online CPG shoppers
- Insights from consultants and CPG executives
- Notable strategic acquisitions in 2018 and 2019
The 2019 Online Consumer Packaged Goods report is available to Digital Commerce 360 Gold and Platinum members as part of their paid memberships. Single-copy sales are available for $299. Get the report now.