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2018 Consumer Products Industry Outlook
Newer approaches and bolder moves in consumer goods
As consumers prosper from stable US and global economies, the consumer products industry will reinterpret traditional levers to fuel growth in a hyper-competitive market.
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- Globalization drives growth
- Paths to innovation
- Growth through M&A
- Digital technologies and applications
The drive toward consumer products company differentiation in 2018
The ability of companies in the consumer products industry to quickly adapt, innovate, and differentiate themselves in the marketplace is often essential to success and driving brand growth.
According to Deloitte Insights’ United States Economic Forecast, the US economy is likely to continue to grow at a moderate 2.0 to 2.5 percent rate in 2018. A key source of strength is consumers, who have benefitted from strong labor, rising incomes, record low unemployment, and low inflation. Households are enjoying growing wealth and consumer confidence remains elevated despite uncertainty in the political and economic policymaking areas.
Companies in the consumer products industry are developing newer and bolder strategies to execute traditional levers against a backdrop of a more stable US and worldwide economy. Among the latest trends are:
- Globalization. Companies in the consumer products industry will strive to strategically capitalize on growth in emerging markets, and seek opportunities to acquire or partner with companies to enable access to consumers, leverage market solutions, and in some cases, access sources of raw material.
- Innovation. Companies in the consumer products industry have traditionally looked to innovate as a source of growth and will try newer and bolder strategies in 2018. Expect many to take an agile approach to developing, testing, and iterating innovative ideas compared to traditional, highly structured, more time-consuming testing methods.
- M&A activity. Companies in the consumer products industry are often increasingly looking to expand across geographies and reach out to markets that can drive both sales and profitability.
- Digitization. Companies in the consumer products industry are aligning technology in creative and efficient ways to optimize customer engagement and influence the consumers’ path to purchase.
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Achieving globalization to drive differentiation and growth
Expanding into global markets is one avenue US-based consumer products companies can pursue to drive growth and brand differentiation. Companies in the consumer products industry could benefit from considering ways in which they can strategically capitalize on the growth in emerging markets and identify opportunities to partner or acquire successful businesses in these markets, thereby having access to their consumers.
- Emerging markets represent an opportunity for growth. Facing issues of weak demand and increased competition in North America across consumer products company categories, many US companies anticipate growth opportunities from outside the United States.
- Achieving globalization through partnerships. One approach is through partnerships between US companies and local brands. Such partnerships potentially help US-based companies adapt their products to the needs of a specific market.
- Realizing the potential of global markets by tapping into consumer insights. Companies in the consumer products industry could gain a foothold in the marketplace by developing deep insights about consumers in the emerging markets they wish to enter.
Newer, bolder paths to innovation
While many consumer products companies have looked to innovation as a source of growth, what’s changing is how companies are pursuing innovation. In addition to following traditional new product development cycles, many companies in the consumer products industry are experimenting with new approaches, such as innovation through:
- Venture capital-styled incubators
- Crowdsourcing and partnering with consumers
- Renovation of previously successful products
- Continued focus on health and wellness/good-for-you products
M&A—An inorganic path to globalization and innovation
Looking ahead, the uptick in consumer products M&A activity is likely to continue in 2018. The steady growth in the US economy is driving up the jobs rate and the rise in consumer spending, albeit gradual, can provide a conducive platform to consolidation.
Activity will likely be driven by one of the two viewpoints:
- Acquisitions for growth and differentiation
- Divestitures to become leaner organizations focused on core brands and profitability
Digitization continues to drive differentiation through efficiency and creativity
Digital technologies and applications have a wide influence on many consumer products companies, from interacting with consumers to operations and procurement. In some organizations, the company’s digital strategy is increasingly becoming part of its overall business strategy.
Many could benefit from continually investing in digital technologies to deepen customer engagement and enhance the consumers’ path to purchase. Investing in digital technologies could also benefit companies in the consumer products industry by driving efficiency in supply chain. Trends in digitization—and their potential benefits include:
- Promoting real-time customer engagement
- Promoting e-commerce
- Blockchain applications
In today’s rapidly evolving marketplace environment, key business issues are converging with impacts felt across multiple industry sectors. What are the key trends, challenges, and opportunities that may affect your business and influence your strategy? Look for more perspectives and insights from some of Deloitte’s forward thinkers.