A Tale of Two Pandemics: CPG During & After COVID

The COVID-19 pandemic drove the largest disruption in Consumer Packaged Goods (CPG) in recent memory. For many categories, it led to unprecedented sales and the challenge of maintaining supply; for others, sales suffered as changed routines reduced demand. All categories, like their consumers, struggled to adapt as the disease ebbed and flowed.

Brands that benefited from increased demand during the pandemic must embed new habits to exceed strong prior-year comparisons. Those that struggled must drive consumers to return to prior habits or create new ones to regain momentum. All must all do this in an environment where consumers are increasingly turning to e-commerce as well as brick & mortar stores.

Regardless, the time to act is now. Those that anticipate likely changes in the market and plan accordingly, focus on understanding and influencing consumer behavior changes, and optimize their presence in physical and e-commerce environments are the ones that will succeed – and we have some data to back this up.

Download our detailed paper for more insights and tips to inform your CPG strategies.

Key Takeaways:

• Consumers are excited but cautious about an uncertain post-pandemic future. Companies that smartly scenario plan for various futures will be better prepared to act.
• Post-pandemic CPG growth will be grounded in habit formation— either to reinforce behaviors that drove growth or to replace behaviors that inhibited it.
• Brands must create advantages wherever consumers shop, which means executing a winning e-commerce strategy. User experience is more important than ever.

The COVID-19 pandemic drove the largest disruption in Consumer Packaged Goods (CPG) in recent memory. For many categories, it led to unprecedented sales and the challenge of maintaining supply; for others, sales suffered as changed routines reduced demand. All categories, like their consumers, struggled to adapt as the disease ebbed and flowed.

Amid this uncertainty, CPG brands face the need for growth. Brands that benefited from increased demand during the pandemic must embed new habits to exceed strong prior-year comparisons. Those that struggled must drive consumers to return to prior habits or create new ones to regain momentum. All must all do this in an environment where consumers are increasingly turning to e-commerce as well as B&M stores.

Regardless, brands cannot afford to wait for more certainty before acting. Those that anticipate likely changes in the market and plan accordingly, focus on understanding and influencing consumer behavior changes, and optimize their presence in physical and e-commerce environments are the ones that will succeed.

Optimism and an Uncertain Future

40% of consumers are optimistic, yet 36% are frustrated.

Consumer perceptions about the pandemic are at an inflection point. Feelings of calm and optimism are on the rise, while frustration and boredom, though still high, are declining.

Our Ipsos Pandemic Adaptability Continuum (IPAC) shows that, while consumers are increasingly moving beyond the pandemic (i.e., Recalibration, Rebuilding, Settling In), the largest group continues to be the Acclimation group, which created new routines in response to the pandemic.

Despite the hope, there is also lingering uncertainty. Nearly eight in ten consumers feel at least some uncertainty about their post-pandemic future, according to the April survey, and 55% believe it will take more than six months for a return to normalcy.

With this much uncertainty, it is critical for CPG companies and brands to develop strong scenario plans. They should conduct workshops that assess alternative future scenarios around the pandemic, economy, supply chain, etc., identify leading indicators of which alternative future is emerging, and wargame the actions the brands need to take to win in that future.

Key Takeaway:

Consumers are both excited and cautious about an uncertain post-pandemic future. Companies that smartly plan for various future contingencies will be better prepared to act.

Habit Changes Enable and Inhibit Growth

Every CPG category must adjust to behavior changes brought on by the pandemic

Many categories have seen incredible growth during the pandemic. Consumers stockpiled toilet paper. New cleaning routines led to growth for paper towels and cleaning products. Food categories like bottled water and ready-made meals saw sustained increases. Discretionary categories like beauty care saw reduced consumer demand. Other categories saw consumption both increase and decrease—for example sweets—as consumers alternately sought to eat better or indulge:

CPG companies now must wrestle with evolving emotional and psychological needs as well as new purchase and usage dynamics. As we emerge from lockdowns and restrictions, will the cleaning and cooking routines that have taken hold stay in place? Will categories that were less relevant regain lost momentum?

Fortunately, Behavioral Science offers clues that can help brands assess how sticky the behavior changes are and how to influence future behaviors.

Ipsos’s MAPPS Framework

Ipsos developed a framework called MAPPS that identifies the key dimensions for understanding and influencing behavior change:

Brands can use MAPPS to Diagnose the role of each dimension, Design actions the brand can take to influence behavior, and Deliver the right actions.

For example, some consumers increased purchase of sweets while others decreased. Was their Ability to consume affected by routine changes (e.g., I usually buy a candy bar at the gas station on the way to work, but I’m not getting gas and I’m not driving to work)? Did Motivations change (e.g., I need a treat. I’m buying those Belgian chocolates online)? Understanding what triggered the change in behavior helps brands know where to focus their efforts to reinforce or change it.

Regulatory Fit Theory

Another Behavioral Science framework Ipsos uses to understand both behavior change is Regulatory Focus/Regulatory Fit Theory. This framework explains how behavior is driven by two governing mindsets:

• Promotion: Behavior focused on exploration, experimentation, achieving a “positive” outcome
• Prevention: Behavior focused on caution, maintaining status quo, preventing a “negative” outcome

Thinking again about sweets, those who bought more may have exhibited a Promotion mindset, buying more or new treats to indulge themselves. Those who bought less may have exhibited a Prevention mindset to avoid gaining weight while being stuck in a more sedentary lifestyle.

The same behavior observed in two different consumers could come from different mindsets. It is critical for brands to know which mindsets prevail within the contexts of shopping, buying and using products, and to create messaging that meets consumers with cues and “nudges” that reflect that mindset.

Key Takeaway:

Post-pandemic CPG growth will be grounded in habit formation—either to reinforce behaviors that drove growth or to replace behaviors that inhibited it.

E-commerce Challenges Established Brands

One in five consumers shopped online for CPG products during the pandemic; tactics that win in B&M are not the same as those that win in e-commerce

Early in the pandemic, as lockdowns expanded, consumers were driven to e-commerce for products they typically purchased in B&M stores. Even as late as March of 2021, many CPG categories see 1 in 5 purchases taking place online (i.e., DTC sites, e-commerce sites, online shopping for B&M stores, etc.):

The move to e-commerce is incredibly disruptive for brands that are strong in physical retail. Brand blocks no longer exist to guide the eye at the shelf; small brands that could never achieve significant distribution are as easy to find and buy as estab - lished brands; consumers can choose the criteria they use to filter and sort alternatives.

Importantly, the tactics that win in B&M are not the same as those that win in e-commerce. Brands need to ensure they create unique tactics for both. To do so, brands should:

• Revisit shopper fundamentals: segmentations, decision trees, P2P, etc. They should map the omnichannel or e-commerce shopper journey holistically and find the key touchpoints to influence shoppers in order to increase conversion.
• Optimize UX: The user experience for e-commerce is a key driver of whether the user becomes a buyer. Brands must create the right user experience for e-commerce through exploratory research and design workshops, build the experience via user-centered design and usability testing, and grow the experience via ongoing tracking and evaluation of impact in-market.

Key Takeaway:

Brands must create advantages wherever consumers shop, which means executing a winning e-commerce strategy is more important than ever.