Cost Pressures Mount as Demand for CPG Products Reaches New Highs
New Report Reveals How Industry Delivered for Consumers in Q1
ARLINGTON, Va. — Today the Consumer Brands Association released its Q1 CPG Economic Pulse report showing that demand has reached its highest levels since the start of the pandemic. Even with vaccines rolling out in greater numbers, the report shows March 2020 and March 2021, respectively, had the first- and second-highest demand seen throughout the pandemic to date.
“From toilet paper and disinfecting wipes to cereal and coffee, we couldn’t have predicted that a full year into the pandemic we’d still be seeing demand at these levels,” said Geoff Freeman, president and CEO of Consumer Brands. “These numbers are a reflection of what we hear every day from our industry — that they are still intensely focused on delivering for the consumer.”
For the first quarter of 2021, CPG products showed a year-over-year growth of 8%, with sales totaling $1.62 trillion, based on an annualized rate. Within the quarter, each month proved to have higher demand than every month last year apart from March 2020, when panic buying skyrocketed CPG consumption. January 2021 brought a 15% year-over-year increase in demand; February saw a 12.1% increase, with the winter storms factoring into that slight decline. While March shows a 1.4% year-over-year decline, it is in comparison to the massive 21% spike the year before.
Revised CPG Economic Forecast
Demand for CPG products during the first quarter of 2021 was higher than predicted at the beginning of the year, affecting Consumer Brands’ initial forecast. Incorporating the latest data on personal consumption, together with upward revisions to consumption data, CPG sales for 2021 are now expected to be $1.56 trillion. The new estimate changes the expectation from a 1-2% decline in demand to anticipated growth of 1.4% in 2021 over 2020.
Steadily Rising Costs Force Change
All the demand has contributed to a supply chain at its breaking point. Increased consumer demand is driving manufacturers to buy more raw inputs and materials, leading to higher costs. Producer prices rose 4.2% year-over-year in March, the biggest increase since 2011. Every link in the chain is adding cost right now — ingredients and inputs, packaging material, labor and shipping — and it may be a long time before the supply chain catches up with demand.
“Relentless demand drove costs up to record highs,” said Freeman. “For our companies that say they have never seen an environment like this, we should be asking: What other levers can be pulled to reduce pressures on the system?”
Read Consumer Brands’ full analysis on cost increases here.
The Consumer Brands Association champions the industry whose products Americans depend on every day, representing nearly 2,000 iconic brands. From household and personal care to food and beverage products, the consumer packaged goods industry plays a vital role in powering the U.S. economy, contributing $2 trillion to U.S. GDP and supporting more than 20 million American jobs.
Published on May 11, 2021
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