Trends Shaping The 2024 Consumer Packaged Goods Industry

This article was originally published in Law360 on December 21, 2023, and is republished here with permission.

As we enter 2024, the landscape of health and well-being is far removed from the initial era of digital watches merely counting steps.

Today, we find ourselves amid a paradigm shift, with advanced devices seamlessly integrating into our lives to monitor various health metrics. This includes automated data and manual inputs related to diet, health practices and overall nutrition.

This holistic and sophisticated approach to personal wellness signifies a significant evolution. In 2024, this comprehensive and better-for-you trend will be a pervasive and transformative force, shaping how we perceive and prioritize our health journey.

The better-for-you, or BFY, segment within the consumer packaged goods, or CPG, industry, poised for a significant evolution in 2024, is driven by a surge in consumer preferences for healthier choices and overall wellbeing. As consumers gravitate toward better-for-you products, they will look for products that signal gut health, relaxation, energy and other functional benefits.[1]

As we anticipate the coming year, it becomes clear that mergers and acquisitions, legal considerations, and other key trends will also play pivotal roles in shaping the landscape of the BFY CPG market.

Traditionally dominated by industry titans, the CPG industry is experiencing a shift with the rise of disruptive entries, particularly in direct-to-consumer CPG entities, challenging the established dominance of significant conglomerates.

This transformation reshapes how consumers engage with the marketplace and how brands deliver their products, marking a visible seismic shift in traditional commerce paradigms.

CPG Industry: Key Facts

At the beginning of 2022, the CPG industry boasted a valuation of $11.49 trillion, with a projected compound annual growth rate of approximately 5% from 2022 to 2031, reaching an estimated $18.94 trillion by 2031.[2]

The top segments within the CPG space encompass food and beverages, cosmetics and personal care, pet supplies, over-the-counter medicine and healthcare, and household and cleaning products.

The food and beverage sector takes the lead in driving sales within the CPG landscape. In May, monthly food sales in the U.S. reached a staggering $1.3 trillion, showcasing robust year-over-year growth in center-store food and beverage sales and perimeter sales.

M&A Trends in the Food and Beverage Industry

The food and beverage industry is witnessing a flurry of merger and acquisition activities, defying concerns over rising interest rates and stringent capital conditions.

Major CPG companies in the food and beverage sector continue to acquire brands to enrich their portfolios, focusing on beverages and health-conscious categories.

In 2024, several noteworthy trends in the food and beverage industry are set to shape the landscape, including a growing interest in foods offering functional benefits and incorporating superfoods and adaptogens to enhance nutritional value. Additionally, we can expect an expansion of online platforms for purchasing healthy food and beverage products, along with direct-to-consumer models enabling closer customer relationships.

Be on the lookout for integration of technology, including applications and wearables, for monitoring and improving health through nutrition, providing data-driven insights for personalized wellness plans as well as the development of healthier snack options with a focus on portion control and nutritional density, such as protein bars, vegetable chips and functional snacks.

Mergers and Acquisitions in BFY CPG

Anticipated to dominate the BFY CPG sector, M&A activities are set to be a focal point as companies strive to strengthen their market positions.

Large food CPG companies are keen to deploy their capital through M&A, yet executives emphasize their current selectivity in targeting assets. They prioritize transactions that enhance their exposure in specific areas or introduce them to rapidly growing categories.

After a phase of prolonged mega-deals, companies are now honing their focus on acquiring individual brands, often in deals exceeding $1 billion.[3] Established players are expected to acquire innovative startups, leveraging fresh ideas and novel product offerings. This trend is propelled by the increasing demand for healthier and more sustainable alternatives, mirroring evolving consumer priorities.

The industry is poised for collaborative efforts and strategic alliances between major corporations and inventive startups. This collaboration is expected to foster the exchange of technological expertise and market insights.

Legal Scrutiny and Consumer Awareness

While the future of BFY CPG looks promising, challenges loom on the horizon.

As consumer awareness of health and wellness grows, regulatory bodies are expected to scrutinize health claims made by BFY products more closely. Adapting to evolving regulations in the food and beverage industry, particularly regarding clear and accurate nutritional labeling, is crucial for meeting consumer demands for transparency.

Stricter transparency and labeling regulations may become commonplace, providing consumers with more information about the nutritional content and sourcing of BFY products.

Personalized Nutrition

Personalized nutrition will continue to have significant breakthroughs in 2024, thanks to technological advancements, particularly generative artificial intelligence.

This transformative force is reshaping the food and beverage industry’s landscape by collecting predictive data and leveraging this information for more informed decision-making.

As technology continues to evolve, sophisticated tools have emerged to analyze diverse aspects of individuals’ health, including genetic and biochemical markers, paving the way for substantial progress in personalized nutrition.

The dynamic field of generative AI, a subset of machine learning, is witnessing intense competition with notable players such as ChatGPT and Bard.

The concept of generative AI as a transformative force in the food and beverage industry is intriguing and reflective of the rapid evolution of business-building technologies available to industry leaders, a trend expected to accelerate further in 2024.

Sustainability Initiatives in 2024

Sustainability remains a central focus in the 2024 BFY CPG market, with an increasing emphasis on eco-friendly practices in food production and packaging.

Additionally, according to marketing research firm Mintel, 42% of Generation Z and millennial shoppers say sustainability and environmental claims are more important than price. As a result, products with “better-for-the-planet” packaging options are on the rise.

Companies must adopt environmentally friendly packaging, sourcing, and manufacturing practices to align with consumer preferences for lower environmental impact and ethical sourcing.

In the CPG industry, a large part of sustainability comes from packaging. For example, candy is usually wrapped in plastic.[4] Still, many candy companies are committing to changing packaging to a more sustainable option as packaging has become a hot-button issue in the cleaning products segment.

Into the New Year

The BFY CPG market is set for a surge in digital transformation initiatives, leveraging technology to enhance customer engagement, streamline supply chains and collect valuable data for personalized product development.

Personalization and customization, driven by consumer demand for personalized nutrition, will be a competitive advantage, creating more niche offerings.

Industry players must remain agile and adaptive as the BFY CPG market marches on in 2024. M&A activities, legal considerations, sustainability initiatives and embracing technology will define success in this dynamic landscape.

By staying attuned to emerging trends and consumer preferences, companies can strategically position themselves to capitalize on the opportunities presented by the evolving BFY CPG market.