Consumer Goods Industry Trends and Outlook for 2024

In times of economic uncertainty, the consumer goods industry is typically the first and most heavily impacted sector. This market is particularly sensitive to any shifts in inflation, consumer preferences, or behavior, and can provide valuable insights into the overall state of the economy. 

Looking back at the past few years, we have consistently seen how macroeconomic events like the COVID-19 pandemic and Russia-Ukraine war lead to global supply chain shortages and high inflation rates. Subsequently, consumers have seen a consistent and considerable increase in prices of goods, as companies strived to offset skyrocketing operational costs. 

And while many companies had success in driving up prices—in part due to the trend of premiumization—the scales may have finally tipped too far. In other words, consumers are now trading down on essential commodities—a signal for consumer goods leaders to adopt a different and more sustainable tactic for revenue growth.

Additionally, as technology continues to advance at record-breaking speeds, and is increasingly integrated into industries’ operations and consumers’ lives, the industry will have to navigate the opportunities and challenges of digital transformation, customer data analysis, and artificial intelligence.

Below, we dive into the key trends shaping the consumer goods market in 2024, as well as the outlook for the industry this year and beyond. 

Top Consumer Goods Trends in 2024

Shift to Profitable Volume

For the last few years, the way most consumer product companies chose to deal with inflation and rising input costs was by increasing product prices. In 2023, the prices of goods reached a new high, yet consumers continued to buy—resulting in healthy YoY growth for the industry. However, cracks in the foundation are beginning to show. 

Consumers seem to have finally reached the limit of how much they are willing to pay for certain products. And companies are now realizing that the astronomic growth they’ve recently experienced is disproportionately attributable to price increases, rather than volume gains. 

In the US and Europe, price increases accounted for 95% of retail sales value growth. Meanwhile in China, product volume and pricing were both under pressure amid low consumer confidence. Global gains in product volume have mostly come from emerging markets, with India being a prime example of balancing growth between price and volume.

In 2024, companies will turn to and leverage emerging markets as a way to unlock product volume growth. Most will be moving away from price increases—only 2% of consumer products executives will prioritize raising prices as part of their growth strategy, according to a survey conducted by Deloitte. Instead, the vast majority of C-suite leaders are now pursuing the strategy of profitable volume, which focuses on selling more units while prioritizing profitability. 

In practice, this looks like divesting low-margin lines of business, increasing product marketing spend, investing in innovation, and being more strategic with price setting. Ultimately, the goal is to create a more profitable product mix that retains as much pricing as is practical, while steadily increasing volume. 

New Strategic Approach to M&A

Although 2023 saw a downturn in M&A activity, experts predict a resurgence of dealmaking in 2024 in the consumer goods space. For those wanting to increase profitability and resist raising prices, acquisitions remain a highly lucrative, sustainable way to expand.

Additionally, economic uncertainty and high interest rates have decreased valuations for potential acquisition targets, making them more attractive for buyers. Consumer product companies with healthy balance sheets will have a selling advantage, particularly as many private equity investors are reluctant to spend capital due to high interest rates.

M&A activity in 2024 will also focus on portfolio consolidation—strengthening the core with established brands to build scale—rather than a “grow at all costs” approach. For the past few years, companies had been acquiring smaller, fast-growing competitors and adjacent brands without prioritizing full integration, a tactic that ultimately proved fruitless. 

Overall, corporations who invest in building ongoing M&A capabilities will be much better positioned than those who engage in episodic dealmaking, according to a McKinsey analysis. Further, leadership must stay on top of key trends and macroeconomic events to keep an advantage over those who pursue dealmaking without a comprehensive market outlook.

Related Reading: 5 Ways Expert Insights Lead to Successful M&A

Continued Focus on Sustainability

For the consumer goods industry, sustainability remains a concern for consumers, shareholders, and investors, as the sector is one of the largest distributors of single-use plastic and is also one of the most strongly influenced by consumer preferences.

With consumers heavily prioritizing purchasing from companies that authentically instill ESG practices, executives see an opportunity for innovation and customer acquisition and retention in sustainability initiatives. 

According to a recent survey by Deloitte, 76% of consumer goods executives said their company embraces a circular economy model, which encourages the reusing, recycling, or refurbishing of goods. Many companies are also innovating in their product development, creating green versions of existing products or developing entirely new product lines meant for environmentally conscious consumers who are willing to pay a premium. Half of global consumers cite sustainability as one of their top considerations when shopping and would be willing to pay 10% more for sustainable products. 

In the regulatory landscape, new disclosure and sustainability rules are emerging. The European Union and the United States are both expected to release new regulations under the Corporate Sustainability Reporting Directive (CSRD) and the SEC’s climate-related disclosures, respectively. With the first CSRD-related reports expected in early 2025, companies will likely be spending the remainder of 2024 preparing. 

This year, regulators are also expected to crack down on greenwashing—unsubstantiated and vague ESG claims in corporate reporting. 

Greater Integration of Technology

Like most industries, the consumer goods space has undergone a period of digital transformation for  several years. This includes internal transformation,(i.e., how companies manage their data) as well as external changes (i.e., new digital channels for selling products, greater reliance on social media), and much more integration between online and in-person shopping.

Even with cost-savings as a top priority, corporations must invest in new technologies and data strategies to stay competitive. Consumers are expecting e-commerce and omnichannel experiences from the stores they shop at, and companies must strive to create a seamless experience for customers shopping both online and in-person. 

But does embracing new technology benefit company profits? McKinsey research found that consumer goods companies bring products to market 50% faster at a third lower cost with double the return on investment when they engage in digitally-enabled innovation. 

Additionally, by utilizing technology to collect and analyze real-time data on customer behavior, supply chain management, and store operations, companies can identify areas of improvement and avoid certain issues or failures.

Use of Artificial Intelligence

Artificial intelligence (AI) is capable of revolutionizing various aspects of the consumer goods industry, allowing companies to gain an unprecedented level of insight into their customers, create better products, and gain a competitive edge. 

More than ever, consumers are craving personalization—AI allows companies to connect with customers on a deeper level by delivering tailored products and experiences.

Generative AI (genAI), a new iteration of AI that can create new and original content, has already made waves in every industry. Within the consumer sector, specifically, genAI has use cases that include internal efficiency enhancements, greater personalization, customer service, improved product development, and actionable business insights. 

In 2024, we expect to see greater integration of AI into consumer goods companies’ operations and strategies. Particularly, AI will be a key tool for realizing profitable volume growth and prioritizing sustainability.

Companies that embrace AI this year will be setting themselves up for greater efficiency, reduced operating costs, and greater customer satisfaction and loyalty.

Consumer Goods Industry Outlook for 2024

The consumer goods industry is undeniably in a season of transformation, and this year will likely separate the leaders from the laggards. As the economy slowly stabilizes—even amidst persistent headwinds—the strategies and tactics that were necessary to survive in years prior will no longer be sufficient. 

Now more than ever, it’s imperative for consumer goods companies to lean into the power of technology and innovation, while staying keenly aware of consumers’ changing preferences and behaviors. Regardless of how the economy fares, achieving these two objectives will increase resilience in the face of unforeseen circumstances, build stronger customer loyalty and trust, and provide a competitive advantage.

Now is the time for implementing new goals, priorities, and strategies—ones that reflect the world we live in today, rather than what worked in the past. Technology, AI, sustainability, and profitable volume are the future of consumer goods, and these will all be integral tenets for effectively serving the rapidly evolving needs and expectations of the modern consumer. 

Get the Competitive Edge with AlphaSense

For consumer goods companies today, it’s crucial to keep tabs on consumer behavior, market trends, and the competitive landscape, so as to avoid research blind spots and mitigate the risk of falling behind.

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