While most industries suffered when the pandemic was at its height, some industries survived and even prospered during one of recent history’s most difficult times. One of those is the consumer packaged goods (CPG) industry. The industry experienced better growth during the pandemic because it was flexible and readily adapted to the changing consumer behaviour and the shift in market conditions. As the manufacturers focus on production, their preference shifts toward contract packing to improve innovation and reduce operational costs.
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Evolution of the business relationships
Looking at the growth statistics, it is clear that most manufacturers will continue to use contract packing with third-party providers now and in the future. But there will be more positive movements, according to experts.
Trends are taking shape that will make a more definite business relationship between contract packing companies and their clients.
1. Innovation
Manufacturers must consider and support consumer behaviour. They will need to respond better to the consumers’ demand for basic goods, such as ready-to-eat foods, and a more and wider range of cleaning supplies. Because of the economic situation, larger CPGs are taking over smaller brands. They are reinvesting in these smaller companies and creating more innovative and desirable products. They likewise reinvent their core brands by adding functionality to their current products or exploring co-branding with other popular products. They also enhance the packaging experience by injecting some personality into the package.
2. Speed and adaptability
The uncertainties the previous two years brought encouraged manufacturers and contract packers to improve their adaptability and speed as consumer demand increased while following new guidelines. As a result, all the aspects of the supply chain were prompted to react quicker than before.
Only those businesses that could adapt faster could benefit from the consumers’ increasing demands. But brands must innovate to stay resilient in the new market environment. They can either divest or reinvest based on the position of the brand. The bigger CPGs are innovating and will need more solid partnerships with the contract packers to ensure their support in executing new marketing ideas.
3. More focus on sustainability
The issue of sustainability is going to play a bigger role in the new market. As it is gaining momentum in the packaged goods market, the projection will expand more until 2027. Sustainability means additional resource efficiency. There is a need to enforce environmental and social standards in the supply chain. It means that the manufacturers will rely more on contract packers to help them meet their sustainability plans, and both will support each other in testing and validating the new requirements.
4. Investing in capital and human resources
Companies realised the importance of investing and keeping good talents. The labour shortage will continue if they do not invest in human capital. In the case of capital investments, they need the support of contract packers as the manufacturers try to reduce their operational costs by getting the contract packers to devise solutions to improve operational efficiencies and speed-to-market technologies.
You can expect to see stronger business relationships between manufacturers and contract packers because of the shift to the digital economy, as brands must not lose the sales opportunities that the shift presents to them.
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