At a time when many industries struggled to stay afloat, CPG companies were busy adapting their operations to meet soaring demands. Annual CPG sales were up 9.4% from 2019 and reached a total of $1.53 trillion in 2020, according to the new CPG Economic Pulse report from Consumer Brands Association.  

Consumers relied on the CPG industry to keep them stocked with food and other essentials during the pandemic. And CPG companies proved they could handle the challenge — over the past year, many were able to increase their production capacity, expand their workforce, and give their employees a raise. 

“CPG companies had to focus intensely on output because people needed their products so they could stay home,” Geoff Freeman, president and CEO of Consumer Brands Association, said in the latest report. “The 2020 economic data is the paper trail of a year when the CPG industry rose to the occasion and delivered.”

A supply boost to meet demand

Following a big 21% sales spike in March, CPG sales remained elevated through the rest of 2020, rarely falling below a 10% year-over-year increase. The consistent demand left no room for rest for manufacturers — to keep up, many production facilities stayed up and running seven days a week and shifted the focus to their high-demand products.

Though overtime hours dropped by 9.6% across the manufacturing industry in general, the average amount of overtime hours for food manufacturers jumped by 5.1% between May and December 2020 (compared to the same period in 2019). 

Pandemic demands also drove many companies to expand their operations. Despite decreases in the broader economy, the number of CPG establishments increased by 2.6% from Q3 2019 to Q3 2020. Other brands increased their third-party suppliers and manufacturers — General Mills expanded its partners by 20% to strengthen its supply chain and plans to hold on to those additional partners until demand slows. 

Hiring and higher wages

The CPG industry suffered a loss of 170,000 jobs at the start of the pandemic. But, unlike many other industries, it was able to recover those jobs quickly, gaining back 125,000 by the end of 2020. While the nation finished out the year at 94% of its January 2020 employment level, the CPG industry was at 98%.

Food companies have also been actively supporting their existing employees since the start of the pandemic, particularly their essential frontline workers. This support includes offering bonuses and incentives and increasing pay. In fact, while non-farm nationwide wages dropped by 0.8% from Q3 2019 to Q3 2020, food manufacturing pay was up by 3.4% for the same period. That’s a total increase of $900 million for the quarter.

A gradual demand deceleration

Consumer Brands predicts that CPG purchases will slow down by 1% to 2% in 2021. Even if that happens, CPG sales for the year would still be between 7.4% and 8.5% higher than 2019. 

Some pre-pandemic consumer behaviors may return as vaccine distribution ramps up. But after a year like 2020, food manufacturers and other CPG companies are prepared for anything. “It cannot be emphasized enough how incredible the industry’s response to sustained high demand was last year,” said Freeman, “and continues to be into 2021.”

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