Why Are CPG Brands Launching More SKUs And More Custom Packaging?
It's no secret that CPG brands are launching more SKUs. In fact, a 2018 study by Lek found that over 60% of brand owners planned to enter more channels with channel-specific products and SKUs in the following 12 months. So why is this happening? There are four primary reasons: demand for "value" brands, increasing promotional activity, micro-segmenting consumers and the need for distinct packaging formats. Let's take a closer look at each of these reasons.
More demand for "value" brands during recessions
During periods of slow economic growth, people are naturally more price-sensitive and looking for ways to save money. In response, many brands have launched "value" sub-brands that offer the same quality as the main brand but at a lower price point. For example, during the Great Recession of 2008-2009, Procter & Gamble launched several new value brands, including Tide Simply Clean & Fresh and Olay Fresh Effects.
Increased promotional activity
Increasing promotional activity is one of the key drivers behind the launch of more SKUs. With more products vying for shelf space, brand owners among have expanded the scope and increased the frequency of their promotional activities, including offering limited-run product variations geared toward special events/seasons. This means that they need more SKUs to support these promotions.
Micro-segmentation
Micro-segmenting consumers is another factor that's driving the launch of more SKUs. By targeting specific sub-groups of consumers with tailored products and messages, CPG companies are able to better address their needs. As a result, they've developed an ever-expanding array of sub-brands, product extensions and new SKUs (e.g., not necessarily a product extension but a new packaging format of an existing product), each requiring its own packaging.
More competition = more custom packaging
Finally, the need for distinct packaging formats is also playing a role in the launch of more SKUs. With the increasing popularity of e-commerce, brand owners are facing the challenge of how to make their products stand out in a sea of digital images. One way they're doing this is by offering different packaging formats for different channels (e.g., online vs. offline). This not only requires more SKUs, but also poses a challenge for logistics and fulfillment.
Conclusion
As you can see, there are several reasons why CPG brands are launching more SKUs. While it's important to keep up with the competition, it's also important to make sure that you have the necessary infrastructure in place to support the increased number of SKUs.
To ensure you can get all of your new SKUs into market on the timelines you commit to, engage a team of production design experts like KitPrint that will shepherd your designs off the screen and onto the shelf.
