Our Take on the Trends on Display at Expo West
By Alex Woolford
At Class VI, we watch for lasting shifts in consumer preferences because they help us understand the true value of our clients’ businesses in this space.
That’s why I recently attended the Natural Products Expo West in Anaheim with a few colleagues. We came away with a rich sense of what consumer packaged goods (CPG) companies are doing to shape and react to marketplace trends—not to mention a few product samples tucked in our luggage!
The entrepreneurs we met at the event helped us flesh out insights we’ve pulled from recent conversations with private equity and strategic buyers. Read for some of the notable CPG happenings and how you might leverage them to maximize company value in a sale or capital raise endeavor, now or down the road.
Trends in consumer taste
Where there’s consumer demand, there’s investor interest in funding or buying a company that can fulfill it. Some of the largest strategic buyers in CPG are acquiring innovative companies to add to their portfolios based on the trends below.
Bulked-up protein innovations
Take a tour through the nearest grocery store and you’ll see bold label copy that didn’t exist a few years ago: “Now with 20 grams of protein!” “Protein Iced Tea.” “Fudge brownies—10 g protein per serving.”
Clearly, the market has moved beyond tried-and-true high-protein shakes and bars. Consumers are voting with their dollars to demand products with added protein where none existed before. This might come from a variety of sources, including whey or plant-based formulations.
Clean product labels
The clamor for protein often dovetails with interest in consuming wholesome food and drinks with fewer artificial ingredients and additives. “Clean label,” “real food,” “natural”—the lingo can vary but the intent is the same, a shift toward healthier lifestyles.
We’ve noticed clean-label traction in everything from energy drinks to plant-based meat, and even beauty and hygiene products.
Taking care with personal wellness
Speaking of beauty and hygiene, consumers are spending more money on personal and self-care. There’s even innovation in categories such as skincare marketed to men—historically not the group driving sales in this segment.
Some companies are pitching grooming habits as important parts of wellness, with knock-on benefits for mental health.
Trend in consumer business
Vertically integrating for supply chain control
Vertical integration occurs when you own multiple links along the supply chain, such as materials suppliers, transportation capabilities, and manufacturing facilities. The disruptions caused by COVID forced many companies to rethink logistics infrastructure and bring key components of their supply chains in-house.
Now we’re seeing investors reward vertically integrated companies with greater acquisition interest. They’re drawn to the benefits these firms accrue, which can include:
- Reduced long-term supply chain and distribution costs
- Supply security and transparency, with data readily available for analysis
- The ability to innovate and protect proprietary technology
The downside is that vertical integration requires significant upfront costs because it involves either buying specialty firms or building the infrastructure to keep your products moving. This is a great strategy if you can afford it, but it requires a careful analysis of the short-term costs versus the long-term advantages.
How can you benefit?
If you own a consumer products business, you might increase revenues from innovating along one or more of these lines.
Do you make food or beverages? Maybe there’s space in your R&D budget for a better-for-you offering with added protein. Hoping to be the next big player in personal care? Consider making a clean-label line with natural ingredients that you can market in wellness venues.
Even if you’re not yet eyeing an M&A deal, making data-backed moves like these could potentially grow your profits by catering to popular preferences. And if you’re thinking of a recap or company sale, you’ll be positioned to capture investor interest.
So pay attention to what’s happening in CPG! Even if you innovate in a different direction, it pays to understand the market you’re playing in.
