Loading the player...

What are 'Consumer Packaged Goods - CPG'

Consumer packaged goods (CPG) are items used daily by the average consumer. The goods that make up this category are ones that need to be replaced frequently, compared to those that are usable for extended periods of time. While CPGs represent a market that will always have consumers, it is highly competitive due to high market saturation and low consumer switching costs. Some basic examples of CPGs are food and beverages, clothing, tobacco and household products. CPGs can also be called fast-moving consumer goods. 

BREAKING DOWN 'Consumer Packaged Goods - CPG'

The consumer packaged goods industry is one of the largest in North America, valued at approximately $2 trillion. Although growth has slowed in this industry, companies that provide CPGs still benefit from large margins and strong balance sheets.

Companies that sell CPGs often face stiff competition. Shelf placement, brand recognition and mass advertising can greatly influence sales of CPGs. Some of the best-known CPG companies include Coca-Cola, Procter & Gamble and L'Oréal.

Consumer Packaged Goods vs. Durable Goods

CPGs generally have a short lifespan. They are intended to be used quickly and are often sold at a relatively low cost. As the name implies, they usually come in some form of packaging that can be displayed on the shelves of retail businesses.

Cosmetics are one type of CPGs. Like most CPGs, they typically have a limited shelf life; the product deteriorates over time or if exposed to extreme temperature fluctuations. Sold in individual packages at fairly low prices, consumers use products such as lipsticks, foundation, blush and eyeshadow on a daily basis, requiring frequent replenishment. After using the product, the consumer either discards or recycles the packaging.

Frozen dinners offer another example of CPGs. These perishable items are often purchased every few days for immediate use. The purchase requires little deliberation on the part of the consumer. Sold at retailers across the globe, they have high volume sales.

Durable goods, on the other hand, are intended to last for several years. In contrast to some kinds of CPGs, durable goods do not deteriorate quickly and are expected to remain in relatively good condition while being used over an extended period of time.

An automobile is an example of a durable good. The purchase typically requires considerable thought and comparison shopping, since it represents a significant financial investment. The buyer of a new car usually expects to drive his vehicle for several years with few maintenance problems.

Economic slumps are often accompanied by flagging sales in durable goods industries. When the financial future is uncertain, consumers are reluctant to spend large sums of money on durable goods, especially if they already own an older version of the product. A family might, for example, decide to hold on to an outmoded washing machine instead of upgrading to a newer model in times of economic stress. In contrast, CPG companies that sell staples such as bread or other basic food products are less affected by market fluctuations.

CPGs in the Digital Age

CPGs have typically been sold in traditional brick and mortar stores. But there’s been a shift for these products to be sold in the e-commerce sector, with more infrastructure in place for online retailers to sell CPGs. Consumers can order and pay for their CPG purchases using the click and collect model, where they can get a text message saying their order is ready for pickup or delivery. Several of Amazon’s business services, like Prime Pantry, allows customers to buy CPGs and have them delivered to their front door. 

RELATED TERMS
  1. Consumer Goods

    Consumer goods are the products purchased by the average consumer. ...
  2. Rival Good

    A rival good is a type of product or service that can only be ...
  3. Private Good

    A private good is a product that is purchased to be consumed, ...
  4. Capital Goods

    Capital goods are tangible assets that a business uses to produce ...
  5. Consumer Spending

    Consumer spending is the amount of money spent by households ...
  6. Consumer Staples

    Consumer staples encompass products most people need to live ...
Related Articles
  1. Investing

    Global Consumer Durables: Exploring Revenue Trends and Fundamentals

    Examine geographic revenue data from the consumer durables sector to identify catalysts and trends.
  2. Tech

    5 Things CPG Companies Can Do to Win More Growth (AMZN, KR)

    This summary of McKinsey's report details the five imperatives consumer packaged goods (CPG) companies can employ to obtain more growth than the competition.
  3. Investing

    3 Popular Consumer Sector ETFs in 2016 (XLY, XLP)

    Find out which consumer sector exchange-traded funds (ETFs) are the most popular going into 2016 based on the amount of assets under management.
  4. Small Business

    2 Key Tactics Retailers Use To Increase Sales

    Many companies use versioning and bundling to increase sales. These strategies can offer value to consumers, but they also mean higher costs.
  5. Insights

    Amazon Changes Gift Wrap This Holiday Season (AMZN, GOOG)

    In a bid to reduce packaging waste, the Seattle e-commerce giant will use velvet bags, instead of wrapping paper, to deliver gifts from its site.
  6. Investing

    3 Things To Consider When Buying Home Products

    There is still room for consumer caution when it comes to purchasing household goods.
  7. Investing

    Will Staples ETFs Continue to be a Safe Haven

    Consumer staples stocks and ETFs that track them can be a haven during tough market times.
  8. Insights

    Consumer Confidence Index

    The Consumer Confidence Index is the result of a monthly survey of 5,000 U.S. households by the Conference Board that measures how optimistic or pessimistic consumers are about the economy's ...
  9. Investing

    Consumer Confidence: A Killer Statistic

    The consumer confidence is key to any market economy, so investors need to learn how to analyze them.
  10. Investing

    UPS Stock: An Earnings Case Study

    Check out the analysis of earnings for United Parcel Service, including historical earnings, past analyst estimates and future analyst estimates.
RELATED FAQS
  1. Which economic factors most affect the demand for consumer goods?

    Understand how key economic factors such as inflation, unemployment, interest rates and consumer confidence affect the level ... Read Answer >>
  2. How does the Bureau of Labor Statistics determine the Consumer Price Index (CPI)?

    Changes in the average price level of more than 200 goods and services across the U.S. economy are used to determine the ... Read Answer >>
  3. What are the similarities between product differentiation and product positioning?

    Learn how two marketing strategies, product differentiation and product positioning, are similar and work together to effectively ... Read Answer >>
  4. What is the relationship between the PPI and the CPI?

    CPI and PPI calculate the change in price of a set of goods and services, but there are two fundamental differences between ... Read Answer >>
Trading Center