Understanding CPG Trends and the Power of Negotiation

By RED BEAR June 1, 2023 | 8 min read

There’s no mistaking the unique environment facing CPG professionals in 2023.

With supply chain issues still stressing businesses and inflation woes troubling consumers, the consumer packaged goods (CPG) industry is looking for inventive and creative ways to solve these problems and look forward.

One key skill to mastering this new era of the industry is negotiation.

RED BEAR Negotiation Training helps transform individuals into world-class negotiators with the skills and confidence needed to succeed in virtually any environment.

But how can this kind of training help your CPG business?

Let’s explore some key trends facing the industry and learn all about how the right negotiation training can help professionals succeed in 2023.

Taming Inflation

Inflation has undoubtedly hit every sector and household, and within the CPG industry, businesses are keen to explore ways to adapt and grow within this tightening inflationary environment.

The unfortunate truth is that slight price increases are hitting CPG businesses hard.

In 2022, food prices across the U.S. rose nearly 10%. While many argue inflation peaked during Q2 2022, global inflation is still at a high of 6.6% in 2023.

While CPG unit prices dropped to 10.2% in February 2023, a decrease of 0.8 points from January, these increases are still above the U.S. Consumer Price Index — showing the somewhat unequal impact inflationary pressures are having on the industry.

Weathering this trend might mean negotiating better terms or finding alternative suppliers that offer more competitive pricing.

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This will test negotiators and put an emphasis on win-win outcomes that leverage creative and collaborative strategies. But that’s not the only way CPG professionals are making attempts to battle inflation.

Another way to mitigate the risks from inflation is through price increases. 

But this is a tricky process. Not only will organizations need to effectively present this increase to consumers, but internal negotiations will be essential to finding solutions that satisfy the needs of internal stakeholders and leadership.

These internal negotiations will also revolve around budget allocation, resource prioritization, and potential cost-saving measures while stressing the importance of executing a concessions strategy to provide a robust give-and-take framework for these discussions.

Moreover, negotiation skills are critical to helping organizations discover innovative solutions to the inflation issue.

“Negotiation skills are critical to helping organizations discover innovative solutions to the inflation issue.”

This might mean developing new business models with partners, new partnerships themselves, or even diversifying product offerings to match consumer demands.

Lastly, inflation issues will put into focus the value of long-term supplier relationships.

These agreements can help mitigate some of the stress from inflation through cooperative efforts toward price stabilization or caps on price increases.

Finding Success in the Era of Shifting Consumer Behaviors

COVID-19 and the subsequent lockdowns forever changed the way consumers engage with brands, and a majority of industry executives think these changes have been considerable.

According to 93% of CPG leaders, keeping up with these changing preferences is a top priority.

As consumer behaviors shift, CPG professionals will need to act fast to work with retail partners to adapt product offerings, positioning, and promotional activities. Collaboration will be the name of the game, and the right approach to negotiation training can help your team develop the skills needed to master these types of discussions.

While the pressure might be coming from external sources, internal negotiations will still drive efforts in product development and sales and marketing strategies to meet the needs of an evolving consumer base.

Another key to succeeding in this environment is partnerships. 

If a CPG company identifies an opportunity to meet consumer demands through a brand partnership (like a health-focused brand partnering with a fitness brand), negotiation training will be essential to finding common ground between parties and reaching favorable agreements on pricing, co-marketing opportunities, and much more.

Finally, to stay ahead of changing consumer preferences, CPG companies may need to invest in innovation and research and development. 

RED BEAR Training can help your team develop the skills necessary to secure funding or negotiate contracts with third-party innovators, researchers, or technology providers.

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Global Markets are Not a Monolith

With COVID responses varying and inflation challenges somewhat specific to geographical areas, operating an international CPG business that answers to several consumer markets is becoming more difficult.

But what’s happening in the U.S. is not completely reflective of the world at large, especially in terms of consumer trends.

Research from Deloitte paints an interesting picture of markets across Asia.

Japan, for example, is seeing a release of pent-up consumer demand after recent COVID restriction lifting. But, paired with a sharp rise in energy and food costs as well as a falling yen, household incomes are weaker than predicted.

Across the Yellow Sea, China is seeing slow growth but increased retail spending. Many experts say this modest growth will continue with increased volatility in the coming months.

These examples illustrate the complexity of global markets.

For CPG business leaders, paying attention to these shifting variables is essential to finding success in these environments.

For example, the slow growth in China might mean looking into other markets for opportunities. This change will require careful negotiation to fully understand the impact this decision might have on a business.

Negotiation professionals working in the CPG industry will need to firmly understand the differences in these markets, as well as cultural variables, to stay ahead.

Understanding the importance of cultural nuances and negotiation with local partners will put an emphasis on cross-cultural negotiation skills. This type of training can help negotiators understand the respective differences in cultures as well as foster an environment that produces effective and successful negotiations. 

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Negotiating Omnichannel Success: Engaging the Modern Shopper

While we’ve yet to see the full death of brick-and-mortar retail operations, there is no denying the impact digital services are having on consumer behavior.

In fact, around 60% of shoppers would rather buy directly from CGP companies than from retail stores. With more and more brands operating online, it’s essential for businesses in the industry to understand the power of an omnichannel strategy that marries online and in-store shopping efforts.

As consumers expect more and more in terms of online experiences, it’s up to CPG businesses to evolve to meet these shifting demands. It’s also an opportunity for businesses to leverage the power of first-party data to help inform business insights.

The omnichannel nature of this new era of retail is putting an emphasis on the skills needed to understand and succeed in operating across multiple channels like through a website or eCommerce store and social media platforms.

As the trend around online purchasing grows, businesses will need to employ increasingly complex approaches to negotiation. Whether it’s negotiating vendor contracts or working directly with consumers, more and more negotiations are happening virtually.

Some vendors are even tackling the sales process with virtual salespeople in both online channels and in stores.

The right training can help organizations by equipping them with the tools they need to navigate this new terrain effectively and profitably.

With the surge in online retail, negotiators will be the key to getting better deals, service quality, and faster delivery times for services. This might mean negotiating with fulfillment operations for faster delivery times, third-party customer service platforms for enhanced consumer support, negotiations with web developers or development teams, or working through vendor negotiations to secure favorable deals that improve a business's bottom line.

Optimizing Supply Chains for Resilience

While inflationary pressures and changing consumer behavior are certainly worth understanding, one stubborn trend is a thorn in the paw of virtually every CPG business.

Even three years after the initial disruption from COVID lockdowns in 2020, 62% of CPG executives believe supply chain issues will be an extreme challenge facing the industry throughout 2023.

To mitigate the risks of supply chain issues and disruptions, negotiators will need to develop robust and collaborative relationships with suppliers. This will involve working together to identify potential vulnerabilities in the current supply chain and develop mutually beneficial agreements to address risks.

For instance, businesses can negotiate agreements that incentivize suppliers to maintain higher stock levels, invest in more robust logistics capabilities, or implement contingency plans for potential disruptions.

Diversification is also another approach to building resilient supply chains. 

CPG professionals will need to negotiate with multiple suppliers across a diverse geographical range. This can help spread the risks and ensure a more steady supply of goods.

The Essential Role of Negotiation in Navigating CPG Trends

While the CPG industry is seeing some overall improvements relative to recent years, many professionals are still feeling the heat from COVID-era disruptions.

Whether it’s supply chain issues or shifting consumer behaviors, one of the keys to staying ahead is mastering both internal and external negotiations.

RED BEAR Negotiation Training is all about turning individuals into world-class negotiators.

Our training focuses on providing unforgettable and uniquely tailored experiential training that focuses on the right principles and behaviors that drive successful negotiations. 

We don’t use tactics but rather provide your team the tools they need to navigate any negotiation with ease and confidence. Our tried and true processes are trusted by over half of the Fortune 500.

Are you ready to see measurable results in your CPG business?

Get started with RED BEAR Training Today

Fill out our contact form and we will be back to you in no later than one business day.

 

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