In January, we gave six predictions for 2024. With the year coming to a close, it’s time to ask: did we get them right?
Prediction one: Consumers Will Spend Less
Actual: Yes, consumers have shifted buying behaviors in 2024, to include moving to private label and comparing prices across retail channels. A recent survey conducted by Alvarez and Marsal Consumer and Retail Group revealed that 25% of consumers with less than $50K in income have switched this year to less expensive retailers, 32% have shifted to less expensive brands, 19% have reduced consumption, and only 24% have made no changes to buying habits.
In response, Alvarez and Marsal now predicts private labels will account for 24% of grocery spending by 2030, up from roughly 20% today. In response, Kroger for example, has just announced that it has launched nearly 600 private label products so far this year.
Prediction two: Supply Chains Will Remain Choppy
Actual: Yes, supply chains have remained choppy throughout 2024. According to Resilinc’s AI monitoring system, EventWatch AI, the manufacturing industry experienced 10,629 potential disruptions in the first half of 2024, up from 8,197 the previous year—a 30% increase. EventWatch AI categorizes supply chain disruptions into 50 event types and 400 risk types, from extreme weather and industrial accidents to labor issues and more. Looking at these categories, the top manufacturing supply chain disruptions for the first six months of 2024 were:
- Factory Fires (1,298 disruptions)
- Labor Disruptions (1,047 disruptions)
- Merger & Acquisition (837 disruptions)
- Leadership Transition (836 disruptions)
- Factory Disruptions (788 disruptions)
Since then, choppiness has only intensified, as we’ve had the East Coast port strike this fall, and delays caused by weather issues, such as Hurricanes Milton and Helene – all of which led to a cascading effect on our supply chains.
Prediction three: AI x Social Media x SEO = More Spikes in Product Demand
Actual: Yes, we’ve certainly seen our CPG customers significantly adjust their product demand based on unpredictable Amazon algorithms, and our CPG customers are continuing to deal with SKU proliferation as consumers shift buying interests and retail channels. We expect this trend to amplify in 2025 as consumers continue to adjust their lifestyles and AI in personalized marketing starts to mature.
Prediction four: Sustainability Goes Mainstream
Actual: Mixed. We’ve seen a growing number of customers delve into our sustainability report, and a few have asked for data related to their carbon scores relative to their individual goods. But our delivery is considered Scope 3 for our brands, and the detail and attention toward tracking Scope 3 results is not required at this point. What is significant is our customers’ continued interest in us minimizing product waste, and using strategically located facilities to reduce travel costs – all consistent with being as efficient as possible for price-sensitive consumers.
Prediction five: Food Safety Certifications Step Up
Actual: Mixed. We haven’t seen an increased demand for official certifications, but we are seeing CPG customers continue to emphasize the importance of quality in co-packing execution, which bodes well for co-packers like us that have robust QA teams in place and quality-oriented cultures embedded within their organizations.
Prediction six: Co-Packing and 3PLs Gain Traction Together
Actual: Yes, we are seeing an uptick in demand for co-packing services in our customers’ 3PL’s facilities. Most 3PLs are not overly excited about PO-oriented contract models, the need for extreme agility or spontaneity required for co-packing, or the market’s strong desire for a per-unit pricing model that eliminates risk for the brand owner.