Top 6 CPG Industry Risks and Challenges

Consumer packaged goods (CPG) faces many risks and challenges. Here are some of the most common ones to watch for in the CPG industry.

December 1, 2023 · READ

Consumer packaged goods (CPG) — and to some extent, services — is arguably one of the most challenging industries to be successful in. It’s a tightrope walk between fostering innovation and adaptability while safeguarding the core elements that led to initial triumphs. This intricate balancing act not only opens doors to new growth opportunities but also poses a constant challenge for top-level executives to meet evolving consumer demands. While this allows organizations to find new growth opportunities, it also means a growing number of CPG industry risks. 

Common challenges facing the CPG industry

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Security Risk Management Report

While flourishing with innovation and adaptability, understanding the multitude of CPG industry risks means grappling with various challenges that demand strategic solutions. These challenges are not just operational hurdles for security teams to overcome; they pose significant risks to the industry’s integrity, financial stability, and brand reputation. While implementing software can help mitigate these CPG industry risks and challenges, it is important to first be aware of them:

  • Counterfeiting: There are approximately $200 billion and 750,000 jobs lost due to counterfeit merchandise, according to the US Customs and Border Protection, making it one of the most important CPG industry risks to mitigate. Security teams must work to identify and investigate counterfeiting rings, collaborating with law enforcement for international shutdowns, and securing intellectual property to prevent designs from falling into the hands of counterfeiters. 

  • Shrinkage: Addressing the pervasive challenge of shrinkage, security plays a multifaceted role by implementing effective controls, conducting thorough investigations into theft and fraud, and promptly responding to incidents involving shoplifting. This is essential for safeguarding assets, reducing losses, and maintaining the integrity of the retail and consumer goods industry.

  • Interaction with the public: Navigating heightened risks of workplace violence arising from increased public accessibility, security teams play a crucial role in ensuring proper interaction through comprehensive training programs. This not only safeguards employees but also protects the brand, as highlighted by past incidents impacting company reputation.

  • Multiple locations: Managing security across multiple locations poses a significant challenge, requiring meticulous enforcement of loss prevention protocols. The complexity intensifies the need for robust incident reporting systems to ensure effective oversight and risk mitigation.

  • Common & re-occurring incidents: Security challenges encompass combating counterfeiting through international collaboration and employee vulnerability, particularly in high-crime areas, while implementing protective measures against theft, vandalism, and insider threats. Additionally, the industry faces heightened risks to executives, necessitating comprehensive protection measures and potential exposure to threats and protests due to social affiliations

Top 6 CPG industry risks

As you and your team work to satisfy each of your consumer’s individual preferences, navigate digital disruptions, and grapple with global market dynamics, the challenges you encounter might make you feel like the ringmaster at a circus. Let’s step into the tent and examine the six most common CPG industry risks.

1. Consumer preferences and social responsibility

In the CPG arena, the paramount challenge rests in the shifting sands of consumer preferences. With a spotlight on wellness and sustainability, brands grapple with aligning their offerings to these evolving values while maintaining market competitiveness. The demand for socially-conscious choices necessitates a delicate dance between tradition and innovation.

2. Digital disruption and changing retail landscape

As consumers make the move to online experiences, CPG companies must confront the impact of voice search, podcasts, and similar avenues and respond by shifting from traditional retail. Adapting to these changes becomes imperative for capturing the attention of a digitally savvy consumer base. The entry of direct-to-consumer startups alongside established retail giants adds complexity to the competitive landscape.

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3. Supply chain struggles and distribution challenges

Behind the scenes, supply chain distribution faces hurdles as retailers emphasize private labels and seek lower prices, which affect production, distribution, and delivery. These intricacies significantly contribute to CPG industry risks and exert pressure on the financial bottom line. Some examples of supply chain challenges include:

  • Vendor negotiations: As executives prioritize their company’s own products, demanding lower prices from CPG brands while reducing inventory is key. However, this puts profitability at risk, prompting a delicate juggling act to maintain healthy margins amid increasingly demanding negotiations.
  • Labor shortages: When the supply chain spotlight expands, a shortage of key performers inevitably emerges. The rise of e-commerce intensifies expectations for shorter delivery windows, creating pressure on logistics, which threatens to disrupt delivery schedules and inviting penalties that can throw profitability off balance.
  • Climate change: A single climate event – like a storm, flood, or other natural calamities – has the potential to halt operations, disrupt product flow, and slow down the journey of goods to the end consumer.
  • International trade: Shifting policies, tariff uncertainties, and geopolitical dynamics add complexity to CPG industry risks. Events like trade agreements, new tariffs, or the aftermath of a global pandemic can tip the balance, reshaping the landscape of international trade and influencing where companies source their supplies and sell their products.
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4. Corporate social responsibility (CSR) imperative

Misalignment with social or environmental values are substantial CPG industry risks, as consumers are becoming increasingly discerning. Loyalty is often directed towards brands that actively support causes aligned with their beliefs, and failure to adhere to these values can result in reputational damage.

The risk amplifies on social media, where any deviation from CSR commitments can swiftly escalate, causing harm. Stringent regulatory frameworks add another layer, demanding proactive compliance to avoid legal repercussions. Ethical dilemmas in sourcing and decision-making further complicate the tightrope walk, making technological solutions imperative to the CPG industry, demanding agility, integrity, and a commitment to responsible business practices. 

5. Intellectual property concerns

Intellectual property theft and patent infringement further compound the complexities of CPG industry risks, impacting branding, reputation, and the ability to innovate. With branding and packaging playing a pivotal role in customer loyalty, the threat of intellectual property theft and patent infringement looms large, thus enforcing the need to safeguard sensitive information as a critical aspect of risk management. Counterfeit products not only dent revenue but also jeopardize brand integrity and consumer trust.

CPG companies should invest in robust strategies, including legal safeguards and advanced technologies, to shield their intellectual property from theft and infringement, ensuring they remain agile and innovative while safeguarding the distinctiveness that sets them apart in a crowded market.

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6. Regulatory compliance challenges

Regulatory compliance challenges are key when assessing CPG industry risks. Given the intricate standards and guidelines governing product formulation, labeling, and marketing, navigating new regulations and heightened consumer expectations demands meticulous attention. Non-compliance not only attracts legal repercussions and financial penalties but also carries the weight of tarnishing brand reputation. With a heightened focus on issues like sustainability, transparency, and health-conscious choices, companies must proactively adapt and ensure that their practices align with a dynamic regulatory environment, fostering both legal resilience and consumer trust in order to mitigate CPG industry risks.

How Resolver helps mitigate CPG industry risks

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Threat Management Dashboard

Resolver offers a comprehensive suite of corporate security software designed to empower security teams in navigating and mitigating risks within the CPG industry and beyond. Our solution facilitates effective risk assessments and site audits, enabling the identification of vulnerabilities and prioritization of countermeasures. With an emphasis on data-driven decision-making, Resolver’s Incident Management Software seamlessly connects incident data with risks, contributing to a proactive risk management approach.

We provide an end-to-end solution, aiding in the reduction of incidents and their impacts through detailed incident lifecycle management, root cause analyses, and trend reporting. Our application supports various use cases, including brand protection, loss prevention, IT security, case management, and violence threat assessment.

With software that empowers security teams to detect, investigate, assess, and report on threats consistently, Resolver allows you to enhance situational awareness by centralizing event identification, alarm management, and response coordination, thereby ensuring effective organizational safety. From features like integration with access control systems, to dispatch functionalities, and mobile app documentation, Resolver offers tailored solutions from basic audits to supporting full enterprise security risk management programs. See for yourself how our consumer goods and retail Corporate Security solutions can help you by joining a showcase today! 

This content was originally published on November 20, 2019
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