Consumer product sales were up 9.4% last year to $ 1.53 trillion

Rising demand from the coronavirus pandemic led to sales of consumer packaged goods, which include everything from toilet paper to canned soup, up 9.4% last year to $ 1.53 trillion, according to a new report from the Consumer Brands Association.

But rising demand has not abated, and the trade group said manufacturers are still struggling to catch up on their inventory. To meet the challenge, companies are hiring more employees, adding new factory lines and raising wages amid the sustained surge in demand.

“This was the biggest test the system could have ever passed,” said Geoff Freeman, CEO of Consumer Brands. “Our wildest imaginations may not have imagined the 12-month wave we have just experienced.”

Even as the pandemic abates, Consumer Brands predicts industry sales will still rise 7.4% to 8.5% in 2021 from 2019. last March. February sales growth slowed somewhat, but was still in double digits. Before the pandemic, strong growth meant an increase in the low single digits for a CPG company.

“This industry is still running a marathon,” said Katie Denis, Consumer Brands vice president of Research and Industry Narrative.

Last year’s surging demand means manufacturers are still trying to catch up, and any obstacle could result in millions of dollars in lost sales. Freeman cited a conversation with a CEO who saw that more than a quarter of its factories were closed for a week in February due to the Texas winter storm. The blockade of the Suez Canal in March caused even more headaches.

General Mills and Clorox are among the companies that turned to third-party manufacturers for a temporary solution to the sky-high demand. The situation has prompted some CPG companies to rethink inventory targets and think about how close products should be to retailers. Freeman said some manufacturers won’t be able to catch up until new capital expenditures come online.

The current stress on the supply chain means that some shortages, such as the ongoing scarcity of ketchup packets first reported by the Wall Street Journal, are more difficult to predict.

“That’s the kind of thing we should see coming six to 12 months in advance,” said Freeman.

The surge in demand has resulted in higher wages for employees in the production of CPG. PepsiCo and Hormel were among those who gave out bonuses to their frontline employees last year. Compensation for food production workers increased by 3.4% in July through September compared to the same time a year ago, according to the Consumer Brands report. Nationally, non-agricultural wages fell by 0.8% over the same period.

“I do not know if [wages] will climb higher than 2020, but there is no reason to believe there will be a drop-off, according to the companies we surveyed with McKinsey, ”said Denis.

CPG companies also increased their recruitment. After the initial job cuts hit the industry, particularly for food service providers, other food, beverage and household product manufacturers tried to bring in more workers. Some companies hired 10% to 20% more workers than they actually needed to account for employees who were in quarantine or caring for sick family members, according to Freeman.

According to the Consumer Brands report, current manufacturing industry employment is down just 2% from January 2020, while total US employment was 6% in March.