Consumer Packaged Goods (CPG): What They Are vs. Durable Goods

What Are Consumer Packaged Goods (CPG)?

Consumer packaged goods are items used daily by average consumers that need to be replaced or replenished regularly. These can include goods such as food, beverages, clothes, makeup, toilet paper, and other household products.

While consumer demand for consumer packaged goods (sometimes known as CPGs) largely remains constant, it is still a highly competitive sector. This is primarily due to high market saturation and low consumer switching costs, where consumers can easily and cheaply switch their brand loyalties depending on price or quality (real or perceived).

Understanding Consumer Packaged Goods (CPG)

Despite experiencing a slowdown in growth over recent years, the consumer packaged goods industry is one of the largest sectors in North America. The sector contributes approximately $2 trillion to the United States gross domestic product (GDP). It is led by well-established companies like Coca-Cola, Procter & Gamble, and L'Oréal.

Although CPG makers generally enjoy healthy margins and robust balance sheets, they must continuously fight for shelf space in stores. Even well-known companies must continuously invest in advertising in an ongoing effort to increase brand recognition and stimulate sales.

Consumer packaged goods generally have short lifespans and are intended to be used quickly. The name originates in their packaging, which traditionally is easily recognizable wrapping that consumers can quickly identify on store shelves.

For example, cosmetics typically have limited shelf lives, as these products quickly deteriorate if exposed to extreme temperature fluctuations. They are sold in individual packages at varying price points, depending on the brand's position in the market. After using the products, consumers either discard or recycle the empty vessels.

Frozen dinners are another popular example of consumer packaged goods. These high-volume perishable items are sold at retailers worldwide and are often purchased for immediate use by consumers. Consumers then replenish their frozen meals each time they visit the grocery store, often choosing the brands they already recognize and enjoy.

Consumer Packaged Goods vs. Durable Goods

Consumer packaged goods are cheaply sold and replaced often. By contrast, durable goods are intended to last for several years and enjoyed for extended use. Consequently, the purchase of a durable good typically involves considerable thought and substantial comparison shopping, given the higher price tags attached to these investments. Computers and automobiles are examples of durable goods.

Economic slumps often trigger flagging durable goods sales because people are more likely to hold onto their cash in times of economic uncertainty. This is especially true with consumers who own older versions of a durable good. A family may opt to squeeze a few more years from an outmoded washing machine rather than upgrade to a newer model. By contrast, sales of consumer packaged goods staples like bread, milk, and toothpaste are less affected by market fluctuations. Consumers consume or run out of these goods faster and must replace them or do without entirely.

The Bottom Line

Consumer packaged goods, or CPGs, are goods used daily by average consumers. They are used quickly and therefore must be repurchased quickly. Examples are food, beverages, personal care items, and cleaning supplies. They are different from durable goods, such as computers or washing machines, which are more expensive and last many years.

The consumer packaged goods industry is one of the largest sectors in the U.S. economy. Consumers continue to purchase consumer packaged goods even during economic downturns, though they may hold off on buying durable goods during the same time.