3 pressing questions for consumer goods companies. 4 capabilities
It feels like the perfect storm. The number of consumers in western countries has either flatlined or is falling. Slowing GDP is weakening consumer demand. Higher commodity costs are creating further margin pressure. At the same time, many marketeers at established consumer goods companies are concerned about a bigger existential threat to the future growth of CPG: changing values and needs, new shopping behaviours changing the decision-making process and perhaps most concerning of all, barriers that once existed for new entrants have come tumbling down.
In that context, it is essential to get clear on the capabilities needed for the future of your business success. Here’s our summary of 3 pressing questions we are hearing and ways in which we are responding to help:
How should we manage brand availability in this ‘Transactions Everywhere’ world?
Incumbent consumer goods companies have largely been distributing through an established order of retailers, but this is changing. Vertical marketplaces, especially in beauty and personal care categories (such as Beauty Bay and Lookfantastic) and hyper-local marketplaces that match local products with last mile fulfilment, are trying to fragment the broad marketplace ambition of Tesco, Walmart, Amazon etc. People now browse, discover and transact direct from social platforms. Voice transactions will improve. Transactions will take place anytime and everywhere. We know from the dramatic growth of discounters that when shoppers change where they shop, they also become open to re-evaluating their brand choices. So what is the capability that helps brands to thrive in a world shifting to everywhere commerce?
How do we re- think our approach to consumer opportunity?
Incumbent consumer goods brands have used an established playbook in their pursuit of growing megabrands, focused on building mass propositions and preferring to acquire companies rather than take on the incubation and risk themselves. As a plethora of smaller companies spring up to cater for niches that were dismissed or unimagined, mass is moving to the edges. An example is UK-based beverage start-up Ugly Drinks that actively positions itself against the mass; or Lily’s Kitchen, a natural recipe pet food using fresh organic meat.
Mark Schneider, CEO of Nestlé, said recently that he felt new smaller brands have become “almost a form of entertainment” [Source: ‘Nestlé: Betting on big brands’, FT.com July 2, 2018]
If that is the case, then we need to ask: where are the consumer moments ripe for disruption, what emotion or utility are we underserving and how can our brand provide new value?
How do we defend brand premiums & the long tail?
Strong brands continue to command pricing power. In many instances, average brands can charge a premium because an individual can’t quickly find the best value. As the growth in ecommerce continues, brands that don’t provide sufficient value as codified by shopper reviews, will struggle for visibility. At the same time, many consumers have grown accustomed to buying private labels without any quality compromise. When innovations get copied quicker than ever by retailer brands, how do brand owners command the price premium they need? The answer lies in innovating around the consumer experience. Even good brands that don’t provide a superior experience will be commoditised and will have to compete on cost.
THE BIG CAPABILITY STAKES IN THE GROUND
In response to these questions, here are 4 of the ways that we are helping companies to catch up and get ahead of the disruptive forces that are challenging CPG:
1. Own data and build analytics capability
In-housing data and analytics, supported by automation and artificial intelligence requires vital new data curation, analysis, insight and management capabilities for marketing and sales teams. We are helping brands navigate the selection of capabilities to deliver hyper-personalised marketing that complement the ever-important fame-driving marketing choices.
2. Build continued brand relevance
Consumers’ mental availability is eroding and with that the divide between distinctive and commoditised brands is growing. We are helping many brand owners to redefine the positioning of portfolio brands that are struggling and define the experience principles that guide how that positioning comes to life in the consumer and shopper journey.
3. Deliver innovation at the experience level
The value of a significant new launch is falling. 89% of the top 200 CPG U.S. brand launches of 2017 earned less than $40 million in year-one sales and sub $20 million launches have become the norm according to IRI’s most recent Pacesetter report. Marketeers have no choice but to go beyond ‘SKUs for news’ and deliver innovation at the experience level.
We are helping companies build the capabilities to deliver meaningful innovation that is transformational rather than incremental.
4. Enable faster opportunity delivery
Global value chains, pricing economics, legislation and operating model has created significant complexity – organisations built for efficiency over speed. Structured for mass production, a question is how can large CPG really cater for the greater customisation demanded by modern consumers?
In response, we are helping clients streamline and simplify their structures and collaboration approaches, so that their companies are more able to identify opportunity spaces and deliver value quickly.