In the future, the deep consumer insight, strong retail partnerships and operational excellence that sustain these strengths will be more important than ever as companies pursue growth in high-value emerging markets and seek to remain competitive in developed markets.
The Future Outlook
Over the next five years, growth in both food and non-alcoholic beverages is expected to slow significantly—to one-third of 2004-2009 levels in food (1.7 percent), and to half those levels in non-alcoholic beverages (2.4 percent)1. Rising commodity prices and mounting competition from emerging-market players who are increasingly becoming active outside their home markets will pose major challenges. But companies with low-cost operating models and the right talent that can meet the needs of shoppers for convenience, health and value in key growth categories such as baby food, noodles, snack bars, dairy and functional beverages will be well positioned. Emerging markets offer huge growth opportunities for affordable products adapted to local needs. Asia Pacific (APAC) is now the largest global market for non-alcoholic beverages, while Latin Americans will soon rank as the world’s biggest consumers of carbonated beverages.
"Accenture High Performance Business Research methodology2 has been enhanced to take better account of positioning for the future. Our recent analysis of the food and non-alcoholic beverages industry, which will be refreshed regularly, covers the period 2011 to 2014."
Industry Background
In both food and non-alcoholic beverages, private label penetration is intensifying, eroding the price premium for branded manufacturers with high quality products that are effectively own brands. Meanwhile, soaring commodity prices are undermining consumer goods companies’ ability to predict and maintain margin.
In developed markets recession-chastened consumers have rediscovered home cooking, are spending less on processed foods and ready meals and are shopping smarter in general as they seek out value for money in whichever retail formats they can. Manufacturers struggle to supply demands for a combination of convenience, health and wellness via a proliferation of new, convenience-based shopping channels. The power of the supermarkets is intensifying in the fight for shelf space and leading non-alcoholic beverages manufacturers are acquiring their bottlers and bringing that capability in-house to further simplify their operating model and tighten control of the value chain.
Regulation is intensifying in both developed and emerging markets, with regulators focused on verifying the scientific basis of product claims in the former and on ensuring the basic safety of product ingredients in the latter.
The High Performers
Against this background, high performers have been able to consistently increase revenues while maintaining strong profitability over a five-year period. They have also delivered higher returns on invested capital over both three and five years—a reflection of their higher levels of capital efficiency.
The Building Blocks of High Performance
These high performing companies owe their success to the mastery of three building blocks.
Market Focus & Position
The high performers have achieved strategic category dominance by simplifying their global brand portfolios and scaling them—at the same time localizing both their business models and their brands in high-potential emerging markets. They focus resources and investments on targeted, high-margin, innovation-sensitive niches where private-label penetration is relatively limited. They reevaluate these choices frequently, leveraging mergers and acquisitions (M&A) strategically in a constant process of global trade-offs and streamlining operations to build business rapidly and efficiently.