How are shifting consumer demands creating disruptive change for CPG companies?
Shifting consumer demands and maturing digital technology are creating disruptive change in how consumers buy. We know many of these disruptive trends are from highly informed consumers. They are price sensitive, trust the crowd and are socially connected. They are embedded in a sharing culture, and are looking for instant gratification. The linear path of purchase that existed before is now replaced by much more fluid paths to purchase. What’s important is that many recent digital innovations are impacting the physical world as well.
So why is this really important for a CPG company?
It’s important for the growth. For the past 15-20 years, consumer goods companies have typically achieved growth that outperformed the market. They were able to achieve that by excelling in local market execution, by driving operational efficiencies and by driving global brands. But today, it’s harder to get to profitable growth — due to market downturn, pressure in emerging markets, changing consumer behavior and raw market price volatility. To seize the initiative again, companies will need to focus on local execution and efficiencies in their operations while implementing best practices to build their brands.
How does a consumer goods company do that given the complex markets that they operate in?
We like to think in terms of market archetypes, clustering of markets that have similar commercial needs and behavior. For example, in organized markets like North America, Germany, France or Australia — it’s all about interacting with modern trade, with big customers, where Trade Promotion Management is very important. But when you move into emerging markets such as Brazil, Russia or Turkey — the market is more of a hybrid with both fragmented and organized trade. The capabilities needed for success are different. When you move into a fragmented market — for example Africa, parts of Latin America and Asia, it’s all about distribution through third parties. So all of this happens in a very complex setup.
The value chain in Consumer Goods is not a simple one either. To reach your consumer, you move from the CPG company to the head office of the retailer into the point of sale and eventually touching the consumer. In many countries there are brokers and distributors that touch the value chain. In the past, CPG companies created their own ‘patchwork quilt’ of capabilities to support them in the front office. But the commercial capabilities that are required very often operate in silos. They are not connected, they are not social, and they are not maximizing the value of bringing these processes together. Delivering a unified customer and field sales experience is critical for future growth. What’s missing is a single platform to execute against all of these priorities simultaneously.
Can you elaborate on this single platform?
Yes, by single platform we are talking about a single system of engagement with the customer and the consumers. The consumer goods industry front office must provide sales, service and marketing processes via many channels: via head office capabilities, field-based capabilities, and marketing-based capabilities. This will enable them to focus on excelling in local market execution, by driving operational efficiencies and by driving global brands.