Big Consumer Packaged Goods (CPG) is not living up to the “consumer” in its moniker. Accenture analysis shows that Utilities, Banking and Insurance—industries historically without a track record of leading consumer engagement—are matching or beating the digital performance of CPG companies.1 With $100 billion annual CPG industry profit at stake by 2025 due to digital disruption, the industry has its work cut out for it.
This is not to suggest Big CPG is no longer relevant—in fact the leading brands in many categories continue to show moderate growth. Yet the risks to their valuations are increasing rapidly. Consumers are discovering brand trust and relevance in new ways—though value propositions that scale distribution and traditional brand development strategies can often not deliver effectively. In parallel, retailers are seeking to replace products with solutions and experiences and create more tailored offerings. Digital disruptors responding to both trends are changing the rules of the game.
What are the disruptors doing with digital that Big CPG is typically not?
Disruptors nail the art of the micro-moment
At the point of consumer decision—to learn, to buy, to refer—disruptors are winning. They have mastered the art of hand-to-hand combat in these micro-moments, leveraging mobile, communities and other “personalized” connection points to create hyper-relevant value propositions. They have established marketing and technology investment profiles tailored to capitalize on the increasing shift of brand consideration and purchase decisions beyond the four walls of the store.
Disruptors put consumers—not product distribution—at the center
Disruptors are putting consumer connections, brand orientation and market localization at the forefront of what they do, as opposed to Big CPG, which continues to struggle in breaking from its scaled, distribution orientation of the past. Through incubators and/or disruptive acquisitions, some incumbents are reshaping their portfolios to pivot into higher value, high growth segments of the market. A Kurt Salmon, part of Accenture Strategy, audit of 45 large CPG players found that 49 percent have experimented with either a venture capital (VC) or an incubator model.2 Similarly, disruptors are reimagining approaches to research and development and commercialization—shrinking time to market by as much as 50 percent.
Disruptors know what to keep in-house and what to farm out to the ecosystem
One innovative CPG manufacturer invites start-ups and entrepreneurs to help create consumer-driven technology solutions for the company’s brands. From omnichannel experiences to Internet of Things (IoT)-based wearables, the company casts the net wide for the latest digital innovations. Several others are looking to manufacturing and distribution partnerships to reimagine agility in their supply chains. Asset light and as-a-service have taken on new degrees of competitive advantage, particularly as disruptors seek to focus more capital on brand and product development, channel enablement and consumer insights.
Digital can give large companies the small company advantage
Digital brings agility in a way no other single remedy can—particularly to established consumer companies. Most disruptors are digital-born companies, so they reap the benefits from day one. Large companies, with legacy mindsets, processes and systems, typically struggle with digital rotation. Some try to retrofit, while others try to find the funding to build again—completely digital—from the ground up. Still others have used M&A as a catalyst.
Regardless of how they get there, getting to digital is essential. Data is everywhere, driving radically faster and more targeted decision-making.
A well-known grocery competitor now offers same day delivery, which is enabled by a distribution network of stores and warehouses carrying products selected based on the insights derived from its wealth of transactional data. This value is now extending into the application of machine learning to create more personalized recipes and solutions based on consumer needs.
Similarly, a clothing company combines human stylists with artificial intelligence (AI) and data scientists to create curated packages for customers. Art has yielded to science—allowing the stylists to spend significantly more time shaping market and customer insights based. The company’s leadership has said it could no longer be successful solely using just humans or algorithms—it requires both.