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Present and future trends for CPG strategic cost management

Learn how Accenture's Robert Willems has a zest for sustainable cost reduction in the CPG industry, especially in the food and beverage sector.

You have an interesting background—born in Holland but living and working in Brazil for the past 18 years. Do you really speak 4 languages?

Five, actually: English, German, Dutch, Spanish and Portuguese. I was working in São Paulo, but I formally transferred to Accenture’s Miami office at the beginning of this year. Being in Miami keeps the Latin flavor I enjoy.

How has your diverse background given you an advantage working with global clients?

I do think having worked in different cultures helps you understand the challenges of a multicultural environment—the way you manage teams, communicate, understanding the way people interpret a message. I encourage people on my team–and my kids–to get as much exposure as they can to other cultures.

Considering your world travel and your work in food and beverage, have you had any interesting culinary experiences?

I try to eat local food wherever I go. The most interesting experience I had was in Mexico. One colleague offered to take me to a typical Mexican restaurant. We had some appetizers. One was tacos or fajitas—but they were filled with grasshoppers. It was served with the traditional spicy sauce and guacamole. It was good, but you don’t want to look at it when eating it.

What do you like about working in the food and beverage industry?

I like it for two reasons. First, the products are very tangible. I see them and drink or eat them every day. Beer, soda, food—they are not just some abstract service or product you don’t see. You have it in your house. Second, the industry is very dynamic. It is fast changing and innovative. Decisions are made quickly, then you move on to the next challenge. I feel at home in that environment.

How has the industry changed since you first started?

In consumer goods, we are seeing industry consolidation, and there is bound to be more. Companies need to look at costs to be more competitive. They need strong products and strong brands. Warren Buffet’s takeover of Heinz made CEOs and CFOs of US food companies realize they must look at costs and get their house in order if they don’t want to be acquired. So now, a lot of companies have cost reduction at the top of the list of strategic priorities.

What are CPG companies doing in response?

Overhead has grown because complexity has grown. For example, there are more regulations to adhere to–like Sarbanes-Oxley accounting rules in the US–and you need people for that. You need to look at areas that don’t have synergies–they just add costs–and look at removing them.

When you look at developing markets, it’s a different game. It’s a race to get market share. CPG companies want to be the first to have a national brand because it has a huge advantage.

At Accenture, you focus on closed loop cost management. Can you tell us more about that?

There are three unique aspects to our approach. One, we quickly unlock money up front through rapid cost takeout, and we use that money to fund structural change initiatives that come later.

Two, we foster accountability for cost categories, and embed that in the day-to-day operations of a company. We look at overhead, but it’s not as straightforward as just looking at travel, for example. We analyze line-by-line and recast categories to build a clearer picture of sales, marketing, travel, et cetera. We’ll look at each cost category in terms of volume and price, and we compare against peers. We get a good feel for how much we can take out, and how to do it.

Three, we build the zero-based budget and create ownership. We believe that to make this sustainable, you need to hold people accountable for the cost categories and build a positive tension to the budget process.

What are the biggest challenges CPG companies run into when implementing such a program?

Culture change. Many don’t have the culture of making every dollar count. A successful cost closed-loop management program involves all areas of the business to get the costs down. You can reduce cost in categories that provide little impact or differentiation, and spend it in areas that drive growth. For example, spending it in marketing and brand campaigns to reach new consumers and drive sales.

Companies with a more aggressive culture are willing to accept some consequences. Some don’t have that culture. Some are conservative in the sense of how they want to manage the cultural change.

How do you see the future of strategic cost management in CPG?

As a whole, the industry has woken up. CPG companies need to be more competitive, especially in developed markets where economies are stagnant. Some have been successful in cutting costs in manufacturing and packaging. But overhead has been overlooked. Tackling overhead costs so they can reinvest in growth will be what separates the winners from the losers.