Over the past few decades, consumer packaged goods companies have seen tremendous growth: they’ve ventured into new markets, launched myriad new products and brands and vastly expanded their distribution networks.
But in doing so, they’ve built up complex, expensive organisational structures, and costs have risen almost as fast as revenues. Consumer products companies face new challenges created by complex consumer and shopper behaviour, retail consolidation and emerging markets. But these same challenges also open new routes to profitable growth.
Consumer products companies have recently sought to attain profitable growth by extending business scale and scope while simultaneously rationalising operations. Although each sector – durables, consumables, cloths, specialty goods, etc. – has faced its own unique issues, there are some common challenges. Across consumer markets, growth has become a greater challenge; increases in wealth, growth in population and opening of new markets has already played out for many. Competition among companies, brands, products and marketing messages has become even more intense: limiting pricing power, raising promotion budgets and decreasing the time before “me too” products appear. Consumers’ attitudes, needs and shopping behaviours are increasingly diverse, forcing a fundamental reconsideration of product management, communications and marketing investments.
Retail consolidation, along with the rise of such new channels as mass merchants, discounters and warehouse clubs, has complicated supplier partnerships and the role of the sales force. As a consequence, several capabilities are increasing in importance. Channel management, from the perspectives of both product supply and sales, has become a more critical part of the strategic agenda. Innovation continues to be the top management priority as companies strive to create new products and brands. Deal making and integration skills remain important as companies push consolidation and globalisation to the next level. Most companies have contended with a consolidating customer base by rationalising brand portfolios and leveraging marketing investments better.
Sophisticated technology and systems investments are being deployed to deliver step-change improvements in effectiveness. In addition, the internet is firmly established as part of the shopping cycle, if not for purchase, then for information gathering and price research. Finally, new questions are being raised about the right operating model and supply footprint as companies explore ways to raise profitability.
Don’t Be Undersold! Brand manufacturers need to reduce prices to ward off competition, especially at recessionary times. They need to reinvent their business model to survive and thrive.
“You bring innovations, insights, next practices and wisdoms that help us to see patterns and make better decisions.”
SVP of a Consumer Products Company