Consumer FMCG - TOUGHER THAN EVER

“Makers of consumer staples are resorting to aggressive discounts to overcome an unexpectedly persistent problem: Their industry is barely growing”, this is how a recent article in the WSJ started. Indeed growing sales at FMCG/CPG companies has never been so hard… According to Nielsen for the last three years unit sales of consumer products have been largely flat in the US. On the other hand Europe is not picking up and many emerging markets have decreased their stellar growth of the last years…

Consumer spending squeezed by what seems to be a “never-ending-crisis” and “need-more-money-Governments” is moving steadily towards cheaper Retailer Brands and as a result the 2-5% yearly price increases that CPG manufacturers used to pass onto the consumer seem to be a reality of the past. (98 product categories, almost one third of total categories tracked by IRI in the USA recorded price decreases in 2013, up from 57 in 2012)

Most Retail and CPG CEOs believe there is an opportunity in e-Commerce to grow sales… in fact e-Commerce is projected to grow at 14% from 2012 to 2016 globally and e-Commerce sales will likely reach $1.4 trillion by 2016 according to Forrester Research. The digital opportunity is such that it may ensure comfortable Market leadership should current leaders tap into it or otherwise may turnaround entire markets should challenger companies be the first and the best to deal with e-Commerce.

  

KEY UPCOMING ISSUES FOR FMCG (and for Retailers)


1. GROWTH

A good index vs. year ago continues being the single key indicator of a healthy business… We have found that there are only “5 EFG” (Engines For Growth) that work in all consumer goods categories, and that in order to maximize growth have to be applied differently depending on the consumer and consumer base, the market dynamics, the competition, the Brand equity, etc.

2. RETAILER BRANDS

FMCG manufacturers can no longer ignore Retailer Brands (‘RB’). They have 100% consumer penetration in many markets (from USA to Australia, from Germany to Canada, from Spain to the UK). But there are a number of myths that have emerged about Retailer Brands (eg “RB win because of price alone” or “RB are for consumers on a budget” or “RB hurt all Brands” or “You cannot win vs RB”…) which build on a general lack of knowledge on which are the best strategies that cannot only stop RB development but that can also make FMCG manufacturers win against them.

3. E-COMMERCE

“I am sold on the opportunity, but… what do I do? That is the state of mind of many CEOs and COOs from CPG and Retail. Three steps: Firstly you need to define what is the role that e-Commerce/Digital will play in the overall strategy (eg.to Build the Brand-Media; to help “white-space” expansion; truly Omnichannel). Secondly you need to choose the right entry strategy in accordance to the risk, investment and level of control that the company wants to have. Thirdly you need to pick the correct “How to win” strategy, in other words which are the tools and the capabilities the company needs to develop or acquire to win with e- Commerce (eg e-Commerce platform, demand planning, logistics, digital marketing expertise, legal and regulatory etc)

                             


And cutting across all those three topics is the FMCG always present issue of INNOVATION. Internal or external? Which are the sources? Which type? (Disruptive, product or commercial) What pace? How to predict its effect in advance? And how to measure it once it has been deployed?