The annual CGF Global Summit is taking place in Paris this week bringing together the leaders of the worlds’ Retail and Consumer Goods (CPG) companies. The traditional CPG business model is under immense pressure. Growth is slowing, costs are rising, and investors are restless. Under the theme of “growth through change” retailers and consumer products manufacturers will be debating what they need to do differently to remain relevant to consumers and shareholders.
Disrupt or be disrupted
Sustainable growth is elusive. Despite the economic recovery in mature markets, consumer confidence is not yet ringing through to the till, and emerging market volatility is weighing on results. CPG remains a great sector. We live on a planet of seven billion people who like to shop, to eat, and to make themselves look beautiful. But many of the CPG industry’s tried and tested strategies of creating value are no longer fit for purpose.
I expect conversations to focus on what companies must do differently – whether it be where and how they sell, how they are organized, and how they innovate.
One topic that probably won’t be on the table is M&A. Acquisitions and disposals have spiked the last few months as companies seek to optimise their portfolios and access categories with stronger potential. I believe there are some very large deals still in the pipeline.
Winning the consumer
How to reach the consumer will be a major topic. CPG has historically been business to consumer driven. But the rapid evolution of technology and data has fundamentally changed consumer behaviour. Now it is the consumer who is in control.
Companies will need to be increasingly granular in how they target and meet the needs of the individual consumer. ‘Big Data’ promises huge benefits for CPG companies but it is not enough to have access to the data, companies must be able to use it.
The traditional advantage in retail was location – the ability to place goods on the consumer’s journey. The new frontier is the know-how to bring goods to people – as quickly and conveniently as possible. Consumers expect a seamless brand experience irrespective of channel or occasion. This is not just a challenge in mature markets; in some emerging markets, ecommerce is growing so fast it may actually overtake traditional retail.
But whilst mobile and e-commerce are transforming the industry, stores will continue to be significant. E-commerce will simply become one channel amongst others, and all CPG companies will have to have omnichannel presence.
Sustainability and corporate citizenship will be a core theme. Companies are increasingly trying not just to demonstrate their ethical credentials but also to deliver genuine value to societies. However, in a 24-7 news world fuelled by sensationalism, nutritional concerns and food safety scares are rarely out of the headlines. And it is increasingly hard to distinguish the efforts of individual companies.
Consumers increasingly want simpler more natural products. Conversation at the Global Summit will focus on how companies can help consumers to live healthier lives, build consumer trust, and guarantee food safety. CPG companies increasingly have a key role in enhancing the evolving health ecosystem.
A key challenge is how to market effectively to a multitasking consumer who gets to jump through the ads whilst they watch their shows? Succeeding in this fluid market requires CPG companies to develop a highly agile business model that accelerates speed to market and helps them to re-imagine their business models.
What do you think the key talking points will be?
By Andrew Cosgrove