ORLANDO, Fla. – The food industry needs to take bold steps – in everything from data practices to supply chain – in order to jump-start growth in the face of unprecedented hurdles, said John Compton, CEO, PepsiCo Americas Foods and Global Snacks Group.
In an address at FMI’s Midwinter Executive Conference here, Compton challenged retailers and suppliers to quickly move beyond traditional comfort zones. He said the industry isn’t growing if one strips out price increases resulting from inflation. At the same time, he added, the industry is moving much slower than consumers in embracing digital advances, particularly when it comes to using new devices to make purchase decisions.
The fast growth in online purchases of categories such as diapers should be taken as warning signs about coming changes in other categories, he stressed.
“The convergence between online and in-store is happening faster than many are willing to accept,” he said.
Compton urged a renewed focus on growth and focused his solutions on three drivers: insights, innovation and in-store.
“Of the $10 billion we spend on insights across multiple industries in North America, half is spent on data collection and interpretation,” he said, adding that the data is often two or three weeks old and often at a macro-level.
“What if we can repurpose money spent on data for shopper needs,” he said. “Let’s solve shopper needs store by store. Let’s focus insights spending on building demand.”
Compton said the industry has difficulty fostering innovation despite more Center Store SKUs. Part of the problem is that rising slotting fees lead manufacturers to favor line extensions, which seem safer than completely new items.
“Yet, 50% of you don’t charge slotting fees,” he told retailers. “Let’s have the courage to launch blockbuster new items that drive growth and consumer loyalty. Let’s repurpose slotting fees against understanding shoppers and building loyalty.”
Addressing the in-store topic, Compton said the industry’s supply chain is too slow.
“There’s still 60-plus days of system inventory in the industry,” he said. “Why don’t we all commit to systemwide inventory reduction.”
He said there’s a $30 million savings for each day of inventory taken out of the system.
“We can use the savings to make the in-store experience better,” upgrading stores to create loyalty, he said.
Compton added that his message is validated by a new white paper from Accenture that pinpoints some $100 billion in “trapped value” in the industry that could be unlocked by retailers and suppliers.
He urged trading partners and the industry’s Trading Partner Alliance to embrace his message and take action.