If having a lot of hurdles makes for an exciting industry, then consumer packaged goods is indeed fortunate.
That business faces a growing number of challenges, including digital disruption, changing consumer behaviors, and new ways of working with trading partners.
Of course, most involved in this industry wouldn’t associate problems with good fortune. However, the bright side is that insightful solutions are coming from many places, including executives at consultencies, associations and trading partner organizations.
In the following piece, executives outline 10 top challenges and solutions. Their comments begin on the next page, or click on the topic of your choice below.
Most of the comments result from interviews conducted during or following the recent GMA Leadership Forum in Colorado Springs. Others were pulled from presentations at the GMA event. In all, the remarks form a useful picture of how the industry can steer itself on a more positive path in the near future.
• Finding Growth: KPMG's Patrick Dolan
• Private Label: ATKearney's Randy Burt
• Consumer Trust: GMA's Jim Flannery
• Online Shopping: The Boston Consulting Group's Jeff Gell
• Consumer Engagement: Deloitte Consulting's Kim Porter
• Mobile and Omnichannel: Cognizant Business Consulting's Meena Surti Patel
• Cybersecurity: PwC's Dave Burg
• Health and Wellness Needs: FMI's Mark Baum
• Trading Partner Relationships: IGA's Mark Batenic
• Understanding Millennials: IRI's Robert Tomei
Finding Growth, Private Label, Consumer Trust, Online Shopping
Challenge: Finding growth in a challenging growth environment.
Solution: Growth is an important challenge that the CPG industry is facing today. The ability to leverage data to garner insights into customer trends, tastes, and buying patterns puts a company ahead of its competitors. In today’s environment, where Millennials are a critical driving force in the market, being able to understand them better through data analytics can lead to growth opportunities.
—PATRICK DOLAN, leader, consumer markets line of business, KPMG
Challenge: The growth of private label makes it harder for smaller or secondary CPG brands to find a place at retail.
Solution: These brands can reimagine their products by tailoring unique offerings for specific larger retailers. These offerings, possibly at opening price points, would solve a need in the retailers' assortments and be additive to store private label strategies.
—RANDY BURT, partner, ATKearney
Challenge: Consumers are seeking more and more information about the products they buy and use.
Solution: The Grocery Manufacturers Association, its members and retailers are moving forward with a new transparency initiative that will provide new ways for consumers to get detailed information about their food, beverages and consumer goods. This initiative will leverage digital technology and feature a consistent landing page format across companies and brands with detailed product information. Customers will be able to get to it in a range of possible ways, such as by search, scanning a QR code on a package or possibly by an app. Companies are expected to begin to adopt this program in the months ahead, with more and more products included in 2016 and beyond.
—JIM FLANNERY, senior EVP, operations and industry collaboration, GMA
Challenge: The shift to digital is happening. CPGs are waking up to it. 1% of CPG items are sold online now. In the next five years it will go from 1% to 5%. That's more than half the growth in the industry.
Solution: This is either your biggest headwind or tailwind over next five years. What do you do? You need to be present where consumers are buying online, with as impressive a virtual shelf presence as in a real store presence. But to really break out, find the right disruptive business model with the right killer customer insight for your category.
—JEFF GELL, senior partner and managing director, The Boston Consulting Group
Consumer Engagement, Mobile and Omnichannel, Cybersecurity
Challenge: Personalized and relevant consumer engagement is a challenge. The exponential increase in data available to consumers and growth of the consumer-to-consumer dialogue in influencing brand awareness and trial is challenging CPG marketers’ ability to influence and shape brand messaging and equity.
Solution: While consumers have more data, so do marketers! CPG marketers can now not only capture consumer data and leverage analytics together with targeting technologies to deliver personalized, relevant messages … but can also develop platforms to proactively influence key advocates, maximizing the effectiveness of brand paid/earned/owned media.
—KIM PORTER, consumer products sector leader, Deloitte Consulting
Challenge: There’s a quick progression of omnichannel retailing and mobile shopping. Digitally focused consumers are adopting mobile shopping faster than many brand owners can adapt, creating big expectations for seamless omnichannel experiences.
Solution: CPG companies will need to be aware that digital consumers will challenge omnichannel retailers, which in turn will put more demands on CPG companies. The CPG companies will have to be smarter on how they work with omnichannel partners and need to simplify data , process, and analytics to be successful.
—MEENA SURTI PATEL, assistant VP, retail and consumer goods, Cognizant Business Consulting
Challenge: Connected field equipment such as sensor-based vending machines can enable CPG companies to improve operational efficiencies, but they can also jeopardize cybersecurity. Field equipment typically lacks the security safeguards of IT systems, and as more data is generated by remote equipment, more data will be at risk of theft or compromise. Hackers also could use connected field equipment to gain access to a company’s IT and operational networks, increasing the likelihood of a breach to a broader volume of data as well as system takedowns and operational failures.
Solution: Protecting against these risks will require an information security strategy that is integrated across IT, operational, and consumer technologies. Key components of the security program should include technologies like strong authentication, transport encryption, automated software/firmware updates, and network monitoring and analysis. Businesses also should implement processes to collect, store, and destroy data, as well as policies to protect consumer data (if such information is collected and stored).
—DAVE BURG, principal, PwC
Health and Wellness, Trader Partners, Understanding Millennials
Health and Wellness Needs
Challenge: Consumers are more interested in health and wellness, nutrition profiles, and where food comes from. They are taking more control of their own health. This is shifting the whole dynamic for retailers and suppliers.
Solution: Retailers have the opportunity to seize the moment. They are well poised because of their stores and footprints, pharmacists and nutritionists, and direct connection with consumers. They need to optimize their assortments and utilize their assets for health and wellness solutions.
Retailers need to collaborate with supplier partners on this challenge, and they are already doing so. We need to make use of feedback from consumers to leverage into the supply chain for product reformulation and innovation. We need to tell the story to consumers about the variety and availability of safe, affordable, quality food.
—MARK BAUM, SVP and chief collaboration officer, Food Marketing Institute
Challenge: Trading partners need to figure out how to work together to meet quickly changing needs of shoppers.
Solution: When we begin to come together to collaborate on ideas, that’s where we’ll be successful. This is especially true in serving Millennials.
Millennials are looking to us for leadership. They are seeking meal solutions ideas, and the industry needs to use tools like smart phones and tablets to reach them with solutions. We're mining the data to get products they want. And this group of consumers wants it now.
—MARK BATENIC, CEO, IGA
Challenge: Some of the stereotypes about Millennials aren't true or only have partial validity. They are stereotyped as rejecting traditional life paths, not being brand loyal, and not influenced by traditional media, but that's only part of the story.
Solution: Marketers need to look deeper and target segments differently. IRI segmentation studies have found important variations among different subsets of Millennials, including those IRI dubbed "free spirits" and others called "new traditionalists." It shouldn't be one size fits all.
—ROBERT TOMEI, president, consumer and shopper marketing, IRI