For the last few decades, Consumer Packaged Goods (CPG) companies have based their success on mass-market brand building and secure access to consumers through mass retailers.
But times have changed – with the pandemic, geopolitical instability and industry-wide digital transformation triggering a seismic shift in the consumer goods landscape.
The long-time success of the traditional approach is losing steam and CPG leaders are making bold decisions to reconnect with customers and safeguard continued profitability and growth.
They’re exploring new business models for omnichannel and DTC.
They’re leaning into the regulatory and reputational requirements of Environmental, Social and Governance (ESG).
They’re leveraging data, new technology and partnerships to enhance agility, flexibility and security of supply chains and products.
It’s time to consider newer, bolder ways of working. It’s not easy but we’re here to help.
With deep sector experience, we can help you untangle the complexity, build strategies and carve a path that’s right for your business.
Consumer & Packaged Goods industry-wide challenges
Increased channel costs
The emergence of new marketplaces and impacts on channel ROI are further impacting CPG companies through lower gross-margin structure.
Disrupted supply chains
Pandemic-induced disruption and the rise of direct-to-consumer is challenging businesses to be more agile, flexible and responsive.
Legacy technology
Outdated and legacy systems and technology are making it difficult to introduce new products and respond to customer demand.
Changing customer expectations
Consumers want to shop when, where and how it suits them. They want brands with a clear purpose, ESG credentials and an authentic presence on social media.
Six opportunities for CPG companies to reinvent and reposition
Truly know your customer
Can you distinguish between your core customer and your core consumer, the end citizen? CPG companies have considered either one as their customer but have not truly differentiated who their customer really is.
It’s time to redefine customers and explore the opportunities presented by alternative business models like direct-to-customer and subscription.
- Support, inform and connect consumers to your products, go beyond direct-to-customer to direct-to-value.
- Reinvent marketing models and build digital capabilities to support new sales models like Direct to Consumer trials across relevant SKU’s, alongside traditional channels.
- Prioritise the building of a data and analytics function; democratise the data to support decision making at every level of the organisation.
Setting a strategy for private label
Private label resonates with price conscious consumers, particularly in the face of increasing inflation and economic pressures. The increasing dominance of private label means that CPG brands need to respond strategically to the opportunities and risks.
- Do you have a clear value proposition versus the private label alternative?
- Outpace competitors by introducing price-conscious shoppers to new products, especially in categories such as confectionary.
- A private label arrangement can boost volumes but dilute margins. Weigh up the overall impact on the bottom line.
Commit to social citizenship and ESG
Environmental, Social and Governance (ESG) credentials are becoming a differentiator for CPG Companies and are increasingly required from a reporting and accountability perspective. Customers are buying into brands rather than buying from them.
- Consider the breadth of your social strategy both globally and locally and keep track of how stakeholder expectations are evolving.
- Move beyond a tick box exercise to develop an ESG roadmap with measurable goals and targets.
- Communicate clearly and transparently around your ESG goals. Don’t run the risk of losing brand relevance, integrity and ultimately market share.
- Empower Marketing to own the ‘S’ in ESG
Refresh your portfolio strategy
Renovate, innovate or retire? It’s time to look at the health of your product portfolio – brand coverage, product coverage and categories for growth. Rationalise portfolios and determine where the organic growth is going to come from.
- Find the right starting point by expanding pre-existing definitions of the cost to serve to include every aspect of getting a product to market.
- Be tougher when assessing a product’s performance.
- Use local insights as the basis for developing a product or creating a joint venture.
Review your channel mix
CPG companies are moving beyond the traditional trade channels to explore new platforms, marketplaces and distribution models - with a keen eye on returns. How do you drive profitability in ecommerce? How do you choose and maximise the right channels?
- Be purposeful in choosing your channel mix. Make sure that you know how, when and where your customers like to shop.
- Understand channel profitability and true cost to serve.
- Respect existing commitments by minimising direct replication of the offering on a DTC platform.
- Consider your ability to execute and scale in channel, including any new skills, capabilities, structures and technology required.
Investing and enabling systems
Modernising your systems can deliver clear benefits to the bottom line, but it will only get you so far. Unless you adapt your processes, systems and structures - you could end up leaving value on the table.
- Become a connected CPG business and realise the benefits.
- Invest in people and processes so that the technology can drive efficiencies.
- Identify existing gaps in process, technology and capabilities.
KPMG’s CPG specialists are here to help
We’re an integrated team of impact driven CPG specialists. With deep sector experience and an eye on the future, we’ll work with you to face challenges and leverage opportunities.
Together, we’ll help you to get the right channel mix and optimise it for profitability and growth. We’ll help you move forward with cutting edge technology, giving you a 360 view of your operations for better decisions and commercial outcomes. Let’s make the bold moves and get ready for you to succeed.
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