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Consumer Packaged Goods
Executive Insight |
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For the makers of food and beverage, health and beauty, household, and other consumer products, it is the best and the worst of times. Most enjoy solid balance sheets, healthy profit margins, and a good return on invested capital – things that CEOs in other industries only dream about. Yet the US$2 trillion-plus consumer goods industry is losing its glow. |
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After 30 years of growth and innovation, when frozen foods, prepared meals, disposable diapers, and other new product categories drove rapid growth, the industry is seeing revenues and market values go flat. “Since the late '90s the industry has not matched its earlier strides in value, quality and convenience,” says Lance Avery, a consultant in the Chicago office. “CEOs are awakening to the notion that this may not be the growth industry that it once was.” |
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Three Keys to Success
In this new environment, consumer product companies must focus on three core processes: |
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Managing retail customers
In recent years leading retailers have consolidated power and extracted concessions from suppliers in pricing, delivery, and other terms and conditions. Retailers now also compete with, as well as buy from, branded goods makers, stealing market share with lower priced house brands. Manufacturers must learn to hold their own in this delicate relationship. |
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Managing consumers
From the 1950s through the '80s, consumer goods companies could quickly build share through mass marketing – a core competence for the industry. But as markets become more complex and fragmented, and consumers grow more sophisticated and selective, companies have to connect with the market in new ways. |
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Managing supply chains
With retailers and consumers increasingly exerting their influence, manufacturers have little margin for error. To deliver products on time, at the lowest possible cost, companies must wring waste and inefficiency from their suppliers' operations, and their own. |
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Get it right or be left behind
“Consumer goods is a detail-oriented, execution-focused business,” says Richard, Lord Bradford, a director in the London office. “CEOs have to get many things right. Today they're pushing to drive profit margins and top-line growth at the same time. They often get one or the other, but it's rare to get both.” In addition, companies must reconcile what is both a strength and a weakness: energetic product advocates who fight for corporate resources and positioning, but worry less about the rest of the business. “It is essential – and very difficult – to make an enterprise focus and identify priorities in an even-handed way,” he notes.
To get started, CEOs should focus on specific challenges and opportunities – for instance, cost reduction, supply chain management, or brand portfolio management. But it's a tall order. “Ten years ago these companies had the best business processes and the top talent in the world,” says Avery. “Today, the world has moved on – and much of the industry is in danger of being left behind.”
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| Apply for Extranet Access |
Epicurus has an extranet with insights into the industry, including an extensive article database, resources to help you to get in touch with industry experts and tools to help you communicate with your consultant. Free access is granted to existing clients.
Apply today |
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