packaged goods

Experts Urge CPGs To Implement Digital Game Plan

Consumer packaged goods companies are at a tipping point. Those that implement effective digital game plans now are likely to establish a significant competitive edge for the years ahead, while those that don't will risk stagnation, loss of share and shrinking sales over the next several years, stresses a new report.

The report, "The Digital Future: A Game Plan for Consumer Packaged Goods," was produced by The Boston Consulting Group (BCG), Google and Information Resources, Inc. (IRI) for the Grocery Manufacturers Association (GMA).  

It points out that digital's current 1% penetration of the overall U.S. CPG market will likely expand to 5% by 2018 (some categories could see penetration of 30% or more by 2018) and could grow to as much as 10% soon after — what the researchers call a "1-5-10" scenario.

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Digital penetration of 5% will account for nearly half of total CPG growth over the next five years, and early movers will have the opportunity to establish positions that will be hard to dislodge, the researchers emphasize. 

“Consumers are embracing technologies, devices and services that make everyday tasks such as shopping, cooking and even commuting quicker, easier, more fun and more efficient," observes Patrick Hadlock, partner at BCG and a coauthor of the report. "This is fragmenting the purchasing pathway as consumers regularly switch back and forth between digital and physical channels, and interact digitally both in and outside of stores.”

According to the report, while many companies have established a digital presence — a Web site, some digital advertising, a presence in social media — most haven't fully integrated digital into their operating models, built a Big Data analytical capability, pursued a multichannel or omnichannel strategy, or tailored their product offerings to the digital or e-commerce marketplace.

GMA commissioned the research to help its members prepare for the digital future. The report concludes that individual companies need to address digital from the top, building new capabilities and making difficult choices and investment trade-offs to defend their margins, share and brand equity.

The researchers say that all companies can make a series of low-risk, "no regret" moves to position for digital success.

These recommended steps include developing an integrated strategy for how far the company needs to go and how to get there; shifting investments to establish a digital brand presence; building the necessary capabilities and organization for a fast-moving digital world; and shaping the evolution to digital with channel partners. 

Manufacturers also need to recast existing capabilities like product placement, marketing content development and supply chain management for a digital world.

While all of this may sound daunting, the report stresses that the critical key is top management's leadership in getting the entire organization to get on board with an adaptive investment strategy -- a big change for many companies. 

A traditional three- to five-year planning approach doesn't cut it in an environment in which consumer expectations are being set by technology companies that have deep pockets and thrive on rapid change. Instead, CPG companies need to experiment with various approaches, quickly measure results, drop approaches that aren't working, and focus resources on those that are working.

A copy of the report can be read or downloaded at www.bcgperspectives.com.

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