Commentary

CPG Companies Accelerate Digital Direct

According to the 2013 report Growth Strategies: Unlocking the Power of the Consumer, by the Grocery Manufacturers Association and PwC US, despite the overall slowing of net sales growth rates in 2012, food, beverage and household products companies experienced positive net sales growth of 7.0%, 5.5% and 3.2%, respectively.

In the age of the digital consumer, says the report, leading CPG companies and retailers benefit from responding to the speed of the connected consumer and balancing operational quality with innovation. Numerous digital channels, accelerated mobile adoption and direct-to-consumer approach are rewriting the rules of retailing and CPG manufacturing. Top-performing companies see success by identifying their consumers, engaging with them and focusing on innovation that directly reach their customers.

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Pamela G. Bailey, president and CEO of the Grocery Manufacturers Association, says  “... providing consumers with innovative products and convenient, cutting-edge shopping experiences... CPG companies are... positioned to enhance consumer loyalty and profitability.” And Steven Barr, PwC, points out that 52% of U.S. consumers are already buying directly online from brands they trust.

In 2013, more than 40% of CPG companies expect to sell products directly to consumers, up from 24% in 2012, says the report. Direct-to-consumer is a potent vehicle for testing new products and reaching out to new consumers faster and more effectively than ever before, says the report, making the retail store aisle no longer the last mile in the purchase journey. Flexibility, it says, will be essential, as companies will need to manage a new set of risks and security concerns.

Bert Alfonso, President, International for The Hershey Company, says  “... consumers today share much more readily with each other and with companies... input tends to be about product’s characteristics... what they like and don’t like... a rich body of information... much more spontaneous and actionable than... in the past...”

Lisa Feigen Dugal, PwC’s North American advisory leader, concludes that “... today’s consumers want solutions... experiences, and value... CPG’s and retailers can address this emergence through social media, innovation and direct-to-consumer channels... “

Among the key findings of the report:

  • Total retail sales reached $1.1 trillion in 2012: $568 billion at grocery stores and $530 billion at food service and drinking establishments.
  • Both top and bottom performing CPG companies experienced a slowdown in net sales growth in 2012.
  • Bottom performers are starting to hold onto their cash, which means they could be ready to start making more investments in research and development (R&D) and marketing to launch new products.
  • Many companies are embracing the need for product innovation as well as understanding consumer and market needs as part of their R&D activities.
  • One of the key issues faced by food manufacturers during 2012 was the continued rise of commodity prices.
  • The food sector benefited from higher sales per employee while remaining flat on inventory turnover and cash conversion cycle
  • The beverage sector posted a strong performance, with return on sales continuing a steady upward pace
  • The household products sector experienced better results in 2012, with also a greater increase on return on sales

The report further highlights best-practices for developing loyalists, determining appropriate social media channels that align with business goals, along with successfully identifying target segments within their organization.

For more about the study, please visit GMA Online here.

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