Retailers and consumer packaged goods (CPG) companies today continue to deal with new rules of consumer engagement as they seize opportunities from advanced technology and the digitally connected consumer, according to the 2013 Financial Performance Report by the Grocery Manufacturers Association (GMA) and PwC US.
“This report shows that in the midst of a challenging economy, the food, beverage and consumer products industry continues to show great resiliency,” said Pamela G. Bailey, President and Chief Executive Officer of the Grocery Manufacturers Association. “By providing consumers with innovative products and convenient, cutting-edge shopping experiences, CPG companies are well positioned to enhance consumer loyalty and profitability.”
Despite the overall slow-down of net sales growth rates in 2012, the “Growth Strategies: Unlocking the Power of the Consumer” report showed that food & beverage (F&B) and household products companies experienced positive net sales growth of seven percent, five and a half percent and just over three percent, respectively.
According to the report, in the time of the digital consumer, consumer packaged goods (CPG) companies and retailers benefit from responding to the speed of the connected consumer and balancing operational quality with innovation accordingly. Top-performing companies see success by identifying their consumers; engaging with them; and focusing on innovation that directly reach their customers. The report explores how numerous digital channels, accelerated mobile adoption and direct-to-consumer approach continue to rewrite the rules of retailing and CPG manufacturing. The report also examines how companies can seize new opportunities by creating lasting brand value.
“CPG companies that engage with consumers directly through digital channels and build out their direct-to-consumer processes will have the best advantage for creating new growth,” said Steven Barr, U.S. Leader of Retail and Consumer Industry for PwC. “52 percent of U.S. consumers are already buying directly online from brands they trust, proving that CPG companies now have far greater opportunities to walk alongside their shoppers in real time while driving sales of existing and new products.”
In 2013, more than 40 percent of CPG companies expect to sell products directly to consumers, up from 24 percent in 2012. According to the report, direct-to-consumer is a potent vehicle to test new products and reach out to new consumers faster and more effectively than ever before to make the retail store aisle no longer the last mile in the purchase journey. Flexibility will be essential, as companies will also need to manage a new set of risks and security concerns.
“Consumers today share much more readily with each other and with the companies than in the past,” said Bert Alfonso, President, International, for The Hershey Co. “Their input tends to be about your product’s characteristics and about what they like and don’t like. We see it in North America, China, Brazil and in other markets that have a high penetration of both mobile and Internet usage. And that’s a rich body of information for companies, which is much more spontaneous and actionable than what you would have had in the past.”
Additional key findings of the report confirm that:
- Total retail sales reached $1.1 trillion in 2012: $568 billion at grocery stores and $530 billion at food service and drinking establishments
- While net sales had slowly increased since the recession, both top- and bottom-performing CPG companies experienced a slowdown in net sales growth in 2012
- Bottom performers hold onto their cash more, which means they could be ready to make more investments in research and development (R&D) and marketing to launch new products
- Many companies embrace the need for product innovation; and understand 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 as there is a growing gap between prices companies pay for raw materials and the prices they can charge for finished goods
- The food sector benefited from higher sales per employee but remained flat on inventory turnover and cash conversion cycle; while the beverage sector also 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
“Both the U.S. and global economies are marginally stronger than they were last year, and the continued slow recovery has led to correspondingly modest growth for the CPG industry,” added Lisa Feigen Dugal, Advisory Leader, Retail and Consumer Industry, PwC North America. “To drive profitability, providing consumers with the core product may not be enough. Today’s consumers want solutions, they want experiences and value. CPG’s and retailers can address this emergence through social media, innovation and direct-to-consumer channels, which will help them understand the wants, needs and values of their consumers.”
Now in its 17th year, the GMA-PwC Financial Performance Report includes analyses based on public information from 144 companies in the food, beverage and consumer products sectors as well as 69 retailers. 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. The report includes recommendations on how companies can improve existing internal organizational design, talent management and how to best utilize partnerships to build quality relationships with consumers.
Register for the live June 20th presentation of the report.