Executive Briefings

Report: CPG Companies, Retailers Shift Focus to 'New Rules of Consumer Engagement'

Retailers and consumer packaged goods companies are dealing 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, titled Growth Strategies: Unlocking the Power of the Consumer.

Report: CPG Companies, Retailers Shift Focus to 'New Rules of Consumer Engagement'

Despite the overall slowing of net sales growth rates in 2012, the report notes that food, beverage and household products companies experienced positive net sales growth of 7.0 percent, 5.5 percent and 3.2 percent, respectively.

According to the report, in the age of the digital consumer, leading 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 are rewriting the rules of retailing and CPG manufacturing. The report also examines how companies can seize new opportunities by creating lasting brand value.

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 for testing new products and reaching out to new consumers faster and more effectively than ever before, making 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.

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.

Among the key findings of the report:

l     Total retail sales reached $1.1tr in 2012: $568bn at grocery stores and $530bn at food service and drinking establishments.

l     While net sales had been slowly going up since the recession, both top- and bottom-performing CPG companies experienced a slowdown in net sales growth in 2012.

l     Bottom performers are starting to hold onto their cash, which means they could be ready to start making more investments in research and development and marketing to launch new products.

l     Many companies are embracing the need for product innovation as well as understanding consumer and market needs as part of their R&D activities.

l     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.

l     The food sector benefited from higher sales per employee while remaining 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.

The report further delves into how companies can gain greater understanding of their customers, as it 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.

For an electronic copy of the complete report, visit PwC or GMA.

Source: Grocery Manufacturers Association, PwC

Despite the overall slowing of net sales growth rates in 2012, the report notes that food, beverage and household products companies experienced positive net sales growth of 7.0 percent, 5.5 percent and 3.2 percent, respectively.

According to the report, in the age of the digital consumer, leading 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 are rewriting the rules of retailing and CPG manufacturing. The report also examines how companies can seize new opportunities by creating lasting brand value.

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 for testing new products and reaching out to new consumers faster and more effectively than ever before, making 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.

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.

Among the key findings of the report:

l     Total retail sales reached $1.1tr in 2012: $568bn at grocery stores and $530bn at food service and drinking establishments.

l     While net sales had been slowly going up since the recession, both top- and bottom-performing CPG companies experienced a slowdown in net sales growth in 2012.

l     Bottom performers are starting to hold onto their cash, which means they could be ready to start making more investments in research and development and marketing to launch new products.

l     Many companies are embracing the need for product innovation as well as understanding consumer and market needs as part of their R&D activities.

l     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.

l     The food sector benefited from higher sales per employee while remaining 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.

The report further delves into how companies can gain greater understanding of their customers, as it 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.

For an electronic copy of the complete report, visit PwC or GMA.

Source: Grocery Manufacturers Association, PwC

Report: CPG Companies, Retailers Shift Focus to 'New Rules of Consumer Engagement'