Declining margins, disrupted supply chains, heightened customer expectations – a perfect storm of market forces is shaking up the consumer goods landscape. For Consumer Packaged Goods (CPG) companies who want to drive profitability and growth, it’s time to make the bold moves – leaning into the challenges and making the most of potential gains. In our work with leading CPG companies, we’ve identified six main levers of success.
1. Using everything at your disposal to truly know your customer
CPG companies have long based their success on secure access to customers via mass market retailers. The rise of diverse distribution channels has reset the playing field and is forcing companies to ask the question: “How do I extract value from new channels while continuing to serve my core trade customer?”
Getting closer to the moment of conversion give you deeper insights into how, when and why your customers purchase. Combining first and third-party data and investing in the right technology can help you fast-track insights and extract real value.
2. Setting a strategy for private label
For retailers, private label has evolved from a value offering to become a point of differentiation and own brand growth in key categories. To stay competitive, CPG companies need to take a fresh look at private label and respond strategically to the opportunities and risks.
There is significant room for growth in the local landscape and CPG companies who fail to innovate risk losing market share.
3. Embracing social citizenship
Environmental, Social and Governance (ESG) credentials are fast becoming a differentiator for CPG companies. The ‘Social’ in ESG is often overlooked in favour of more attention-grabbing environmental issues. However, just as searches for ESG have increased five-fold in the past three years, we now observe that the spotlight is turning more frequently towards good ‘social citizenship’ and, in fact, the manner in which businesses conduct themselves in the community is a mark of differentiation this year and beyond.
CPG companies without a clear social proposition or who struggle to back their claims are at risk of losing conscious consumers to brands with clearly articulated values.
4. Focusing on portfolio health
A robust data-driven product analysis will help you sort promising products from the underperformers. In the current market, where margins are tight and inflation is causing production costs to soar, you need to respond dynamically or risk losing market share.
Are you across the true cost to serve, channel performance and category share? Don’t be weighed down by unprofitable product ranges and a compromised ability to make the right call on portfolio health.
5. Channelling the right strategy for profitability and growth
CPG companies are moving beyond traditional trade channels to explore new platforms, marketplaces and distribution models. E-commerce has generated significant excitement but achieving profitability can be more challenging than expected.
The best starting point is to understand channel profitability. Follow this up by balancing experimentation in new channels in parallel to core retail.
6. Investing and connecting to play
Don’t miss opportunities for growth and efficiency by delaying your investment in systems and technology. It has never been more important to have a seamless and connected experience across all aspects of the front, middle and back-office functions.
Technology solutions don’t operate in isolation and companies that focus exclusively on the technology are missing the benefits of having the right processes, capability and people in place – they risk leaving significant value on the table.
How KPMG can help
KPMG specialises in helping CPG companies. From defining and operationalising customer-driven strategies to driving improvements and growth across end-to-end operations, we work with our clients to ensure they’re able to not only respond but thrive in today’s dynamic market.
Take a deeper dive into our new report series for the consumer goods sector; Are you leaving value on the table? Learn more about the levers of success and connect with our team of CPG specialists.
