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GMA/PwC Report: ‘Demand Chain’ Driving CPG Growth

Having more or less maximized returns from the supply chain, top-performing food, beverage and household products companies are increasingly focused on the “demand chain,” according to the 2012 Financial Performance Report from the Grocery Manufacturers Association and PwC.

A relatively new term, the demand chain refers to activities that drive growth by driving customer interactions with a company’s brands and products.

“The demand side consists of innovation, marketing and sales—and I would say the key is how these activities are integrated to identify and exploit opportunities,” says Sunny Delight CFO Bill Schumacher, as quoted in the report.

Today, operational excellence is a given, the researchers stress; what will differentiate companies and drive their bottom lines is anticipating and meeting emerging customer needs.

“Companies can still drive competitive advantage through the supply chain, but the margin on that advantage is getting narrower,” observed Don Mulligan, CFO of General Mills. “Going forward, the winners will be whoever has the best marketing ideas, the strongest sales organizations and the right service delivery. That is the demand chain.”

“There is a greater focus on consumer trends and exploring the consumer landscape now,” agreed Hershey CFO Bert Alfonso.

The report, noting that a quarter of global consumers and a third of U.S. consumers say that companies usually fail to satisfy their expectations—and that most say they’d be willing to spend more with companies capable of doing so–stresses that “the gap in companies’ ability to anticipate and create demand is huge, and therefore so is the opportunity.”

Companies are just starting to truly grasp that consumer expectations and attitudes are changing radically, and that keeping pace is critical to their survival, the researchers point out.

CPGs that shift new strategic investments to their demand chain “will stand the best chance of creating new growth,” sums up Susan McPartlin, PwC’s leader, retail and consumer industry.

Consumers are now “omnichannel” shoppers, and they “expect a seamless experience,” McPartlin says. CPG companies need to address consumers in all channels of choice, and map their demand chains based on consumers’ “shopping journeys,” she says.

Consumer preferences and insights should be the core of all CPG growth strategies, influencing all functions and driving change, McPartlin emphasizes. The challenge—and the opportunity—she adds, is that companies need to reach consumers not only through physical stores, e-commerce and social media. And those involve considerable research and groundwork, including determining which brands and products are suited to e-commerce platforms, and how to glean and make sense of the fragmented, unstructured but hugely valuable insights in social media.

Consumers are now “omnichannel” shoppers, and they “expect a seamless experience,” McPartlin says. CPG companies need to address consumers in all of their channels of choice, and map their demand chains based on consumers’ “shopping journeys.”

Three-quarters of CPGs report that they’ll leverage social media for brand promotion over the next 12 months, and nearly a third will use social media to increase consumer loyalty (versus 17% saying the same last year).

To stay relevant to consumers, CPGs must rethink their demand chains to drive awareness, conversation and loyalty across channels, the report sums up. They must be on the digital platforms that their customers prefer so they can influence the buying process directly, and they must also be ready to adapt as digital touchpoints evolve. And they must also, of course, develop metrics to measure the effectiveness of digital efforts.

Further, since emerging markets continue to represent the largest growth opportunities, CPGs must stop thinking that they can simply rebrand legacy products for these markets, and invest in R&D and social media conversations with consumers in these markets to glean meaningful insights.

Financial Performance Trends

The relevance of all of the above becomes clear in the context of the CPG 2011 financial data in the report.

via MediaPost Publications GMA/PwC Report: ‘Demand Chain’ Driving CPG Growth 06/19/2012.


About Bob Innes

Who am I and what I do best! I am a skilled Sales and Marketing team player known for performing behind the scenes miracles that increase base distribution, improve customer relationship management, exceed annual sales volume,and profitability for Consumer Packaged Goods companies. And I've been doing it for over 15 years. My successful contributions include such clients as Kraft Foods, Mars, Bumble Bee Foods, Unilever, Johnson and Johnson and SC Johnson, and JM Smuckers.


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