Business is bloody right now.
Year-on-year EBIT growth across top 100 CPG brand owners across the world has been declining since 2010, went into negative growth in 2014 and then flattened out a little bit again in 2015 onwards. To offset this, manufacturers have looked towards BRIC and Emerging markets to offset sluggish growth. Since 2014, more than two thirds of revenue growth and an even bigger share of profit growth - among the top 50 global CPG firms - has come from pricing and mix rather than volume.
Over the same period (circa last 4 years) we've witnessed the emergence of tech/ advances in AI and machine learning, that will eventually require fewer 28 year old MBA's traditionally working as data insIght specialists/ strategy leads. Strategic forces are increasingly adding tension to consumer goods companies’s brand performance.
The role of Amazon and its butterfly effect in shifting purchase behaviours, possibly over-stated by recent accounts. There will be more Amazon’s. More direct-to-consumer plays (DTC). Retailers of manufacturer brands are developing their own Private Label portfolio’s and as a result are increasingly been seen as competitors for a manufacturer.
These competitive pressures are amplified by the growth of discounters and the impact on price and margins. Consumers are no longer shopping the way they did 10 years ago. These 'evolved' buying behaviours along with a proliferation of competition in the form of upstarts and category disruptors coupled with increasing supply-side cost pressures represent additional challenges (and opportunities) for modern leadership teams globally.
Europe is one of the most intensely contested market spaces of all, where challenges that every manufacturer and retailer is facing, - innovation, renovation, growth, portfolio and branding, capabilities, data and analytics, all of these need to be improved to stay in the game. Implementing a one size fits all strategy, including price increases across the entire product portfolio isn’t the right solution.
Product, price and pack innovation may be effective in helping counteract price and competitive pressure, but the key to boosting revenue and profit growth lies in boosting your capabilities from the top down. Culture, igniting your leadership team, grounding your teams in their roles, democratising customer empathy throughout the organisation, innovating from the core. Chaos and ambiguity require focus, fearlessness and speed.
There is a new breed of competitor attacking from all angles.
My top summary takeaways from discussions this week:
Adopting the right mindset and vision (3-5 years), aligned to the best people to build a growth culture starting with the core team (evangelists) and radiating outwards, providing a compelling rationale, reason to care/ reason to believe. Inspire the art of the possible.
Fail forward; trip up, not down. Promote a culture of experimentation. Test-learn-iterate. Fearlessness comes from having tried over and over again until we get it right and win. Move fast and build things. Incubate and accelerate from the core.
Promote a relentless obsession with customer-centric data and analytics to inform future positions using design-thinking and customer empathy in everything you do. Democratise customer empathy. It doesn’t just belong within the insights/ analytics/ data science department. Empower everyone, align them to the customer’s unmet needs and experiences. Follow the honey.
Frameworks and approaches for innovation matter, although igniting the leadership team and ensuring they don’t just sponsor, but become active champions of change, is an absolute non-negotiable.
Toolkits/ approaches and learnings incorporating ‘outside-in-thinking’ helps teams to ‘connect-the-dots’ between organisational strategy and vision, competitive game theory and pragmatic customer selling stories, including the identification and commercialisation of ‘white-space’ opportunities, resulting in breakthrough businesses to compete with new entrants in markets experiencing ‘seismic consumer and social shifts’. How does one of Europe’s best-selling beer manufacturers respond to a decline in lager sales as a result of switches to craft brewing and non-alcoholic beverages? How does the world’s most admired cola company mitigate the effect of smaller, healthier ‘non-sugar’ brands, whilst already engaged in a brutal and relentless price and promotion where 1p can equate to £30m per year in the UK market alone, a war they need to win against, whilst pivoting to new emergent market spaces? And how do we create a culture and mindset for DTC growth and innovation whilst also having to supply our existing b2b customers? Validate with customers/ users. Test. Iterate.
How do we improve ‘ knowledge transfer’ and build a lasting capability within the organisation, to embed the ‘learn-by-doing’ ethos, and often the 'learn-to-unlearn-to-relearn’. How do we improve growth mindsets, reduce fixed mentality thinking. What got you here won’t get you there.
Ecosystem is everything. Ubuntu magic, meaning, 'I am, because of we’. Longitudinal studies conducted at Harvard Medical School have shown that the single biggest predictor of happiness, wellbeing and success in life (and for longevity) is ecosystem or tribe. 'We rise by lifting others'. Workplace buzz matters.
Perfectly imperfect is driven by an innate fear of losing out on the opportunity. Act intentionally, and with pace.
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