Consumer Packaged Goods Are You Ready for Recovery? Presented by: John Brandt, CEO The MPI Group

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1 Consumer Packaged Goods Are You Ready for Recovery? Presented by: John Brandt, CEO The MPI Group

2 Have you survived? How did your company fare in 2009? Has your company and industry emerged from the recession? Many did not: U.S. business bankruptcies up 38% in

3 How will your company fare going forward? How will CPG markets rebound in 2010? Expansion predicted: Wal-Mart Stores sales projected to rise 7.8% to $408.2 billion in 2010 from 2008 and $405.6 billion 2 Target Corp. sales projected to rise 3.2% to $65.4 billion in 2010 from

4 Three things determining your CPG future Customers are changing Markets and mediums are changing You must change

5 Customers are changing Buying habits are changing Cash-strapped consumers became more frugal

6 Consumer restraint but expecting value Luc Speisser, executive director, brand strategy, Landor Associates: With their purchasing power reduced, people will shop less emotionally and more rationally; fewer impulse items will end up in the grocery cart. And it s consumers direct experience with a product that influences how they perceive the brand, rather than the other way around. Brand name alone isn t enough to motivate sales. 3

7 Consumer restraint but expecting value Todd Hale, SVP Consumer & Shopper Insights, Nielsen Co., rated consumer restraint as the No. 1 consumer trend in 2010, followed by a consumer priority on value: Value messaging must also include some point of differentiation beyond pricing. Manufacturers and retailers that drive the recession wave and take an active role in innovation and ad spending are likely to be the big winners. 4

8 How customers see themselves and your reaction Only I matter I am a buying customer I m unique You know me!

9 Consumers embracing new CPG fulfillment models Buy online, no shipping charges, and return or exchange at brick-andmortar stores) Unlimited selection opportunities online

10 CPG markets changing Brands and images Interactions with companies Selling to customers Fulfilling orders Brand loyalty

11 Brand power diminished? What s in a name? Many consumers forced to try and now like private-label/store brands Many willing to forego brands (and extra costs associated with brands)

12 Customer eyeballs moving from TV to internet Network TV revenue was $23.6 billion in 2009, down 7.2% from $25.4 billion in Total broadcast TV revenues fell 12.8% 5 Many CPG broadcast TV revenue categories fell 2009 vs (e.g., toiletries and cosmetics down 34.6%) 5

13 Go to where customers are going Limited shelf space as retailers reduce the number of brands, focus on top sellers Online stores growing faster than total retail and expect online purchasing to continue to grow.

14 You must change in five ways Market to one Overcome fulfillment obstacles Build brand loyalty Leverage technology Understand customers

15 Marketing to one Digital business is everywhere and impacts all CPG business models CPG companies must augment mass media to evolving technologies for one person at a time (promoting short-lived brands that customers want now)

16 Overcoming fulfillment obstacles Any delay in time-to-market destroys a product s prime profit-earning window As economy picks up, agile inventory management necessary to serve millions of markets of one

17 Building brand loyalty Ensure products, services and support satisfy customers (many forget this step but still ask for customer loyalty!) Establish affinity programs that correlate satisfied consumers with what they want (more than marketing guesswork)

18 Building brand loyalty (continued) First Data 2009 Consumer Loyalty Study: Consumers prefer coupons for discounts on total purchase but only 61% indicated that they receive that reward as a member of a retail rewards program. 7

19 Leveraging technology Collaborate in real time with retailers Capture millions of unique demands Coordinate entire supply chains around millions of demand signals

20 Understanding customers Can your systems track, manage and share this information? Building customer-relationship repository Identifying trends Flagging opportunities and problems Enabling what-if scenarios

21 Customers prefer self-service 61% of Convergys customers surveyed prefer self-service or automated technologies than waiting to speak to a customer-service adviser, double the amount since

22 Combine best practices (lean) with technology Communicate demand signals Design and develop products to satisfy customers and regulatory standards

23 Combine best practices (lean) with technology (continued) Synthesize forecasts into just-in-time production schedules and inventories based on actual consumption (not prediction)

24 CPG growth plan Connect with customers on a one-toone basis across all mediums physical stores, online stores, optimized handhelds, social media networks, etc.

25 CPG growth plan (continued) Collaborate with major retailers, regularly sharing sales information, consumer habits, buying trends, loyalty-program reimbursements, etc.

26 CPG growth plan (continued) Explore consumers demographics, lifestyles, social concerns (green/ sustainability, fair labor practices, fair trade) when developing, making and delivering products

27 CPG growth plan (continued) Monitor all practices and measures, making real-time decisions to optimize growth and profitability

28 Question & Answers? Contact: John R. Brandt, CEO The MPI Group

29 Sources 1: Chelsea Emery, U.S. Bankruptcies Rise 38 pct in 2009, data compiled from court filings by Automated Access to Court Electronic Records, a part of Jupiter esources LLC, Reuters, Jan. 5, : Standard & Poor's NetAdvantage, March 17, 2010.

30 Sources 3: Luc Speisser, Luc Speisser on Food and Beverage Trends: What can we expect to see in 2010? Landor's 2010 Trends Forecast: Market Trends and Their Impact on Brands, Landor. 4: Todd Hale, Winner Winner Chicken Dinner Top Consumer Goods Spending Trends, NielsenWire, Dec. 16, 2009.

31 Sources 5: 2009 TV Ad Revenue Figures, TVB Online citing Kantar Media. 6: Quarterly Retail E-Commerce Sales, 4th Quarter 2009, Retail Indicators Branch, U.S. Census Bureau, Feb. 16, 2010

32 Sources 7: Loyalty Program Study Finds Consumers Want Discounts from Retail Programs to Save Money, Customer Think, Aug. 26, : Frank Sherlock, Customer Service for the Social Network Age, The Financial Times, FT.com, Oct. 8, 2009.