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Manufacturers and retailers shift focus to engage consumers

More than 40% of CPG companies expect to sell products directly to consumers in 2013, up from 24% in 2012
By Modern Materials Handling Staff
June 26, 2013

Leading consumer packaged goods (CPG) companies and retailers are responding to the speed of the digital consumer and balancing operational quality with innovation to connect to them. These are among the findings in a new report from the Grocery Manufacturers Association (GMA) and PwC US, titled Growth Strategies: Unlocking the Power of the Consumer.

Top-performing companies are finding success by identifying their consumers, engaging with them and focusing on innovation that directly reaches their customers. The report explores how digital and social media, accelerated mobile adoption and a direct-to-consumer approach are rewriting the rules of retailing and CPG manufacturing.

“This report shows that in the midst of a challenging economy, the food, beverage and consumer products industry continues to show great resiliency,” said Pamela G. Bailey, president and CEO of the Grocery Manufacturers Association. “By providing consumers with innovative products and convenient, cutting-edge shopping experiences, CPG companies are well positioned to enhance consumer loyalty and profitability.”

“CPG companies that engage with consumers directly through digital channels and build out their direct-to-consumer processes will have the best advantage for creating new growth,” said Steven Barr, PwC’s US leader, retail and consumer industry. “Fifty-two percent of U.S. consumers are already buying directly online from brands they trust, proving that CPG companies now have far greater opportunities to walk alongside their shoppers in real time while driving sales of existing and new products.”

In 2013, more than 40% of CPG companies expect to sell products directly to consumers, up from 24% 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 is essential, as companies need to manage a new set of risks and security concerns.

“Consumers today share much more readily with each other and with companies than in the past,” says Bert Alfonso, President, International, for The Hershey Company. “Their input tends to be about your product’s characteristics and about what they like and don’t like. We see it in North America, China, Brazil, and in other markets that have a high penetration of both mobile and Internet usage. And that’s a rich body of information for companies, which is much more spontaneous and actionable than what you would have had in the past.”

“Both the U.S. and global economies are marginally stronger than they were last year, and the continued slow recovery has led to correspondingly modest growth for the CPG industry,” added Lisa Feigen Dugal, PwC’s North American advisory leader, retail and consumer industry. “To drive profitability, providing consumers with the core product may not be enough. Today’s consumers want solutions, they want experiences and value. CPG’s and retailers can address this emergence through social media, innovation and direct-to-consumer channels, which will help them understand the wants, needs and values of their consumers.”

Among the key findings of the report:

• Total retail sales reached $1.1 trillion in 2012: $568 billion at grocery stores and $530 billion at food service and drinking establishments.
• 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.
• Bottom performers are starting to hold onto their cash, which means they could be ready to start making more investments in research and development (R&D) and marketing to launch new products.
• Many companies are embracing the need for product innovation as well as understanding consumer and market needs as part of their R&D activities.
• 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.
• 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.
• Despite the overall slowing of net sales growth rates in 2012, food, beverage and household products companies experienced positive net sales growth of 7%, 5.5% and 3.2%, respectively.

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.

Click here to view the full report.

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About the Author

Josh Bond, Associate Editor
Josh Bond is an associate editor to Modern. Josh was formerly Modern’s lift truck columnist and contributing editor, has a degree in Journalism from Keene State College and has studied business management at Franklin Pierce. Contact Josh Bond


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