Pivoting the Consumer Goods Industry

Pivoting the Consumer Goods Industry

By George Joseph

Consumer goods companies (CGCs) have seen exceptional growth over the years. However, multiple changes in the industry are placing their current business models and strategies to the test.

It’s All About the Consumer

The most important contributor hindering the growth of CGCs is the customer. Tastes and preferences have changed causing an increase in demand for private labels as well as cheaper, less processed, and small brand products rather than larger known brands. Channels of distribution is another major factor as individuals are moving to the e-commerce marketplace to satisfy their demands. Both of these are reasons why major retailers like BCBG and Payless have filed for bankruptcy this year. An ever-growing health-conscious population is also changing the retail market industry, forcing CGCs to devise new strategies to accommodate the consumer’s evolving preferences.

Why Small Consumer Goods Companies Are in The Lead

Large consumer goods companies (LCGCs) are battling with small consumer goods companies (SCGCs) with the latter currently posing better signs of progress. SCGCs are beating growth expectations year after year in comparison to LCGCs and are expected to outpace the industry’s growth. LCGCs were at an advantage, with their enormous budget, salesforce and ever growing supply chains. Today, however, LGCGs are facing competition where being bigger might not necessarily be better. SCGCs are benefiting from the change in demand trends into niche products as well as the shift into e-commerce models; Online distribution is catching pace and favored by SCGCs as a preferable platform for growth.

How to Compete in the Consumer Goods Industry

To compete in the consumer goods industry, companies will need to make significant changes. First, they need to reignite growth among traditional grocers in a manner so as not to over spend in the process. It is not the easiest path, so companies must be cautious in making any investments. The next issue would be to take note of the change in distribution channels and how and when to make the switch. Here are a few steps that can aid in this period of transition:

Evaluating the risk of allocating resources between channels:

LCGCs must cope with the changes or face the risk of reduced growth. It is important to evaluate resources and strategies before implementing a new model. How much consumer spending can be captured, and how much retail space would you have to give up are some of the essential questions companies need to ask before moving forward.

Coming up with a specific strategy to focus on:

When shifting channels, analysis of the different distributors within the channels is important. Should you be in business with customers directly or would linking up with experts make the switch more beneficial? Brand image should also be taken into consideration as it could be viewed in the eyes of customers in other perceptions.

Making a shift should not eliminate growth in previous channels:

A move to e-commerce is important but traditional channels or retail should always be a part of the improvised model. Traditional grocers are affected by the changing customer spending behavior and will alter their demands accordingly. CGCs must have more tightly thought out deals and greater collaboration if they are to gain from this channel. Sales teams need to be proactive and develop strategies for different channels and not just a universal account. A more cross-functional environment would have to be embraced by firms to reach specific goals.

Simplicity is necessary. It might not be a negative step to drop a few products and concentrate resources towards top selling brands. Focusing on those products can result in increased sales as additional resources can be put into the distribution and marketing of top earning products. One key question to ask is whether you can compete with SCGCs with the products at hand or will you need to innovate and acquire new products.

Costs would have to be reduced to fund these growth activities. It’s important to allocate for change by moving away from certain products and assets should be taken and funds allocated towards growth sectors. Zero-based budgeting can help as it creates a structure of where the costs are aligned to promote growth areas.

CGCs are facing a difficult task trying to stay afloat during this time of varying consumer trends and preferences. Their attitude towards niche products and online shopping has resulted in reduced margins through retail leading to CGCs up taking a different model to capture growth. Balance is vital between spending resources efficiently into products that matter, diversifying into channels, and keeping costs at bay for the best results. Staying dormant during this time will only result in falling margins and growth.

Image courtesy of pixabay.com

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