Has the CPG Business Model Truly Failed or Are We Ignoring What Made the Industry Great?

Last year Forbes reported on a survey of more than 200 global FMCG C-suite executives from both the retailer and manufacturer sides of the business. The article summarized the findings with a fairly dire outlook: stating that, “antiquated marketing and brand-development models are hobbling retail and consumer products companies, chipping away at sales, earnings and market share”. The author went on to explain that efforts to adapt FMCG to how technology has transformed the shopper have overwhelmingly flopped. I debated these comments with the partners at Middlegame extensively. We agree that the era of E-commerce and the social nature of the internet have made things more difficult for FMCG, but they probably represented more opportunity than threat. We saw the real issue as something more fundamental.

The digital revolution has clearly made shoppers more empowered than ever. They demand the right products, at the right prices, with the right incentives, or they will immediately find other ways to spend their money. However, there is a limited FMCG response to address this watershed moment. What we find is often an assortment that lacks consistency and fails to offer a true pervasiveness relative to other buying options. The pricing is confusing and leaves the interpretation of value less than straightforward in the very short time that shoppers engage with the shelf. Merchandising is overwhelmingly focused on price reduction and a deal-driven mentality instead of used as a tool to encourage trial or to reinforce brand preference for repeat buyers. The result is rapidly slowing growth or even overall portfolio decline.

From an assortment perspective, the products shoppers find continuously stocked need to be meaningful to the predominant occasion or trip missions associated with the store visit. Otherwise, the shelf only offers the shopper clutter and confusion. Moreover, managing all of these SKUs severely bogs down the supply chain. Subsequently, prices need to be aligned with the value shoppers place on products given the occasion, brand, flavour, ingredients, package type, size, etc. for the overall gain of the portfolio or category. If we can’t financially accomplish this, the product doesn’t belong in the offering. Finally, merchandising and promotions need to represent welcomed disruption for shoppers that reinforce how products and their prices align with the same occasions and trip missions facilitated by the channels.

Basically, our conclusion was a call to return to simplicity marketing. A great Harvard Business Review article called To Keep Your Customers, Keep It Simple talks a lot about this. The findings demonstrate much higher sales are associated with brands that make it easier for consumers to gather and understand information about the product, weigh the options offer, and trust the information. This article is actually part one of a three-part series offered by the HBR in 2012. The other two were digital only. I highly recommend taking the time to read the series.

Middlegame is the only ROMI consultancy of its kind that offers a holistic view of the implications of resource allocation and investment in the marketplace. Our approach to scenario-planning differs from other marketing analytics providers by addressing the anticipated outcome for every SKU (your portfolio and your competitors’) in every channel. Similar to the pieces in chess, each stakeholder can now evaluate the trade-offs of potential choices and collectively apply them to create win-win results.

Contact us at info@ middlegame.com