business news in context, analysis with attitude

A guest column by Todd Ruberg

Content Guy's Note: I don't run a lot of guest columns here, mostly because most of the people who offer to write them just want to sell something. But a conversation with my friend Todd Ruberg focused on "analysis paralysis," which is something that I believe is an enormous problem for both retailers and suppliers; Amazon's speed should have the same impact on companies' rate of change as Walmart's efficiency model had on the way its competitors worked on supply chain issues. (If it doesn't, they're probably screwed.) Anyway, based on that conversation, I asked Todd if we could run some of his thoughts here on MNB, and he graciously agreed. So, enjoy.

The pace of disruptive change in our industry is head spinning:  Just in the last weeks we have seen Amazon’s offer to acquire Whole Foods, Walmart’s acquisition of Bonobos, and more news of Lidl and Aldi expansion. It’s so fast, in fact, that whatever I say today may already be outdated tomorrow.

While the pace of change may have increased, the fact of change actually is an old story. Over the course of my thirty-five years in the CPG Industry and as a business development leader for a major CPG company, I watched the growth of Walmart, the emergence of the Club and Dollar channels, the decline of print ad & promotion effectiveness, the consolidation of the big food channel retailers, and the emergence of online shopping. And I could go on.

If change is inevitable, and disruption is the only thing that really is predictable, the real challenge is being proactive and reacting in ways that help businesses continue healthy growth year after year. And that means going beyond research (which remains critical) and finding ways to turn findings into profit, and market change into growth.

It means getting beyond Analysis Paralysis.

Every industry has its challenges. For the CPG sector, it’s changing consumer preferences and demographics disrupting the traditional brand building tactics. Changes in the consumer path-to-purchase and the rapid increase in eCommerce retailing require new capabilities and trade programs in order for brands to succeed.

All this is happening at a time with a slowdown in consumption growth, putting pressure on costs and spending, when new investment choices in rapid technology advances seem necessary. Meanwhile, in the marketplace there is retail consolidation, accelerating store closures, new “channels” with online and mobile, and new competitors (especially Amazon) emerging and growing fast.  All driven by a consumer/shopper who wants access to brands and information “anytime, anywhere, anyhow” – and expects retailers and brands to deliver on these changing expectations.

How are the industry players responding to these new conditions? Traditional players see growth stagnating, margins under pressure, and an unclear path on how to best re-strategize successfully.

For some retailers, it’s been “wait and see.” Most now are working on their own response to mobile and eCommerce growth, but margin pressures continue, exacerbated by the need to invest in technology, pricing of goods in an environment driven by algorithmic pricing, and deflating commodity pricing.

For CPG companies, it has been predominantly tightening their belts through “zero based budgeting” exercises, focusing on the “ROI” of spending as their growth stalls. They are caught in the challenge of both brick & mortar and eCommerce retailers looking for best price and differentiation, fearing that this challenge will drive a “race to the bottom” price environment that ultimately will place further pressure on their trade spending and margins.

All this has led to a contentious environment between retailers and their suppliers, as they each look at their own bottom lines, and introduce new initiatives to transfer value that is viewed as “zero sum” in this slow growth world.

There is no one-size-fits-all solution. But there is an adaptable model we can all use to grow in today’s marketplace and to future protect our business - an approach called Enterprise Value Creation.

The realities and challenges of this marketplace require CPG to be capable of more than just developing a brand and marketing it with retailers. With so much change and pressure on retailers, for a CPG to stay relevant, and be a valued partner, it must be “capable” of driving growth – creating value across the entire enterprise. This means shopper targeting and acquisition along the full Path to Purchase, supply chain efficiencies, superior online and in-store retail execution, category design, and more. And, a sales force capable of tailoring those capabilities to a specific retailer through joint business plans.

The CPGs (big and small) growing and scoring the highest marks from retailers on their ability to create value tend to have some things in common.

First, they have a keen understanding of the shopper they share with each retailer, with “actionable” insights on in-store and online shopping, including tactics to build that shopper’s loyalty and basket size.

They also understand how those shopper insights could become a “conceptual platform” used to articulate with their retail partners – Why is this category important? How can it be leveraged to build a retailer’s overall sales and shopper equity? And how can the insights be turned into profitable growth for both parties?

They all have value-creating capabilities across the total enterprise, including the ability to look carefully at their own costs and spending, from their organization costs, to their trade funds or retail, and then reallocate for the best return within or outside of that retail partner (ensuring new investments are not always incremental).

They're able to bring innovation and merchandising ideas to life across multiple channels, fitting up to that retailer model and their unique shoppers. They can incentivize the most efficient and effective logistics and best business practices.

And ultimately, they can provide the resources and sales abilities to build sustainable and profitable customer based Joint Business Plans.

This is no time for indecision, for Analysis Paralysis. The change and disruption in the industry will only accelerate.  There will likely be players that simply won’t survive. There will also be players that use the disruption to urgently drive change, survive and thrive.

Those players will be the ones that critically and honestly assess their capability opportunities, and get to work building up those most important to win.

Todd Ruberg is a partner with Simpactful, a CPG/Retail consultancy firm built with a team of experienced line leaders from both CPG and Retail firms. This article is based on a new white paper from the group, which you can read in its entirety here.

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