COLORADO SPRINGS, Colo. -- Consumer packaged goods (CPG) companies winning in their categories are three times more likely to invest in growth channels and the Hispanic market, 50% more likely to use pricing optimization tools, five times more likely to view retailer collaboration as a strategic priority and invest twice as much time in talent development, according to the 2012 Customer & Management Channel Survey released at the GMA Executive Conference on Monday.
These are some of the findings from Winning Where It Matters: A Focused Approach to Capturing Growth, a collaboration between the Grocery Manufacturers Association (GMA), McKinsey & Co. and Nielsen.
Since 1978, the report has provided regular updates on the practices of top-performing CPG companies, but unlike other market surveys, the findings link company financial performance and in-market results with self-reported business practices to identify winning approaches.
Overall, the report found that winning CPG companies outperform their peers in four key areas: bold investment in growth areas; advanced use of analytics to fine-tune pricing and promotion; prioritization of retailer relationships; and commitment to talent development and strategic planning efforts.
"Best-practice sales strategy continues to include heavy investment in emerging channels, an emphasis on customer collaboration and a focus on investing in next-generation capabilities," said Brian Lynch, senior director of business and industry development at GMA. "Specifically, focus on dollar, club and online channels, joint retailer-manufacturer initiatives and time spent nurturing high-potential sales talent all received high marks as particularly effective by survey participants."
A new element to the 2012 survey is the "battle at the shelf" analysis. As consumers make more product and brand purchase decisions in-store, shelf performance becomes an area where CPG companies can gain market share. Often, performance hinges on how well companies manage assortment optimization. Many CPG companies reported challenges striking the right balance in their assortment optimization efforts.
"Using advanced analytics to drive pricing, promotion and shelf management strategies is table stakes for CPG companies who expect to lead their categories," said Steve Matthesen, executive vice president of professional services for Nielsen. "The report bears this out: companies using analytics as a strategic tool enjoy top-line growth and share-price improvement, while their peers grapple with a flat to declining market."
Also new to the study this year is a focus on the growing importance of the Hispanic market. "Hispanic consumers are a key growth segment, with buying power increasing 50 percent through 2015," said Kris Licht, partner in the consumer practice at McKinsey & Co. "CPG companies that win with Hispanics focused on tailored products and marketing, created better in-store experiences with retailers, and increased Hispanic-focused resources and capabilities."
Winning organizations are three times more likely to invest in high-growth channels, such as club, dollar stores, discount and e-commerce, with significant payoff. "These emerging areas contributed more than 25% of total growth, with winning companies achieving as much as 16% more channel growth than their category peers," said Kari Alldredge, senior expert in the consumer practice at McKinsey & Co.
Looking ahead, the survey highlights the increasing importance of sales technology, which encompasses traditional disciplines such as internal systems, the growing importance of data sharing with retail partners, and the high-growth area of shopper micro-targeting that includes smart-phone apps, mobile couponing and other interactive marketing strategies. This discipline was new to the survey as not quite 25% of respondents reported activity in this area, but almost 80% reported plans to build this capability in the next two years.
Nearly 220 CPG executives from more than 50 companies participated in the 2012 survey. These companies represent many of the biggest brands in the food, beverage, personal/home-care categories and almost $160 billion in U.S. sales.
Click here to view the full report.
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