Jan 19
Three Levers for CPG Transformation Amid Historic Uncertainty
By Adrián Velázquez and Sebastián Ramírez
The great Winston Churchill put it best: “To improve is to change; to be perfect is to change often.” Faced with challenging conditions ahead, companies must explore many different ways to drive sustainable top- and bottom-line growth.
However, transforming a business can be a daunting challenge. Where to start? What avenues to explore? Which bets must be placed? We believe companies should start their exploration considering three major avenues for transformation: Value Creation, Commerce, and Sustainability.
Value-Creation Transformation
Amid global economic gloom, consumers are looking for ways to cut spending and find value. Inflation and general concerns about the economic outlook have driven consumers to take a closer look at their finances. A survey by NielsenIQ found roughly one in six consumers say they’re focused on daily essentials like utilities and groceries. Meanwhile some pandemic-era gains have receded, including shrinking spending on travel, dining out, gym memberships, delivery, and live entertainment.
In order to stay relevant and sustain consumer demand, CPG companies need to examine how they add value to people’s lives, and find ways to add more without asking for more money.
All companies should rethink and strive to reinvent their supply chains, manufacturing processes, and distribution models with keen eyes for efficiency. The next generation of AI systems can help firms reduce inefficiencies in production and shipping, and data-driven systems can bridge gaps between business and retail partners to smooth the customer journey and drive sales.
Companies must focus on what they can control. It is now time to create, explore, and de-risk new business models and ways of doing business. The greatest differentiators lie in the ways that consumer products are created, manufactured, distributed, and experienced by consumers.
Commerce Transformation
Revisiting the way people find and purchase your products is perhaps the most fertile territory to look for impactful business transformation opportunities. The sustained rise of ecommerce continues to provide new opportunities to both consumers and companies. Marketplaces like Amazon, GoPuff, and DoorDash have proven that shortening the tether between buyers and sellers pays off, creating new ways to drive sales and increase brand loyalty, while providing a low-cost, low-stakes digital path for companies to acquire new customers, test new ideas, and gauge consumer interest.
The significant rise in ecommerce subscriptions — such as wine clubs, meal kits, and grocery delivery — provides yet another avenue to explore. According to Forbes, global e-commerce subscriptions increased from $72.91 billion in 2021 to $120.04 billion in 2022, and are projected to hit $904.28 billion by 2026.
Further, the enthusiasm for the gamification of shopping also continues to grow, with products embedded into web-based games as well as VR and AR shopping experiences. This opportunity alone represents an entirely new route-to-market you should be considering.
To sharpen your competitive edge, your company must reimagine the ways people try, buy, use, reuse, and even return your products. This is the time to take a second look at the strategic role ecommerce and digital pathways can play for your company in helping you drive significant, incremental business results.
Sustainability Transformation
A majority of consumers are asking brands to incorporate sustainable practices into their operating models. Mastercard found that 85 percent of adults say they would be willing to amend their lifestyles to prioritize the environment. And 62 percent said they value companies that incorporate sustainable practices throughout the entire value chain — from sourcing, to manufacturing, to distribution.
Sustainable practices, and demonstrating a real commitment to sustainability, is no longer a nice-to-have, PR-centric endeavor. It is now a genuine, consumer-driven strategy that companies must fully and thoughtfully explore to drive consumer preference, generate sales, and build brand love.
More often than not, companies face innovation challenges that intersect with the three avenues of Value-Chain, Commerce, and Sustainability Transformation. Not long ago, Coca-Cola asked us to help them think, design and implement a solution for their new digital platform for both existing and new beverage categories. They sought to deliver meaningful value at every touchpoint, build personalized experiences around drinks in order to strengthen consumer connections, and deliver products directly to consumers’ homes in a more eco-conscious way.
We began by imagining a platform for consumers to personalize their Coca-Cola cans, alongside an “open to better” campaign launching in January 2021. Our user research led us to three key customer needs — personalization, sustainability, and convenience — and we got to work developing a platform that could integrate these three pillars across all products and services. We carried out weekly brainstorming sessions and prototyping sprints and designed the centralized platform alongside the other vendors and agencies that work for Coca-Cola to ensure a cohesive experience. This platform allowed us to experiment, drawing from consumer insights to prototype and test new functionalities. In four months, we and Coca-Cola were able to design, develop, and launch a digital platform that sells a new suite of bespoke packaging, and other personalized merchandise, directly to consumers in nine European geographies.
We believe the three strategic transformation avenues — Value Creation, Commerce, and Sustainability — represent the biggest opportunities for companies to explore during these uncertain times. Are you prepared to embark on that journey?
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If companies don’t innovate, they die. Yet many firms struggle to find quick and effective ways to bring innovation to life. To help companies hack innovation, we use thinking, designing and implementation models that enable transformation and growth. Check out our website here for some examples, and please get in touch if you think we can help.
