CAGNY 2020: Day 3

Let’s start with the consumer…

Unless you’ve been living under a rock (or have been hit on the head with one), you know that health and wellness is one of the most persistent and compelling consumer trends in the market. Today’s presenters recognized this – with multiple companies talking about clean label products and innovations. Herbalife’s incoming CEO, Dr. John Agwunobi, gave the most ebullient presentation, with the most confidently delivered statement about the company’s position within an attractive and on-trend set of categories. In a week of low single digit sales growth targets, Herbalife’s mid-to-high single digit results were almost shocking – though, entirely understandable when you recall that they operate in weight management, sports performance and general wellness. Kerry Food came at the opportunity from a different angle, pitching themselves as the taste and nutrition leader, with a mission to “nourish life”. And finally, Church & Dwight’s Chairman and CEO, Matt Farrell, told an unusually memorable story of Archana Gupta, one of their R&D practitioners, who was inspired when shopping for RXBars to develop an Arm & Hammer laundry detergent with only six ingredients.

“Market Matters”

Reformulations of this type have been increasingly common in our industry, across CPG segments. People are willing to choose – and even pay more for – brands with this cred. And that brings me to my second theme – a phrase I borrow from P&G's CFO/ COO Jon Moeller: “Market matters”, i.e., focus on growing the market, not share – because (no pun intended) a rising tide lifts all boats. Their “superiority” strategy addresses “five vectors of superiority” – product superiority which consumers are willing to pay more for – but, also packaging, brand communication, retail execution and value. Through this strategy, P&G claims to have driven 28% of market-wide growth in its categories – and a stunning 45% of US category growth. And, as the market leader, of course, P&G benefits disproportionately, and this was evident in its superb financial results.

There is another way in which “market matters” – and several companies discussed the importance of market intimacy in driving success. Last year, PepsiCo instituted a significant reorg in its North America beverages business, with the argument being that decisions should be made in market, as close as possible to customers and consumers. CFO Hugh Johnston reinforced the benefits of this approach in his remarks today – and also discussed how the next stage of transformative technology is to achieve additional consumer and customer intimacy through data – which will also drive market-expanding growth through predictive analytics-driven innovation.

Finally, Herbalife’s Co-President and Chief Strategy Officer, John DeSimone, emphasized the direct and frequent intimacy of their direct sales model, actually bringing a group of real-life distributors on stage with him to celebrate the people who own the personal consumer relationships driving their business.

Disruption, with intent

While “market matters” addressed the core business, companies did not entirely neglect new areas of business. In some cases, this was due to market necessity; as Imperial faces a pervasive decline in combustibles, it (like other tobacco leaders) has made next generation products a key priority. In other cases, this investment in the “new” was a measured bet for continued long-term growth, while in a position of current strength. P&G (who seems to have regained their mojo in every way) proudly shared their standout presence at CES, as well as the two entirely new businesses they have developed with build studio M13 – Kindra and Bodewell.

Restructuring, with rigor

That is not to say that presenting companies ignored the operational aspects of their business; as we know, these are the most basic of table stakes in this challenging environment. Newell Brands’ new President and CEO, Ravi Saligram, shared a comprehensive presentation on the company’s turnaround strategy – and announced that CFO Chris Peterson would be taking on an additional role, focusing on reducing complexity in their business (which was built through a series of acquisitions). The FUEL program includes Lean Six Sigma, overhead reduction, IT consolidation and cash conversion; the company is also working on gross profit improvements by dramatically reducing SKU complexity and improving their forecast accuracy.

Other forms of restructuring included that common theme of the past several years (and this week) – portfolio rotation through acquisition. Church & Dwight has had a long-standing strategy based on acquiring diverse power brands. PepsiCo continues its growth in developing and emerging markets with its acquisition of Pioneer Foods.

The ecosystem era

The final – and, personally, most interesting – theme of the day was the continued evolution of ecosystems and, specifically, companies pitching their modular capabilities, which they can “lend” partners who lack these skills. Treehouse Foods’ traditional business has been private label for retail; however, CEO and President Steve Oakland pointed out the new and growing opportunity in lending their manufacturing skills and capabilities to the new and growing upstart brands who lack the expertise and capacity – and who are forming a increasingly significant part of the market.

Take note: This is not just an opportunity for small brands; more and more, I am talking to large CPG companies who are working with co-manufacturers in order to serve the proliferating and niche demands of consumers. Even CPG companies who have had long-standing co-man arrangements are telling us that the very nature of these relationships are changing, evolving from the purely transactional to a true partnership, with these players proactively bringing ideas and co-innovating with the brands.

Kerry also took this partnership point of view, with CEO Edmond Scanlon stating that their strategy is to “co-create with our customers, for the consumer” – acting as the “& Partner” for the “& Consumer”. That is, Kerry’s strong R&D-based business provides the specialized knowledge and capability to co-develop integrated solutions for its customers.

That brings us to the end of the day. Tomorrow is the final day of CAGNY – and I look forward to the power line-up of Colgate-Palmolive, L’Oréal, Coca-Cola and Nestlé.

I’ll see you, then.

Want to see more? Read my other posts:

• CAGNY 2020: Day 1
• CAGNY 2020: Day 2
• CAGNY 2020: Day 4