Digital Transformation

There’s never been a time of greater change for the FMCG industry than right now. The pandemic took growth to unprecedented levels, accelerated digital adoption, and changed almost every aspect of how we live and work.

As we start a new year, Deloitte reports that 93% of consumer goods executives say profitable growth is the top priority. But the industry is facing a number of challenges:

• How to retain shoppers who tried your brand for the first time?
• What to do about out of stocks, which still sit at about 12% (IRI)?
• How to increase prices to offset inflation when consumers are expected to be more price sensitive this year?

The companies who will come out on top are those who transform their business and leverage technology to fuel the change.

It’s Time to Personalize Connections with Consumers

In order to win in today’s environment, brands need loyal consumers. They spend 2 - 3x more, are more willing to try a brand’s new products, and often act as ambassadors by telling their friends and family how much they love the brand. But creating loyal consumers is hard because they are more demanding than ever before.

It’s not enough to have highly satisfied consumers; brands need emotionally-connected consumers (and the reward is 2x the lifetime value). Brands need to move past demographic targets and develop a deep understanding of their consumers. As I noted in a prior article, they also need to build 1:1 relationships with people, as 80% of consumers expect a personalized brand experience.

That’s why best-in-class FMCG companies are turning to data-driven marketing, which can unlock 3 - 5% incremental growth (according to McKinsey).

FMCG companies are growing their datasets and building strategies to collect first party consumer data, powered by a CDP (customer data platform). This robust consumer insights engine is at the center of everything they do. They are also leveraging technology that builds more intelligent consumer segmentation, conducts A/B tests, and analyzes campaign effectiveness.

Sell more, and do it more efficiently

Yes online sales are growing at astronomical rates. But we can’t forget about the store, home to 80 - 90% of total FMCG sales. Brands are spending $200 billion annually on in-store merchandising and marketing and are pretty unhappy with their results. Missing SKUs, lack of new item activation, crappy display support and more have led to missed sales and strained retail relationships.

DSD brands are investing in technology that streamlines in-store activities to free up time for their reps to focus on achieving perfect store execution. In return, they’re saving time, increasing share of shelf, growing share of assortment, and building gorgeous brand displays which have unlocked up to 100 bps of incremental market share.

Brands are also investing in technology that helps them win with the long tail of fragmented retail: independent stores, bodegas, and everything in between. It’s a $2.8 trillion dollar industry and today 33% of the owners/operators want a seller-free sales experience. In fact, Forrester predicts that 80% of B2B sales will be digital by 2025.

Companies are using technology, such as B2B ordering apps, self-service platforms, and social commerce to grow sales while reducing cost to serve in the long tail.

Don’t Work Harder, Work Smarter

25% of Americans quit their jobs in 2021 and 67% of information workers are still working remote.

That has meant recruiting, onboarding, training and off-boarding employees remotely. Companies are investing in technology that creates journeys and communication for employees, automates workflows, and serves as a unified training platform.

But it doesn’t stop there. FMCG needs to be attacking any duplicative, manual, or non-value added tasks. For example, why have dozens of people pulling data from multiple systems, harmonizing and analyzing it when you could create a central data lake with beautiful visualizations and standardized reports that save time for everyone?

People are truly the greatest resource. FMCG needs to use technology to ensure their talent can focus on what’s going to drive business results.

To Drive Profitable Growth

2022 is going to be a tough year for FMCG. IRI is predicting 7% volume declines and 10% dollar declines. Raw material and transportation costs are up 20 - 60%, putting pressure on already thin margins. Now is the time to invest in transformation. That's why I'm expecting to see a huge accelerating in digital transformation across the industry.

All opinions are my own and do not reflect the views of my employer or any other organization I am affiliated with.