Exploring the FMCG & CPG World: What's Changing, Challenges, and Future Focus

To an outsider, the FMCG and CPG industries sometimes look invincible. We often imagine that players in these spaces enjoy high revenues, high brand loyalty, and high barriers to entry. What we don’t realize is that they are constantly on their toes, striving for success in a volatile landscape.

At Tigerhall, we regularly talk to C-level leaders from our Fortune 500 clients and beyond. Umesh Phadke , Chief Transformation Officer at 欧莱雅 , is one of these leaders who has shared first-hand insights with us. We will explore these in this article.

There are lots of things that we already know about these industries thanks to how widely reported they are in the media. We know, for example, that there are supply chain pressures because of the Russo-Ukraine war, inflationary pressures impacting pricing, and everyone knows that there is a perpetual war for talent.

But are there layers to these industries that we are not privy to? With our Thinkfluencers, we take a deeper dive.

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Why large FMCG & CPG firms enjoyed a competitive advantage 10 to 15 years ago

The industry has seen a huge shift in recent years, about 10 to 15 years ago, players were seen as big fish or “whales” - they enjoyed a competitive advantage thanks to ? three main factors, as defined by Umesh Phadke of L’Oreal:

Capital to Manufacture

It was prohibitively expensive for new players to enter the market due to the high costs of manufacturing. Substantive investments were required to build factories, buy machinery and hire labor in order to? launch any type of manufacturing capability. Larger players are obviously able to manage such large sums of investments, but not smaller players or entrants.? - Karen Chong something is missing here i think??

Capital to Distribute

It was extremely expensive for new players to enter the market due to high distribution costs, particularly given that the infrastructure was built for the existing players. New players needed to find channels to distribute to large supermarkets and retailers, and would have found it challenging to compete for shelf space. New entrants also needed capital to develop delivery and distribution channels, which would be typically cheaper for existing players due to their scale.

Capital to Media Paths

Marketing and advertising required large sums of capital for traditional media, including TVCs, and ad campaigns, as there were limited other marketing or media channels. These traditional forms of media required significant production inputs, time, and labor, increasing the barriers to entry.

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What has Changed | What Our Industry Sources Say

Beware, But Also Hail, the Rise of the Piranha

Start-ups (the “Piranhas”) in the CPG / FMCG world are able to move quickly as they have fewer legacy systems and “baggage.” As such, these new players can create new product variants and, thanks to the advent of e-commerce, distribute them online rapidly based on consumers' demands. Nowadays, new players no longer have to rely on legacy distribution systems and instead can connect directly with the consumer through e-commerce and social media. Piranhas provide more variety for consumers meaning that established brands have to be agile and move as quickly as new start-ups in order to protect their market share.

Disruption is the Norm

While FMCG and CPG firms enjoy large market shares, their consumers’ mindshare is being chipped away at by the emergence of small brands that are gaining popularity in a viral way. Cosmetic brands like L’Oreal have to cope with the emergence of viral brands like Fenty and Rare Beauty. The likes of Kellogg and Mondelez have to contend with the rise of Impossible, Huel and Olipop, and Beyond Meat.

Agility + Anticipation

The “Whales” may be deeply embedded in terms of scale and innovation. However, being agile enough to respond to change quickly and being able to anticipate and predict future trends in order to be one step ahead of the game is critical. For example, the recent Kellogg divestiture into three smaller companies shows the drastic steps that sometimes need to be taken for a company to be asquick and as agile as needed. From an outsider’s standpoint, a reorganization often has negative connotations and might seem drastic, but Kellogg knew that change was necessary to remain relevant and thrive in an increasingly competitive business landscape that is seeing more and more new entrants.

Data is Your Baseline

The great advantage that the “Whales” have over the “Piranhas” is the amount of information that they have accumulated over many years - “Whales” should build global data oceans from lakes. Data is key to understanding one's consumers, overall industry trends and is critical when shaping and? executing future business strategies.?

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So What Do FMCG and CPG Organizations Care About Now??

In our conversations with stakeholders in the FMCG and CPG industries, we came across some key commonalities:

Sustainability

Our clients are thinking about how sustainability impacts their top line → going carbon neutral, rethinking packaging, diversity numbers, to positively impact growth.

Omnichannel

Our clients are always thinking about their distribution channels, and the right mix of e-commerce, digital, and in-store marketing in order to reach their target customers better.??

Innovator’s Mindset

Marketers in client organizations are looking for creative and innovative thinking to drive new approaches to marketing, partnerships, and distribution.

Customer Centricity

FMCG and CPG organizations are always looking at how to better manage their own clients, who are large complex organizations such as Target and Walmart. They want to stay on top of both newer distribution channels as well as the more traditional stores.

Data Analytics

Our clients in this space are looking closely at how data can build insights for marketing, commercial, and branding teams.

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What’s Next?

Interesting things lie ahead for the FMCG and CPG industries, with various moving pieces that need to be brought into the business strategy, including sustainability, data analytics and omnichannel distribution. More important than anything is that, talent in this space needs to have mindsets that mean they are prepared for greater competition and increasing pressure from new entrants. They need skills that will ensure they remain relevant as roles evolve in line with industry trends. As business leaders, it’s time to assess the current skills and mindsets of your talent pool and ensure they are ready to execute your strategy.?

Written by Karen Chong , Director for Learning Strategy at Tigerhall