Despite the shocks and perplexities that year 2020 posed to the world, it was also a year of glory and unprecedented growth for CPG companies. Businesses operating in this sector not only played a critical role in fulfilling fast altering demands of customers as they curated their habits around the new normal, they also did so handsomely, by adapting to new rules of doing business, and fast. While CPG industry growth shot up by over 8% YoY compared to a meager sub-2% growth during the last three years, the projections look more optimistic for the years to come.
However, things are changing fast yet again, and customer behaviors are evolving to reflect shifts in the underlying realities – demand spikes and troughs are becoming the rule as a result, supply chains need readjustments to find much-needed resilience, and appealing to the customer will take a lot more than it did during the pandemic. There is good news for all players – big or small, CPG businesses are all set for a continuum of growth.
To capture this growth for the 4th generation of the CPG enterprises, they must reimagine their brand value, reinvent the adaptive supply chains, and pivot their strategy with consumer experience at the center, – and without doubt, digital will be a critical catalyst in making it all happen.
It is imperative for CPG organizations to reinvent themselves with flexible manufacturing, adaptive supply chain and capabilities to make intelligent data driven decisions. CPG enterprises need to leverage the principles of Industry 4.0 and applies technology in the context of an organization’s unique business process and customer journeys to help organizations innovate beyond the product.
CPG 4.0: Enabling tomorrow’s consumer enterprises, today
Over the last two years, the CPG sector has witnessed a shuffling in the leadership equation – while new players have emerged to capture new segments of the market such as protective equipment and sanitization products, former small companies in packaged foods and beverages sectors have multiplied their revenues to double their previous figures. Here is a snapshot of some factors that have caused this agitation:
- Brand factor: While brands formed an important tether between CPG businesses and customers, the post-2020 world says otherwise. Now, only three in ten customers in the food and beverages sector say that brand affinity figures into their purchasing decision. In other segments too, product attributes are taking the front seat in driving customers to buy a product, and brand pillars must now be aligned to these attributes – meaning, sustainability, healthiness, nutrition.
- Supply chain health: When the pandemic started, retailers were running with empty shelves, and ecommerce sites frequently ran out of items across key segments in the CPG category – this was due to upstream outages across supply chains. On the flip side, some segments like apparel manufacturing and retail have frequently combated inefficient supply chain logic with clearance sales. Now, some apparel brands are experimenting with sell first, make later models. The premium on inefficient supply chains will continue to rise, and digital excellence and experimentation will be the key to finding the much-needed resilience.
- Making marketing work: CMOs are already talking about a cookie-less world, and soon after the e-retail frenzy was shifting marketers’ hopes to digital marketing, data privacy imperatives are leading to reconsiderations. This is not necessarily bad news – like in other industries, where advertising on 5000 websites led to the same results as doing it on 400,000, CPG must rethink their marketing budgets. Analytics and integrated sales engines and D2C models will now play a greater role than targeted advertising has until now. CPG industry will find avenues for powering better CX across more than just engagement and sales, but with the product too – listening to the customers’ voice when it comes to product design and functionality improvements will be made easier as brands built their D2C channels, and QR-code powered digitally-connected products will pave the way for enriching these channels.
- Manufacturing smart: Discounting the supply chain challenges, CPG companies must also pay close attention to their manufacturing models. While labor outages led to factory winters in 2020, automation has helped businesses achieve faster, more efficient, and reliable manufacturing at lower costs. Leaders like P&G are already onto their next stage of evolution – that is, green manufacturing – in the hopes of making their sustainability claims more compelling to environmentally conscious buyers. This means that smart manufacturing and integrated sales and logistics functions will be critical in maintaining healthy inventory levels and retaining the pricing advantages while the market exerts pricing pressures across some segments.
- Orchestration excellence: That remote orchestration became the top priority for CPG’s business continuity agenda, must serve as a lesson in envisioning operations as a source of cost-competitiveness and resilience. Scalable execution models built on a bullet-proof core will be the key to meeting demand spikes, and modular digital architectures will enable CPG brands to innovate and serve at the speed of evolving consumer choices in the time to come. Speed of execution will come from automation and digital orchestration enablers like AI-powered digital operations, intelligent automation across manufacturing to customer service functions, and vigilant trend-watchers on the board.
CPG enterprises will need a technology partner to accelerate their journey towards a modern, data driven, and digitally connected agile enterprise.
While technologies like AI, big data, automation, and IoT are the building blocks of digital transformation, it takes more than technology for a holistic transformation. Technology must be applied in the context of an organization’s unique business process and customer journeys to help realize the ever-elusive productivity gains and meet consumer expectations of hyper-personalized experiences. CPG Enterprises would require a technology partner to help them accelerate their journey towards a modern, Data driven, digitally connected agile enterprise with differentiating solutions for the entire CPG value chain that embody the concepts of the industry 4.0 to leverage the convergence of people, data, and technology.
Time to gear for the glory to come. Are you ready to take your CPG 4.0 flight to take off?
Written by Vijay Verma.
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