In 2015, consumer products executives are faced with many of the same challenges they have encountered through the years. What is interesting, however, are the different ways in which companies are confronting these challenges and the various strategies they are employing to lay a foundation for success. Clarkston’s Consumer Products Practice Leader, Steve Rosenstock, answers some key questions pertinent to consumer products executives and discusses his outlook on the industry.
It seems like we have been talking about the same challenges in our industry for some time now. Which of these classic trends or challenges do you see having the most profound impact in 2015? Fifteen years ago, I participated in a panel discussion around the challenges companies were facing to more effectively manage and realize return from their growing trade spend. It is fair to say that our industry is still wrestling with many of the same challenges today.
At the same time, although the issues might remain the same, they continue to evolve with the nuances of a changing consumer reality. Take the manufacturer-retailer relationship as an example, which could be better characterized as a tug-of-war. Since the beginning of full service retail, manufacturers have struggled to engage with consumers, and they still face this challenge, but with different conditions. In today’s landscape, manufacturers have numerous routes to connect with consumers outside of the retailer – not the least of which is selling directly to consumers as P&G does through their e-store, P&G Shop. Manufacturers are leveraging these direct to consumer routes to not only increase engagement, but to also collect consumer data, offer digital promotions and quickly test innovative new products.
The challenge is still consumer engagement, but the twist is now choosing the right engagement strategies and creating capabilities to understand the plethora of information collected; all while maintaining a working relationship with retailers. The value-based consumer is another trend that has been consistent over time. However, today, consumers define value differently than they have in the past, as they have access to information to assess value at their fingertips. Historically, many consumer products manufacturers have focused on meeting the needs of value-based consumers through the lens of providing quality products for a low price. Today, consumers’ definition of value goes well beyond quality and price – things like convenience, speed, lifestyle assimilation, social implications and even environmental impact might be considered in the value equation. With the ability to compare and contrast products quickly online, consumers can quickly manage through the decision making process. Again, same challenge, different response.
In addition to these persistent challenges taking new twists, what new issues are Consumer Products executives facing? The slowdown of international emerging markets is a new phenomenon for the Consumer Products industry, as over the last several years, growth in these markets has been a pillar of many companies’ corporate strategies. To combat this slowdown, manufacturers are now looking to redefine emerging markets and find demand growth through further segmentation within mature markets. The concept of ‘America, the Emerging Market’, is evident through the following: • The newly insured: The Affordable Care Act has given many people the ability to become consumers of healthcare services and products. New patients with insurance and flexible spending arrangements create a new market for over the counter (OTC) drugs. • Baby boomers: This growing population can provide growth potential for drugstores and other companies supporting the aging.
To read more about the 2015 Consumer Products Trends Report, download the report below.