As I approach nearly a decade in the CPG consulting space, it’s interesting to look back at the growth this industry has experienced in that time – growth that, while impressive, has come with its share of growing pains. Many of the CPG organizations that remain competitive today survived thanks in large part to disciplined strategies—strategies that accounted for uncertainty, demands for consumer-centricity, organization agility, and a commitment to quality. CPG organizations unable to read the tea leaves over the years often succumbed to the trials by fire. The industry today is left with a mix of competitive giants, young startups, and niche organizations, all facing an exciting decade ahead.

Lessons Learned From A Decade of CPG Consulting

A decade of growth was not without misfortunes. The most evident lesson for me from these past 10 years is that uncertainty is certain. Only 12% of the Fortune 500 from 1955 remains in business today thanks to mergers and acquisitions, brand erosion, and the ever-mounting pressures of digital competitors. To complicate matters, more than $17 billion in CPG sales have shifted from large players to small ones since 2013. Even as larger manufacturers continue their growth-by-acquisition strategies, the share of smaller brands has continued to grow.

In a climate rife with uncertainty, manufacturers have looked to streamlining operations, squeezing as many inefficiencies out of their complex processes as possible. Optimization of production lines, inventory, and logistics has been crucial to navigating competitive pressures. More proactive investments around machine learning to enable predictive maintenance and route optimization have also become the norm. To remain competitive, manufacturers have looked to maximize the utilization of all assets across the supply chain.

Many of the organizational changes in the past decade have been a result of the growing power consumers have in the marketplace. Consumers have always spoken with their wallets, but they are more informed and connected than ever before. These connections have moved beyond the physical and in many ways are now emotional in nature. In recent years, brands have sought to more intimately understand their consumers’ preferences and more importantly their values.

Changing Brand Dynamics

Brand loyalty has become closely linked to brand authenticity, and more broadly corporate social responsibility. The majority of millennials today steer their business to brands actively supporting the social causes they care about. But even when a brand’s social commitments are attractive, consumers still place a premium on experiences.

In the past 5 years, the rise of pop-up store experience has indicated that physical activations are still playing a critical role in creating the digital evangelists of tomorrow. Bridging the physical and digital worlds has been a relatively new challenge for CPG brands, but consumers will continue to seek out “Instragrammable” moments. Being ready to shine in those moments is paramount for today’s CPG organization. Compared to 10 years ago, consumers now place a premium on brands that can offer personalized experiences. This is no small feat given consumer demographics continue to drastically shift. Delivering on the nuanced expectations of the CPG consumer is certainly growing in complexity.

In the face of all this uncertainty it’s clear that weathering this storm would be impossible without organizational agility. This agility is often facilitated by standardization and harmonization of critical processes throughout a business, but often complicated by mergers and acquisitions that have grown commonplace in the industry and M&A activity is only expected to increase. In fact, M&A activity among the top 50 consumer goods companies, including P&G, L’Oréal, Nestle and Unilever, jumped 45% to a 15-year high of 60 deals in 2017.

In looking back over the decade, those organizations that prioritized process harmonization ahead of digitization and automation have faired better. It’s easier to focus on innovations for the future for those manufacturers that have promoted discipline in their ways of working over the past several years. These manufacturers can more easily deliver on strategic initiatives like accelerating their supply chains (including new channels like direct-to-consumer) and carefully applying artificial intelligence within critical business functions.

Of late, I have admittedly been looking at things through the lens of quality when it comes to CPG. I find the quality organizations of today at a critical juncture in their evolution. The modern quality group shoulders a huge burden in nurturing trust among consumers and protecting a brand’s image. It’s clear that organizations serious about their growth have considered quality a crucial stakeholder to overall transformation initiatives. Evolving beyond the checklists and SOPs of yesteryear, the quality group of the future is at the forefront of driving collaboration both inside and outside the walls of the CPG manufacturer. The successful transformations have each been rooted in a few key best practices:

• Focus on your people first—investments in technology alone will fail; equipping your workforce to best leverage the digital tools around them will yield positive results
• Challenge the status quo—legacy processes from yesteryear may not complement well the digital workflows of tomorrow
• Identify the Critical to Quality (CTQ) moments in your value chain—find ways to quantify your performance against each, and provide transparency into this empirical data to your frontline workers

Be it a focus on integrating quality throughout a product life cycle, harmonizing global processes across manufacturing sites, or differentiating consumers connections in authentic ways, a decade in CPG consulting has proven to me that CPG organizations have certainly had their hands full. The next several years are likely to bring similar uncertainty and disruption, but in the tumultuous waters ahead lies tremendous opportunity—opportunities to deliver value to consumers in surprising ways with new technologies and capabilities. It is a future that Clarkston is excited to help CPG leaders successfully navigate.