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CPG Strategic Priorities in 2024: Insights from CAGNY 2024

Each year, CEOs from many of the largest CPG companies in the world attend the Consumer Analyst Group New York (CAGNY) conference along with hundreds of investment professionals and industry experts to discuss strategic priorities for the coming year and beyond. While companies share updates on their financial performance and projections, their presentations focus on strategic priorities for the business and capital allocation priorities. Across presentations from CEOs of General Mills, Conagra, Coca Cola, Hershey, Coty, Mondelez, McCormick, Pernod Ricard, Kellogg, Pepsi, Kraft Heinz, Kellanova, Reckitt, P&G, Clorox, and Church and Dwight, our team sat down to summarize themes of what’s happening in the industry and where priorities lie as we continue into 2024.

CPG Industry in 2024: Macro Trends

  1. Shifting from value creation via cost reduction to value creation via growth. So much work has been done over the last many years to drive bottom-line efficiency and EBITDA improvement. While additional value will continue to be realized at the bottom line, there is a renewed focus on driving top-line growth to return to, and in some cases exceed, historic top-line growth rates of 3-5%.
  2. Realizing value from strategic technology investments. For many CPG companies, COVID accelerated digital transformations. Much of the discussion was about making smart investments that built the foundation for greater value realization down the road. The next few years is when many leading CPGs expect that they will truly begin to realize value from these investments and scale them.
  3. Moving past disruptions to the supply chain from COVID. Supply chain issues that originated over the main years of COVID permeated the mindshare of CPGs and resulted in lower service levels, lower profitability, and higher prices for consumers. The majority of large CPGs feel the turbulence and resulting drag on financials is behind them thanks to investments in agility, multi-sourcing, and input and labor availability.
  4. Meeting consumers where they are with new norms. COVID altered the way consumers think about, buy, and consume CPG products. While some companies tweaked their portfolios and marketing to address new needs, many took a wait-and-see approach. Now, companies are driving full steam ahead to meet consumers where they are where and address needs with staying power.
  5. Planning for an elongated inflationary environment. CPG companies have had to adjust to dramatic changes in inflation and interest rates over the last three years. Now, the majority of large companies are planning for an elongated inflationary environment – one where inflation does not necessarily return to the historic norms of the 2000s and 2010s. They intend to maximize their use of scale to deliver the most cost savings possible.
  6. Executing in the era of perpetual capability development. Rather than talk about investment in a given business function, market, or geography, companies have drastically shifted the conversation to focus on building capabilities. These capabilities are not static end points, but areas of focus that leverage the latest technologies and thinking to drive value for customers, employees, and shareholders.
  7. Re-accelerating impact of challenger brands on big CPG. While many of the largest CPG could leverage their bargaining power across the supply chain to recover from COVID challenges over the last few years, many brands with less scale were not as fortunate. In fact, many mid-tier suppliers found their entire capacity consumed by a few big players. Now, smaller disruptor brands and private label are regaining steam, challenging big CPG at the shelf.

The Core Strengths Portfolio

Businesses are approaching their core capabilities, products, and services with renewed vigor and invention in 2024 to identify new opportunities for creating value. Below are some of the key themes we heard, including:

  1. Divesting non-core brands and redeploying capital into core categories. The era of big CPG building a portfolio with the aim to be as diversified as possible is over. Nearly every leading CPG company self-reported an aim to become more focused, exit or deprioritize non-core assets and reinvest that money into accelerating growth of their core portfolios.
  2. Enhancing the portfolio via M&A that reinforces the core. In the past, many large CPGs used their M&A capability to bring in brands that allowed them to enter adjacent categories and gain a foothold in new markets. Now, as companies seek to reinforce and invest in their core, they are turning their attention to products that supplement their core focus, rather than attempt to drastically expand it.
  3. Driving core innovations across occasion. CPG companies have always considered the consumer journey when planning and testing their new innovations. That continues to be more important than ever as companies seek to expand their portfolio, while focusing on their core categories. The common method is to highly focus on occasion and rituals that facilitate product use.
  4. Delivering for value seeking consumers. Uncertain economic times, rising inflation and interest rates, and stagnant wage growth have all contributed to consumer headwinds. While value consumers have always been a part of the CPG strategy, there is increasingly more emphasis placed on value seekers. This co-exists with intent by most to drive premiumization and gross margin accretion.
  5. Increasing focus on renovation vs. innovation. Rather than focus the innovation muscle primarily on delivering new-to-market innovation that have large upside and risk, many large CPGs are refocusing on “lowercase i” innovation, focusing more attention on line extensions, packaging innovations, and new formats and formulations of existing products.

Next-Generation Sales and Marketing

Consumers have drastically shifted buying habits, forcing consumer products companies to adopt new tools for sales and marketing, leveraging advanced technologies and a deeper understanding of their consumer base.

  1. Optimizing price-pack-architecture. After an era of unprecedented price increases across most CPG categories, companies are now turning their attention to revise price-pack-architectures and bring product packs back in line with pricing slopes. This challenging work requires significant collaboration with retail partners and is a focus of acceleration with innovative technologies.
  2. Personalizing the path-to-purchase. Personalization is increasingly important to CPG companies in every sense of the word. Particularly in marketing, there is an acceleration of truly personalized advertising that is optimized for different types of consumer targets. AI is for the first-time giving companies the opportunity to create thousands of variants of their message to deliver the right message to the right consumer at the right time.
  3. Leverage truly advanced analytics to better segment and target. Another key area that AI is permeating CPG companies and driving business value today is in segmentation and targeting. Many of them have noted significant improvement in the effectiveness and speed of targeting and segmenting, using AI to identify latent needs and meaningful categorization that drives action.
  4. Maximizing revenue growth management efforts. While RGM is by no means a new concept, the amount of data that companies now have access to are making it the most critical focus in all of sales and marketing. The blending of intelligence between promotion, pricing, trade spending and mix is allowing companies to win with more precise offerings to consumers and customers.
  5. Winning at the store and winning at the shelf. In-store execution continues to be a key focus for CPG companies as it remains very difficult to break through the noise to drive consumer interest. CPG companies continue to partner deeply with retailers to drive win-win executions that drive increased basket ring and profitability for both the retailer and CPG.

Strategic Investments in Transformative Capabilities

Digitalization demands over recent years has driven businesses of every shape, size, and type to realize new capabilities and technologies within their operations. As time has progressed, the below key themes outline how businesses are considering transformation in 2024.

  1. Delivering on the promise of digitization. For the last many years, investment in digital technologies for sales and marketing, supply chain, and back office dominated capital allocation plans and investor read outs. For those who have invested, new enterprise-wide capabilities are allowing teams to do more with less, make decisions with better data, and find new ways to surprise and delight the consumer.
  2. Driving flexibility and agility through advanced technologies. Considering the extent of change that companies suffered through the pandemic, one hallmark of investment in digital technologies are those delivering capabilities that make the organization more adaptable to change. These investments allow companies to move faster, reduce cost, and identify risk before it is very impactful.
  3. Investing to feed the digital core. Renewed investment in a digital core, particularly with a strong modern ERP is the most foundational investment to build additional capabilities on top of. When an organization invests to ensure the core is best-in-class, they can refocus their team’s energy onto high value strategic activities that support customer growth and innovation.
  4. Building analytical rigor and skillsets across the organization. All the new investments in technology capabilities over the last several years must be met with an equal emphasis on building out relevant analytical skillsets across the organization. Companies that are prioritizing these skillsets, building it into their development, evaluation, and overall culture are able to maximize the opportunities behind these key investments.
  5. Continuing investment in leadership and culture. Market leadership is only maintained and growth through a strong pipeline of leadership that can address the future needs of the business at it evolves. Companies continue to invest in strengthening their leadership pipeline and instilling a culture that teams want to work and invest their careers in.

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Tags: Consumer Products Trends, Event Recap