The fast moving and consumer packaged goods (FMCG/CPG) landscape remains largely the same as last year—with topline growth continuing to be challenging, if not elusive, in many instances. Fast-paced consumer change, heightened expectations, and increasing channel disruption are the norms. The pressure has never been greater, and with it, the urgency among brands and businesses to implement sustainable growth strategies. The term “evolve or die” has never felt more appropriate in this world where brands operate at the speed of life.
Population, geographic, and behavioral shifts continue to squeeze these brands.
- Boomers (many with fixed incomes) continue expanding their influence, driving preference toward discount and club channels and the brands that thrive in them. This is happening at a time when consumer spending is actually increasing, so others, including millennials, are opting into higher-end, premium brand offerings with their discretionary income. So the very top and bottom are seeing some strength. The middle? Not as much.
- We’re also seeing the continued growth of urban cores with compact retail formats and shopping behavioral shifts, both of which challenge traditional CPG stalwarts in reaching, engaging, and closing their consumers.
- Expectations are also on the rise. Consumers who have been trained to appreciate disruptors in other sectors, like Uber and Airbnb, carry expectations from those experiences with them wherever they go. This includes their dealings with the CPG sector, which has arguably lagged behind other sectors in the areas of innovation, digital adoption, and so on.
With that as the backdrop, you can start to appreciate the challenges to growth in this sector, in particular for:
- Brands that serve neither a value tier nor an ultra high-end, premium position
- Brands that have traditionally relied on conventional distributional channels to support their growth
And many of the FMCG/CPG brands on this year’s list, except perhaps LEGO, fall into this category. To say there is pressure on these brands would be an understatement.
The Best Global Brands on our list understand these challenges and see them as opportunities. Here are a few ways these CPG brands are taking action.
Reset and regrow: Transformation for the long term
In response to market pressure, we’ve seen many brands and businesses begin a structural transformation process to cut costs and drive systemic, streamlined operations. Johnson & Johnson committed to streamlining and centralizing marketing efforts against 100 disparate global brands. Procter & Gamble (P&G), the parent of the Pampers and Gillette brands, is undertaking a major cost-cutting and streamlining initiative. Kellogg’s Project K is yet another. Behind these initiatives, these businesses ultimately aim to be able to invest more in what matters: their brands.
Key to the success of these initiatives will be converting short-term savings and restructuring efforts into true, long-term growth strategies. Success requires a long view, and brands need to resist temptation to take short-term savings to simply cover immediate topline shortfalls, which is a non-sustainable game.
Embrace technology and disruption
Change is inevitable, and brands need to be active participants in this change. As technology evolves exponentially, brands need to meet consumers where they are (see: Age of You). For instance, consider the emerging Gen Z, the first digitally native cohort. All they will have ever known is a digital world, and they will shape tomorrow’s brand-experience expectations. To them, digital is air. This is important to grasp, as the FMCG/CPG sector has lagged behind other ones in the use of technology to innovate and disrupt, yet its future success depends on being able to do exactly that.
One brand that has seized the opportunity in this space is L’Oreal. Its commitment to technological innovation, leveraging new digital channels, and empowering employees through digital and innovation training has propelled L’Oreal’s market share growth. L’Oreal seems to understand rapidly changing needs and offers products at just the right time, launching services such as the MakeupGenius app, the My UV Patch, and the connected brush by Kérastase (named the world’s first smart hairbrush).
LEGO is another brand that has capitalized on technological opportunities. Syncing physical play to digital platforms with the launches of the LEGO NEXO KNIGHTS digital game, LEGO Life social network app, and LEGO BOOST programmable robots contributed to record revenue this past year.
Technology is also being leveraged to forge new distribution channels and business models. Take Gillette, for example, which is facing threats from younger, cheaper, and digital competitors (e.g., Dollar Shave Club). Gillette is taking action and reshaping its strategy. With the launch of Gillette On Demand, Gillette is positioning itself directly against subscription-based competitors, establishing a piece of the growing e-commerce market for themselves.
Leveraging new leaders to win in the new growth game
Many of the FMCG/CPG brands on our list existed long before the digital revolution turned the world upside down—for example, P&G (175+ years), Coca-Cola (125 years), and Kellogg’s (100+ years). The game has clearly changed over that time. And a sector that once attracted the best talent (think Ivy League MBA destinations) has lost some cachet versus the Googles and Apples of the world.
To better compete, brands and businesses need to tap new expertise to bring fresh, relevant strategic thinking. And their focus needs to be on what matters most: growth.
We’re seeing the brands on our list taking action.
- P&G, the parent of Pampers and Gillette, has bucked its longstanding promotion-from-within approach and is now recruiting external talent to up their game. The promote-from-within strategy has a long history of inertia, and moving away from this (even in parts) will require a major cultural shift, but one that may prove critical in restoring its brands to past growth levels.
- We’re seeing the continued rise of the Chief Growth Officer. Many FMCG/CPG companies have created growth roles, often replacing CMO roles. These businesses can no longer rely on traditional methods of growth, and this role is symbolic of that fact—and hardwires growth into the organization. Coca-Cola is one of the latest brands to staff this role.
Humanize the brand: Emotional connection
Leading FMCG/CPG brands, including those on our list, continue to see increasing pressure from private label and value brands from every direction: product performance, price, consumer acceptance, retailer margins, and distribution. But one area where the Best Global Brands have a clear opportunity for dominance is in humanizing their brands and connecting to consumers at a deep emotional level. Being able to do so is not optional: it’s core to creating a value proposition that supports growth.
P&G showed its dominance in doing what it does best—humanizing its Gillette brand and creating powerful emotional connections. The brand launched a new campaign film as an introduction to TREO, described as “the first-ever razor designed solely for assisted shaving,” for use by caregivers and individuals who’ve lost the ability to safely shave themselves. The touching film was a winner of numerous Cannes awards, including prestigious gold.
Danone’s brand purpose is another emotionally rich example of a CPG brand building affinity with its consumers by emphasizing shared core values. Danone’s commitment to bringing health through food has been ingrained since it was found in 1919, and its CEO, Emmanuel Faber, has championed a manifesto that solidifies its convictions and commitments, consistent with the brand’s original mission. Taking action toward growth, they’ve launched Danone Manifesto Ventures—an investment unit aimed at driving entrepreneurial-based growth.
The consumer goods category remains a fraught sector, but with immense growth opportunity. Pressure is increasing, but pressure it what creates change at a fundamental level. The Best Global Brands that continue to rise to the top stay in a constant state of change to keep their businesses ahead, watching and growing alongside their consumers. Leveraging technology and the potential for connection inherent in their brands, the Best Global Brands remain models for driving growth in a changing world.