The rate of change and disruption in the market combined with external factors such as COVID-19 and Brexit are making companies rethink what it means to be a consumer business. In the last 12 months businesses have moved from focusing on survival to concentrating on recovery. Now, many are looking beyond the immediate crisis to focus on how they can return to profitable – and sustained – growth. At the heart of this shift in thinking is the emergence of new risks to growth and a realignment of strategic priorities. We believe that the perception of these risks differs from sector to sector and from business to business, as to the strategic implications and resulting priorities. Therefore, in January 2021, we surveyed CEOs and CFOs from consumer centric businesses such as retail, consumer products, travel, hospitality, leisure and automotive which collectively accounted for more than £250 billion in global revenue in 2020. Efficient and sustainable growth: A new blueprint for businesses is emerging The results of our survey highlight the difficult, often conflicting choices that need to be made in the current environment. The short-term tactical management required to keep businesses afloat differs substantially from the careful strategic management required to mitigate against the medium- and long-term risks. Meanwhile, there is also a contradiction between businesses forced to cut costs and decrease investment while also targeting growth. As a result, a new blueprint for business is emerging where businesses look at their value chain from supply through to demand and seek both to increase its efficiency and encourage greater end-to-end collaboration to drive growth. This inevitably involves breaking down traditional functional silos and creating new ways of working and measuring teams. Given the challenges associated with COVID-19, cost reduction is inevitable in the short term, and consumer businesses will be forced to solve the conundrum of how to do either the same or more with less. Growth risks: Navigating the path from COVID to climate To understand the new risk environment, we asked business leaders to identify factors that they considered to be a high risk to growth in the short, medium and long term (see Figure 1). While the assessment of risk changes over time, there are some obvious themes that emerge in each timeframe, with similar risks clustering together when ranked from highest to lowest. Short term – COVID-19 and the economy The highest risks to growth occur in the short term, highlighting the importance of both resilience and agility for a consumer business, with prominent risks creating extreme volatility in the market. In the short term, COVID-19 was considered the greatest risk to growth (78%). After COVID, the next biggest risks are the UK economy (59%), Brexit (48%) and the global economy (48%). There is a strong relationship between these risks, with COVID-19 and Brexit both having an impact on the fortunes of the local and global economy. COVID-19 has also had a disproportionate impact on the consumer economy, as businesses have been forced to close for extended periods while consumer mobility has been limited due to lockdown restrictions. In addition, it has negatively impacted household expenditure which was down by 10% in 2020. However, consumer spending still accounted for almost 60% of the UK economy meaning that the consumer will play an integral role in a post-COVID economic recovery. The emergence of COVID-19 and other economic risks also help explain why 43% of business leaders identified the resilience of their supply chain as a high risk to their growth. In an industry that relies heavily on global supply chains, COVID-19 has severely challenged the ability of suppliers to ensure continuity of supplies. The first wave of the pandemic not only caused factories of all kinds to halt production, it also caused volatility in demand that has proved hard to forecast. This was clearly visible during the early stages of the pandemic in the UK when stockpiling and panic buying had a major impact on grocery retailers. Such unpredictable demand for goods naturally puts a strain on even the most resilient supply chain. Consumer supply chains have also been pushed to their limit by the surge in online sales that is a direct result of the COVID-19 restrictions. Online sales as a proportion of retail total sales climbed by 10 percentage points in 2020, with consumer businesses forced to pivot to or accelerate existing online strategies to continue trading. The shift to online is set to continue post COVID-19, with consumers unlikely to revert fully to their pre-pandemic behaviours. The investments made in online capabilities during the pandemic mean that many companies are now much better prepared for the shift towards online shopping. As a result, 65% of business leaders did not consider the increase of online shopping as a risk to their growth.
Figure 1
* Resilience of our supply chain: The ability of our suppliers to ensure continuity of supply at all times.

** Adaptability of our supply chain: The ability of our suppliers to innovate/integrate new technology and adapt to our needs over time.
Medium term – Fragmentation of the market In the medium term, consumer business will likely become increasingly exposed to a fragmenting market. With digital innovation creating lower barriers to entry, competition becomes the biggest risk to growth. To succeed in the medium term, businesses will need to move beyond the short-term survival tactics currently being employed and refocus on the consumer, using data to increase the efficiency of both their consumer and customer marketing spend, offering more personalised services, and identifying and targeting specific niche areas of growth. When asked to identify risks to growth in the medium term, 57% of business leaders cited competition from new entrants/challenger brands and 54% said disruptive business models. The challenges associated with these two particular risks, and the approaches required to mitigate against them, are markedly different from the challenges presented in the short term by COVID-19 and Brexit. In mature consumer markets, there are relatively few opportunities for growth. However, challenger brands, new entrants and disruptive business models do not suffer from the same lack of growth opportunities and as a result, they have been responsible for much of the growth we have seen in the last few years. While new competition will always represent a challenge, the new business models emerging also represent an opportunity. Rather than trying to trying to outcompete challenger brands and disruptive business models in ways that would likely end in a ‘race to the bottom, larger businesses should instead look to harness their power. We have already seen a number of businesses take advantage of opportunities to acquire capability as well as brands that have evolved to target specific niches/routes to market to increase growth and expect these trends to continue. Long term – Climate change will dominate the strategic agenda In the longer term, climate change dominates the thoughts of our respondents, with 50% identifying it as a high risk to growth. In contrast, the next highest – competition from challenger brands and new entrants – was identified as a risk by only 35% of business leaders. The reality is that climate change is more than just a risk to growth. Looking beyond the ten-year timeframe we gave to our business leaders, climate change represents an existential threat not just to businesses, but entire sectors and industries. As one of the defining challenge of our lifetime, taking action to slow down the impact of climate change should be viewed as a responsibility, not just a boardroom objective. In addition to the increased regulatory burden and stricter reporting standards surrounding climate change, consumer businesses find themselves vulnerable on three fronts. First, physical assets and supply chains are exposed to substantial risks associated with a changing climate. Second, because consumer businesses are responsible for over 25% of global emissions, transformation of the sector is integral to the successful decarbonisation of the global economy. Finally, changing consumer behaviour and attitudes are challenging the businesses that serve them to rapidly adapt their products and services, as well as the platforms and channels they use to sell to and engage with consumers. If consumer businesses continue to prioritise short-term economic growth, the measures needed to protect the world’s population will become a heavy burden on the economy and consumer businesses. It is therefore imperative that consumer businesses increase their focus on sustainability, making strategic decisions and cultural changes that reduce their own exposure to risk and support wider efforts to decarbonise. In the fight against climate change, many consumer businesses have already announced ambitious net zero, or even carbon positive targets. Although many of the targets are set 20 or even 30 years in the future, businesses must begin to take action now in order for these targets to be achievable. Efforts such as reducing transport emissions by electrifying vehicle fleets and last mile delivery, switching to renewable energy sources and reducing waste can all have an immediate and lasting impact. COVID-19 and Brexit: Putting a squeeze on growth Our survey identified COVID-19 and Brexit as two of the top three risks to consumer businesses in the short term. Both have caused considerable disruption in the last year and have taken up a considerable amount of senior management time and attention as businesses have focused first on survival and then recovery. They have also proved to be a distraction from longer term strategic risks. Looking ahead, and in an attempt to understand the business consequences of COVID-19 and Brexit better, we asked business leaders how both were likely to affect business over the next three years (see Figure 2). The results showed that businesses expected to feel a squeeze on both their revenues and profits, and on their ability to spend and invest. As a direct result of COVID-19, 48% of business leaders expect to see a decrease in revenue and 45% expect a decrease in profits. Among the most significant results, 73% of respondents said that COVID-19 was likely to lead to an increase in cost reduction programmes, 68% expect a decrease in capital expenditure and 65% expect to reduce hiring. Similarly, a significant proportion of business leaders expect Brexit to have a negative effect on revenues (37%), profits (50%) and hiring (30%), while 44% expect leaving the EU to increase their focus on cost reduction programmes.
Figure 2
The growth conundrum: Can businesses get more out of less? With revenues and profits in decline, and uncertainty surrounding a shrinking economy, business leaders must make difficult choices. However, survival cannot become the default mindset for consumer businesses. Shareholders, investors and board members are always demanding that businesses do more. Indeed, when we asked business leaders to identify their strategic priorities over the year ahead growth was their primary concern (see Figure 3). But what does a return to growth look like after COVID-19? For 85% of respondents, winning sustainable and profitable market share is a strong priority, with most business leaders expecting to achieve this through their existing products and services (70% strong priority, 26% somewhat of a priority). A smaller, but still significant number of business leaders are targeting growth in new areas: half say that introducing new products and services is a strong priority and nearly a third have made expanding into new markets a priority. Moreover, 42% of business leaders indicated that expanding through acquisitions is either a strong or somewhat strong priority. At the same time, 81% have made reducing costs a priority, while less than a third are prioritising an increase in capital expenditure. This means that the pursuit of growth will need to be balanced by financial discipline and focused on value protection and creation, with clear targets for return on investment. In essence consumer businesses must find a way to do more with less, or at the very least with the same amount of investment. The current financial environment has forced many businesses to pursue cost reduction programmes. However, others have been adopting a smarter, more adaptive mindset, focused on creating efficiencies through investing in digital transformation. Over the next year, we expect investment in digital transformation and the adoption of more agile ways of working to continue as many consumer businesses will be keen to incorporate the lessons learned during the pandemic. As a result, most business leaders identified efficiencies (93%) and investment in digital transformation (93%) as strategic priorities for the year ahead.
Figure 3
Totals may not sum to 100 due to rounding.
Targeting efficient and sustainable growth While survival is paramount at this time, many consumer businesses are already reflecting on how a return to growth can be achieved. However, the short-term challenges they face risk having a lasting impact on their businesses. The negative impact on revenues and profits will affect the ability of many to invest in the future, while the tactical management overload risks creating a distraction that could see long-term strategic planning stall. For many, a return to growth will require a fundamental rethink about what it means to be a consumer business. According to the CEOs and CFOs that we surveyed, consumer businesses will first and foremost look at creating efficiencies to protect and create value and support sustainable growth. To help you assess the challenges facing your business we encourage you to sign up for further insights and to review selected thought leadership provided below.
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