Two years of consumer products growth tailwinds end has been saved
Perspectives
Two years of consumer products growth tailwinds end
New growth strategy challenges lie ahead
Since 2020, macroeconomic conditions and consumer behaviors have given the consumer products industry (CP) favorable growth tailwinds. Those are shifting as inflation, lapsing stimulus packages, and consumer pessimism arise. A proactive growth strategy can help CPs sustain success and pursue what may feel like elusive targets.
Explore content
- Dynamic conditions may challenge growth strategy frameworks
- The challenge with traditional methods
- Assign, Connect, Train—or ACT
- Capabilities required to ACT
- Getting started
Dynamic conditions may challenge growth strategy frameworks
COVID-19, stimulus packages, a strong employment market, record consumer credit levels, and significant appreciation of financial assets contributed to dramatic shifts in consumer spending.1 Demand for consumable and durable goods spiked and then held strong relative to service spending, which was interrupted and/or curtailed by the pandemic.2 CP companies benefited from resilient demand, and the media prepared consumers to expect an inflationary climate, clearing the path for a wave of “riskless” price increases and gainful returns.
In 2021, consumer products results spoke for themselves. Consumer packaged goods experienced 8% year-over-year sales growth, bolstered by double-digit increase in demand.3 Price increases were hardly a deterrent; consumers’ overall sensitivity to price softened as much as 30%, and frugal behaviors such as couponing saw a dramatic decline.4
In contrast, recent months have seen the macroeconomy pointing in a different direction. Rapidly rising energy prices have dented disposable income and created spending uncertainty. Financial asset values have been volatile, demand for services is increasing, and geopolitical events are creating a degree of caution. Further broad price increases, like those that characterized 2021 and early 2022, may no longer be palatable for many consumers (and are likely to be more difficult to sell through to retail partners). Meanwhile, supply chain and commodity complications continue to pressure costs, compress margins, and confound commercial planning efforts.5
These trends lead to obvious questions. How will CP companies continue to capture elusive growth targets? How can growth be achieved by doing more with less in order to preserve margins? These concerns will likely be a top priority for many executives—and traditional approaches may not be sufficient to achieve aggressive growth targets. In our view, the key to success in the new environment will include an increased level of focus on granular, micro-opportunities; a detailed understanding of everyday actions required to capitalize on these opportunities; and an efficient, technology-enabled sales force. Now is the time to ACT!
To learn more about shifting patterns in consumer priorities, financial well-being, spending intentions, and more, view our Global State of the Consumer Tracker.
The challenge with traditional methods
In an increasingly challenging economic environment, we believe traditional methods of growth identification may not be sufficient for consumer products companies. This is due to three major pitfalls observed in many organizations:
- Non-differentiated growth expectations: Companies often establish high-level growth objectives but lack the organizational alignment required to achieve the stated ambition.
- Lack of focused recommendations: We find organizations often lack the ability to provide focused, targeted actions to commercial teams. As a result, sales and marketing functions may find themselves chasing growth in an unorganized, uncoordinated manner—wasting effort and limiting the ability to achieve overall targets.
- Reliance on sales heroes: Organizations frequently rely on pockets of uneven, siloed excellence within sales teams. As a result, growth is consistently driven from similar sources (i.e., the same sales teams, the same markets, and/or the same consumers), limiting the ability to capture a full range of opportunities or broaden the base of potential demand.
Assign, Connect, Train—or ACT: A better method for achieving growth
In order to overcome these challenges, we recommend CP companies follow a different approach we call ACT.
Getting started
While our approach may reflect a potentially daunting shift, capabilities can be built over time and, eventually, standardized across the business. This often starts with defining a series of pilot markets, where granular data can be more easily collected, harmonized, and analyzed. Initial recommendations are often shared offline in order to present near-term opportunities.
Successful proofs of concept help build the case for a more fully integrated and automated approach and help identify gaps in data (and data-enrichment solutions) while creating change champions across commercial teams. CP companies do not necessarily need to solve for a complete set of capabilities before shifting to a new approach and starting to ACT.
Endnotes
1 Demetrio Scopelliti, “COVID-19 causes a spike in spending on durable goods,” US Bureau of Labor Statistics, November 2021.
2 Andre Tartar and Christopher Cannon, “How Covid turbocharged the American consumer,” Bloomberg, December 14, 2021.
3 Consumer Brand Association, CPG Economic Pulse: Q1 Report, May 2021.
4 Rachel Layne, “Why companies raise their prices: Because they can,” Harvard Business School Working Knowledge, May 5, 2022.
5 Suzanne Kapner, “Retailers’ inventories pile up as lead times grow,” Wall Street Journal, June 18, 2022.
Get in touch
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Drew Gaputis |
Ed Johnson |
Paul Marcenac |
The authors would like to thank Evan Augeri and Hayden Monroe for their research, support, and collaboration on this piece.
