There was a time when size and scale provided a significant edge for the major U.S. consumer companies. Yet lately, many players in the fast-moving-consumer-goods (FMCG) space have been lapped by spry start-ups, innovative retailers and savvy niche brands. But the game isn’t over, and recent research from the Boston Consulting Group and Nielsen highlights how protecting—and growing—profits is very attainable for large FMCG companies that enact the right strategies.
The recent Boston Consulting Group and Nielsen study identified the top 10 FMCG performers by annual gross profit, then analyzed the common elements of their successful strategies. In looking at the market’s top performers from 2006-2011, the researchers found that the consumer was the common denominator. To drive profitable growth in the U.S., the Boston Consulting Group and Nielsen assert that companies need to return their focus to consumers, and their strategies need to address purchasing behaviors and mindsets that are reflective of the recent recession, the proliferation of retail channels and innovations in technology.
Everyone can learn from these top performers, as each applied at least one of the following five strategies to achieve their recent success.
Focus the portfolio. Companies with more concentrated product portfolios outperform their more fragmented counterparts. The top product category for the 10 top performing FMCG companies accounted for 56 percent of sales on average, compared with only 35 percent for the bottom 15 companies.
Partner with winning retailers. FMCG companies must gain a better understanding of a successful retailer’s consumers. They will then have the ability to develop and market products that meet a particular retailer’s needs.
Innovate to grow the category. Through a combination of organic R&D and M&A, the top performers expanded their categories in one of two ways: by making fewer but bigger innovation bets, or by expanding product lines that did not cannibalize the existing portfolio.
Sharpen your marketing. The top-performing FMCG companies increased their marketing budgets. But most importantly, they repositioned their brand/s to cater to the cost-conscious post-recession consumer. They were also much more precise in their use of mass media.
Master the art of pricing. Successful companies price their goods and services based on several factors rather using than a one-price fits all approach. Best-in-class players are looking at regional differences, product segments, ingredient mix/quality, seasonality, packaging options, retail outlets and consumer’s willingness to pay.
Large FMCG companies can no longer rely on their size for success. They need to embrace the notion of doing fewer things better. And they should start by renewing their focus on the consumer.
For more detail and insight, download "The Game Has Changed" report.