Digital Technologies Key for CPGs in Evolving Retail Industry

By Mark Hamilton-Bowker and David Ware, Accenture CAS

The groceries market is changing at a rapid pace: new consumer behaviors, mounting competition, rising cost pressures and digital disruption. All of these threaten to overwhelm consumer packaged goods (CPG) companies that do not rise to meet the challenge.

This transformation is consumer-led. For example, a recent DunnHumby study of seven million shoppers in 18 countries revealed that shoppers are abandoning the large weekly shop: the number of shopping trips people make has risen by almost 20 percent over the past five years, with price-sensitive customers 16 percent more likely to make small basket purchases.

Several factors have prompted this shift. The rise of discount grocers such as Aldi and Lidl in Europe has encouraged consumers feeling the pressure in a recessionary environment to be more promiscuous in their shopping choices; these consumers have also become more conscious of waste. Meanwhile, online stores continue to capture market share. In the UK, for example, internet-only grocer Ocado just this year has broken into profit for the first time in its 15-year history. New entrants are also making their presence felt, not least within the groceries sector.

One consequence is that CPG companies must now operate in a different sort of sales environment. For example, supermarket groups are now moving away from operating through ever-larger super stores – some chains are now executing store closure programs, and mothballing plans for new openings.

At the same time, CPG companies are facing unprecedented cost pressures, particularly in the deflationary economies of Europe. As margins are squeezed ever-tighter, every link in the supply chain has to offer greater value – and every last penny of investment must be made to work harder.

Seeking a new approach

Against this backdrop, CPG companies need a new approach – one that is fit for purpose in a radically different landscape. But while businesses increasingly understand that many of the answers can be found in digital tools and technologies, they worry about their ability to make the leap to such solutions.

This is true of businesses around the globe. Accenture’s 2014 CMO Insights study found that just 21 percent of CMOs globally believe their company will be seen as digital businesses within the next five years, despite the gains to be realized from this shift. For instance, 84 percent of high-growth companies and 67 percent of low-growth companies say they recognize the strategic importance of digital channels.

In the CPG sector, most businesses have so far only taken baby steps. Above all, they continue to struggle with the pre-purchase conversation. For example, few CPG companies have much understanding of how consumers are choosing the products that end up in their baskets.

The tools exist to help solve this knowledge gap. In areas such as trade promotion management, reporting and analytics, retail execution and customer service, digital technologies offer CPG companies compelling ways to enhance the consumer experience. New digital merchandising technologies offer a fast, reliable and cost-effective view of CPG companies’ products positioning and presence on the shelf in stores. It also reduces the likelihood of goods being out of stock, while improving compliance and opening up cross-merchandising opportunities.

This is not to say that the digital opportunity is only to be found at the point of sale. From the supply chain to distributor management to fulfillment, new tools are emerging that enable CPG companies to drive value. For those businesses that embrace digital, it's now possible to operate more effectively from end-to-end, making smarter decisions based on more accurate information at every stage.

This is what is required if CPG businesses are to cope with the shifting sands on which their businesses are built. An integrated sales platform that incorporates a range of digital tools is the key to making stronger connections with consumers – to see the world through the eyes of the shopper.