Consumer industry executives look to improve analytics, supply chain
In the past year, collecting and interpreting data, preventing data breaches, and offering customers an around-the-clock shopping experience regardless of where they are have become more important issues than growth and international expansion, a global poll of more than 450 senior executives at food, drink, and consumer goods manufacturers and retailers suggested.
Anticipating what consumers will buy and understanding how they will shop – online or in a store – and how much they are willing to pay have become critically or very important to many more executives, according to research conducted by KPMG in collaboration with The Consumer Goods Forum and Oxford Economics. Data analytics topped the 2014 list of strategic priorities at 56%, followed by digital strategy at 54% and data security and privacy in fifth place at 47%.
Last year, revenue growth, international expansion, and consumer demand were the dominant concerns in the industry. Only 26% of executives considered consumer marketing among their top three priorities. Operations technology ranked seventh with 22%.
But the industry is getting more interested in better reading its customers and is increasingly turning to data gathered through smartphones, the internet, the cloud, social media, and other technologies.
Examples the KPMG report mentioned include Evian refrigerator magnets that use Wi-Fi to automatically re-order a customer’s supply of bottled water, predictive modelling Amazon and other e-commerce sites apply to project customers’ online shopping patterns, and loyalty cards that allow grocery chain Tesco to track customer preferences and habits.
The increased use of data also affects other strategic priorities in the consumer industry, such as supply-chain logistics and talent development.
Data. Industry executives have realised that superior data collection and interpretation can gain them an advantage, KPMG survey results suggest. Respondents ranked improving data analytics as their top area of strategic focus (56%) during the next 12 months, followed by providing customers a seamless shopping experience regardless of their location, channel, device, or time of the day (54%). Data analytics was also among the top three areas respondents identified for investments this year (28%).
As consumer goods companies collect more customer data, they also become bigger targets for hackers, and the number of data breaches increases. In the past two years, 78% of businesses worldwide experienced at least one data breach, according to Torgny Gunnarsson, CEO of data security firm Imprima.
In the KPMG survey, 29% of respondents identified data security and privacy as one of their top three challenges. Among companies with annual revenue of less than $1 billion, it was 37%.
Growth. While consumer market trends project growth rates in the low single digits, nearly two-thirds of respondents in the KPMG survey expected annual organic sales growth of more than 6% over the next two years. The top three growth strategies respondents named were promotion and pricing (36%), strengthening the equity of existing brands (36%), and success in emerging markets (35%).
About half of all companies planned mergers and acquisitions, according to the KPMG survey. Japanese companies looking for growth outside their home market and Chinese companies looking to gain access to raw materials or processing expertise were particularly interested in M&A. Respondents listed as the top three M&A benefits: increased market share in existing markets (41%), portfolio diversification (37%), and new geographic markets (33%).
International expansion was another important growth driver. Forty-six per cent of respondents considered international expansion critically important for their companies in the coming year. Consumer goods manufacturers and companies with annual revenue of $5 billion or more were most likely to be interested.
Companies are also willing to invest in expanding their businesses overseas. In the KPMG survey, international expansion ranked among the top three areas for investment this year (32% of respondents).
Supply chain. Sourcing products and parts globally and selling goods through multiple channels make it difficult for consumer companies to ensure suppliers adhere to required standards, track and manage inventory, and optimise supply-chain efficiency and logistics.
Thirty-eight per cent of all respondents in the KPMG survey identified supply-chain management as their most difficult task. It was 50% among non-food retailers. Lack of information and visibility across an extended supply chain was the biggest challenge.
Top goals for supply-chain improvements were greater speed and flexibility (45%) and better end-to-end planning and forecasting (39%).And consumer goods executives said they are willing to spend more on supply-chain improvements than on any other strategic focus. Forty-two per cent identified it as one of their top three areas for investment this year.
Talent. Finding the talent to support their increasing use of data analytics and growth strategies is also a significant challenge for consumer goods companies, especially in emerging markets. Fifty-two per cent of respondents in the KPMG survey identified human resource development as very or critically important over the next 12 months. In Latin America, it was 63% of respondents, and among companies with 30% or more of their sales in emerging markets it was 73%.
Consumer goods manufacturers are lacking talent skilled in product innovation (53%) and procurement (47%), two critical drivers of organic growth. Despite the stated need for skilled talent, only 22% of respondents in the KPMG survey identified human resources as a top area for investment.
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—Sabine Vollmer (svollmer@aicpa.org) is a CGMA Magazine senior editor.