CPG trends to look out for
Over the past few years, the CPG sector has undergone some changes, shifting its focus towards improving the bottom line. This is mainly through brand recognition, loyalty, and omnichannel strategies, while keeping a focus on efficiency.
The effects of COVID-19 on the consumer landscape are undeniable, particularly when combined with the past few months, seeing the world’s geopolitical climate in turmoil. This, along with energy price issues, has added to the existing pressure on commodity prices. Due to this level of cost increase, it has been difficult to compensate, even within companies that are performing well sales-wise. As a result, CPG companies are seeing their P&L’s increasingly stretched.
Cost reduction and efficiency are once again extremely high priorities, and NTT DATA keeps a keen eye on mitigating these trends and maintaining or even increasing the top line with end-to-end solutions designed to focus on the areas that matter.
“It is important to be highly responsive to changing circumstances, particularly during times of volatility and uncertainty such as now. This is vital when it comes to showing responsiveness and agility in everything from sourcing to manufacturing processes to supply chain fulfilment.”
To strike the right balance between maintaining Top Line progression and fostering efficiencies, companies operating in the CPG space must keep a close eye on the modern trends that are reshaping the sector.
Today’s CPG trends
Trends in Consumer Packaged Goods can be broadly categorised into four key areas: brand evolution, channels to market, value chain, and logistics and manufacturing transformation.
- Brand evolution
When it comes to brand evolution, gone are the days when customers would rather pay a premium on branded products that they like and recognise over a product they don’t. What we’re seeing now are customers who would rather see new variants in products, greater sustainability and real eco-consciousness. To satisfy those demands, brands must be more transparent across the board.
Customers also want to buy any time, anywhere and in any way, and this is now being extended across into B2B customer nodes. The main drivers in purchasing decisions are now technology and a personalised customer experience. As a result, targeted promotions and careful sales management are more important than ever.
- Channels to market
A retail landscape that has already evolved from small, independent shops to out-of-town megastores to global mega-brands is now undergoing a tech revolution. Omnichannel shopping is what customers now prefer, with online buying now the default setting for many. Data collection and its effective extraction and analysis play a crucial part in setting up this process for customers and making sure they receive offers that are relevant to them.
- Value chains and logistics
After the disruption the pandemic caused to the global supply chain, political upheaval, globalisation of production and environmental issues have made for unusually unpredictable times. Part of the consumer response has been to look closer to home for their goods. We are also seeing a trend towards improved agility, meaning faster responses to short-term changes and ‘last mile’ challenges. More specifically, we’re seeing the way in which logistics has to adapt to a more intense use of digital channels. Digital channels demand a faster response and increased flexibility.
- Manufacturing transformation
Health and safety and sustainability concerns are particularly noticeable in the food and beverages sector, which comprises a significant proportion of all Consumer Packaged Goods. These concerns are driving trends that skew manufacturing towards methods that reduce wastage in both product and packaging, enhance product quality, and cut down on the use of power, as well as consumables.
In such goods, where unit prices and therefore margins are generally low, such trends have a disproportionate effect on the bottom line. So we’re expecting to see more widespread use of automation systems and better, deeper use of data. This establishes product pedigree and will drive higher levels of operational efficiency, with multiple production assets being driven from a single point.
Consumers are increasingly savvy to so-called ‘green washing’, so delivering on promises of green operations is already a basic requirement and smart manufacturing must adapt. Expectations of a circular economy, for example, are going to need to be met as consumers demand transparent production. NTT DATA provides solutions to address these new demands with a focus on four main areas that are expected to be critical for consumer goods companies.
Four areas to focus on
NTT DATA predicts the main areas of focus for consumer goods companies will be agility in the supply chain, smart factories, agile finance, and a data-driven approach. In each of those areas, it’s tech and data that are going to be the tools used to future-proof CPG businesses. NTT DATA strategies are centred on the most important aspect within these approaches: efficiency.
- Data-driven commercial excellence will maximise the value chain in sales, marketing, relationship management and channel expertise. This expertise is built through knowledge of retailers and their channels to market, optimising marketing spend, and efficient Sales Force Automation. With retail channels changing fast, the data gathered both through conventional streams such as sales and new, automated methods such as social media comment and advertising trends, is increasingly valuable.
Data analytics now allows accurate and holistic views of both retail channels’ health and consumer preferences even as they evolve. It can also steer marketing by providing granular insights to creative teams, providing 360-degree impressions of target consumers for everything from gamification to personalised loyalty schemes.
And in Sales Force Automation, advanced management systems now enable retailers to build actionable strategies, setting achievable targets and specific engagement actions. Purchasing, marketing and sales can all collaborate in a coherent and directed strategy if the right tech tools and processes are in place, which NTT DATA employs for maximum efficiency within businesses.
- An agile supply chain is characterised by high service levels, efficient logistics and faster incident resolution. Combined, these will enable supply chains to deal with volatility in the short term and survive it in the long term. NTT DATA have developed and optimised efficiency tools to capture transactional data from the length of the supply chain, providing a real-time picture of ‘the truth’ to build those characteristics into the chain.
- Smart factories are already here. Hyper-automation enables faster decision-making and centralised system control. And this extends outside the factories themselves, with AI and digital agents monitoring supply-chain developments to switch purchases and maintain supply. NTT DATA focuses on strategies that improve efficiency across all areas.
- Agile finance is the critical enabler of all these other changes. Finance teams have had to evolve to maintain competitive advantage, leveraging data and changing the way companies model their businesses to ensure sustainable growth, accurate forecasting and dynamic budgeting.
A sector at the leading edge
Though many consumer brands are long-established and even traditional in nature, the sector nonetheless finds itself at the cutting edge of the tech and digitalisation revolution. Twenty years ago the industry was looking to standardise processes with ERP solutions, with SAP the champion in that regard. Now CRM. SCM, PLM and MES can increasingly be integrated in a single tech solution, often with SAP as a core component.
NTT DATA’s CPG team numbers over 2,000 experts worldwide, collaborating with the core Business and IT teams to innovate and add value to partner companies in the CPG sector. Businesses must continue to evolve their core functions in a complex CPG landscape, and SAP S/4HANA’s Cloud scalability, integrative capabilities and robustness are helping them do just that.