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From the opening keynote address by the president of Google to the individual sessions led by retailers, CPG manufacturers and consultants, the importance of becoming “digitally mature” in today’s fast-changing business landscape was the pervasive theme of the Grocery Manufacturers Association’s Leadership Forum this past weekend.
Held at the historic Broadmoor resort in Colorado Springs, Colo., Aug. 23-24, the forum hosted some of the heaviest hitters from across the grocery industry to discuss e-commerce, executive talent acquisition, food safety, collaboration and analytics, product recalls, changing demographics, sustainability, social media, ethnic marketing and regulatory issues.
GMA also awarded some of its top member talent for excellence in new products, marketing and lifetime achievement.
I caught as many of the concurrent sessions as possible, and here are the highlights:
Succeeding in Grocery E-Commerce
Leaders at Peapod, Kraft and Instacart discussed the tipping point that online grocery has reached in North America and how the market can deal with new growth opportunities. Online grocery sales are still considered at an introductory stage in the U.S., while it’s at a growth stage in places like the U.K., France and the Netherlands, with maturity and saturation still far ahead on the continuum here and abroad.
Key drivers of grocery e-commerce are freshness, quality, convenience, urbanization and connectivity. The group shared recent research showing 70 percent of U.S. consumers are willing to try buying groceries online, while a third of shoppers are willing to pay for same-day delivery.
Michael Brennan, SVP and COO of Peapod, noted that e-commerce is a combination of grocery, logistics and the internet, and few companies have mastered all three: “If you get the balance right, there’s a ton of demand.”
Nilam Ganenthiran, head of business development and strategy for Instacart, said barriers to consumer acceptance of online grocery sales lie in shoppers' perception of quality, speed, choice and ease. He added that e-commerce “removes friction and makes bigger baskets easier.”
Unlocking consumer insights is a “continuing journey,” said Tom Corley, EVP and president of U.S. sales and foodservice at Kraft. “E-commerce has growth written all over it.”
The Big Shift in Technology and Demographic Trends
Consumers are spending more time with digital than traditional media, so companies need to deliver experiences that translate to digital content.
That was the crux of the issue as discussed by Lisa Hammitt, VP of marketing for Salesforce.com; and Karen Sauder, national industry director for food, beverage and restaurant for Google.
Retailers and CPGs must understand consumers’ purchasing criteria, Hammitt stressed; they need to leverage digital for cultural relevancy and turn data into insights.
Products are now social, not just functional and emotional; 90 percent would recommend a retailer after a good experience, and digital makes doing that easy and immediate.
Sauder noted that constant changes in technology can slow down organizations because ignorance begets slowness.
By 2017, Millennials will surpass Baby Boomers in purchasing power, according to data the panel presented, and half of Millennials live a “three-screen” lifestyle – a great segue to the session led by Erin Liber of DunnhumbyUSA, who noted that Hispanics as well as Millennials will be driving future shopping trends.
Liber poked holes in some misconceptions about Millennials, to wit, the group is a strong shopper of center store (particularly canned soup) as they struggle to strike a balance between freshness and convenience. Meanwhile, Hispanics are least engaged in center store but are strong in dairy, meat and bakery.
At the last of the Saturday breakout sessions I attended, the panel of representatives from Google, IRI and Boston Consulting Group shared findings of their joint initiative on e-commerce. "The CPG industry is fast approaching a tipping point," says the executive summary of the group report. "Companies need to plan for a '1-5-10' market in the U.S. over the next five years." To explain:
- Digital's current 1 percent penetration of the U.S. CPG market will likely expand to 5 percent by 2018 and could go as high as 10 percent, presenting both a challenge and opportunity;
- That 5 percent represents nearly half of total CPG growth over the next five years, putting companies without effective digital strategies at a disadvantage;
- Penetration rates will differ by market and some categories could exceed 30 percent by 2018.
Further, the path to purchase is fragmented; shoppers regularly switch between digital and physical channels. CPG companies will need to serve multiple retail models as e-commerce continues to evolve. Success can come through developing an integrated strategy, building an adaptive organization, building brand equity online, revising category management across all channels, resisting old capabilities and developing joint plans between CPGs and retailers.
As far as technology is concerned, said Google’s Paul Gormley, “The future is here – it’s just not evenly distributed.”
Which means that companies need to work harder to become what Amit Singh, president of Google Enterprise, calls “digitally mature.” As Singh explained in his opening keynote address, this means leveraging the web to build brands by engaging at scale; employing collective intelligence; working collaboratively and in real time, using data as a core element; and developing technology that’s easy to use.
Singh shared data showing digitally mature companies have 26 percent higher profitability. “There is no `technology part’ of your company – everything is technology,” he declared. “Companies must succeed in creating transformation through technology or face destruction by competitors that do.”
Reaching Consumers Across Channels
Day 2 of the conference continued discussion of the importance of digital. A panel led by Fox Television host and tech consultant Shelly Palmer debated the impact of “digital disruption” in the retail space, a term Palmer derided, since this has all but become the norm.
Digital content must have value or shoppers – especially the coveted Millennial Moms – will opt out, the panelists warned. “All it takes is one of us to screw it up and then we all have a challenge [in reaching them],” said Doug Rozen, chief innovation officer at Meredith Accelerated Marketing.
The rate at which technology is developing and becomes readily available to the masses should be an asset to smaller companies looking to gain an edge – or at least not wholly lose out – to new competitors. For example, Palmer said, local independent grocers could leverage the availability of Uber where available and use it as its home delivery vehicle to compete with Amazon Fresh.
Finally, among my chosen Sunday sessions, a panel of CPG and retail executives discussed growth priorities among leading CPG companies as revealed by the latest Consumer Analyst Group of New York (CAGNY) study. Topping the laundry list: executing the “perfect store,” a goal that obviously requires the buy-in of retailer partners.
Don Knauss, chairman and CEO of Clorox, shared the top three questions retailers are asking him:
- What’s your innovation doing to grow the category?
- Are you bringing excitement to my store?
- How are you eliminating waste in the supply chain?
GMA bestowed several awards during the course of the forum, honoring new products, marketing and lifetime achievement.
The group on Sunday presented retired Walmart president and CEO Mike Duke with its 2014 Hall of Achievement Award, the association’s highest honor. “His visionary leadership has had a profound and lasting impact on the companies, communities and consumers he has served during the course of his impressing career,” GMA President and CEO Pamela Bailey said of Duke, who started at Walmart in 1995 after beginning his retail career with Federated and May department stores.
On Saturday, GMA and its Advisory Council awarded two 2014 CPG Awards for Innovation and Creativity. The Division A award, for companies with sales of less than $3 billion, went to Big Heart Pet Brands for its development of Milk-Bone Brushing Chews to improve canine oral health. The Division B award (sales over $3 billion) went to PepsiCo’s Frito-Lay team for its “Do Us A Flavor” interactive campaign designed to bring younger, tech-savvy shoppers to the mature Lay’s potato chip brand.
Saturday’s events were capped off by a keynote address and Q&A with former Secretary of State Condoleezza Rice, followed by a grand barbecue on the west lawn of the Broadmoor.
The forum drew to a close on Sunday night in rockin’ style with a dinner and entertainment provided by Huey Lewis and the News.
Read my live reports from the forum on Twitter @jimdudlicek