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    Digital Technologies Key for CPGs in Evolving Retail Industry

    Product manufacturers must 'seek a new approach'

    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.

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