Supplier insights: the four capabilities that CPG companies need to build

Date : 21 February 2021

Stewart Samuel

Program Director - Canada

We look at how suppliers are evolving their approach and increasing their investments in a different set of capabilities as they look to build on the momentum of 2020.

Competing against tough comparables from 2020

Over 20 global CPG companies participated in the annual CAGNY (Consumer Analyst Group of New York) event this year, sharing updates to their commercial frameworks, investment plans and growth prospects. Following what was a successful year for most, especially those where food retail customers account for most of their business, ambitious growth plans were outlined. Most companies are expecting to deliver year-on-year sales and profit growth, despite lapping tough comparables.

Source: IGD Research

Rapid innovation, digital marketing, ecommerce and data and analytics

Central to this is the investment which is being made in developing a new set of capabilities. Although CPG companies will continue to develop their capabilities in traditional areas such as account management, customer relationships and category leadership, most are increasing their investments into new areas. These include rapid innovation, digital marketing, ecommerce and data and analytics.

Inter-related capabilities

What was evident at CAGNY is the inter-relationship of these four areas, with data and analytical capabilities underpinning the progress which companies are aiming to make in the other areas. The Kellogg Company highlighted how the pandemic heightened the importance of next generation data and analytics capabilities, using AI and machine learning to operate more effectively. Kraft Heinz is shifting its innovation focus to products suited to the online shopper, while Mondelez is adopting a tailored portfolio approach, developing large format packs and high value gifting ranges for the online shopper. Fewer, bigger, better, faster is the mantra driving product innovation.

Digital marketing dominating discussions

Discussions throughout the week were dominated by the continued shift to digital marketing. In addition to increasing overall marketing spend in 2021, CPG companies will also increase the share being dedicated to digital marketing. At Kimberly-Clark, 70% of its marketing investment will be dedicated to digital, while General Mills has developed a new digital marketing playbook focused on brand building, remaining relevant and bringing its purpose to life a more modern way.

Building a competitive moat

Companies are adopting a mix of approaches in building these new capabilities, upskilling internally and recruiting externally. Data and analytics has become one of the key talent battlegrounds, as CPG companies must compete with firms in other sectors, where these skills are also in high demand. However, the nature of the technology, indicates that being an early mover in this space, can help to build a strong competitive moat for businesses.

Retail Analysis subscribers: explore these themes in more detail with our two-part report series, How consumer packaged goods companies will win in 2021.  

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