Start Up Blog

the FMCG strategy

Posted in entrepreneurship by Steve Sammartino on July 7, 2011

As far as I can tell this is the strategy of every large FMCG company – (Fast moving consumer goods – think super market and convenience stores).

Keep prices low. Never take a price rise.

Sell to who we’ve always sold to.

Only make things the factory can make.

Focus on volume, that’s what keeps the factory busy.

Deliver short term quarterly profits.

Innovate incrementally. Flavours, sizes.

Only invest in a brand if there is an immediate return in sales.

Buy media on mainstream channels.

Buy startups who innovate in our category.

Conduct significant research to test ‘everything’. Make all changes research suggests. Safety in research.

Roll out good ideas from one market (Country) in all countries.

And this industry wonders why it fails to grow, increase revenue or attract change agents. As someone who has worked in the space for many years, it’s time someone told the industry to forget everything they think they know. This strategy isn’t working. It’s why companies like Kraft foods have the same share price they had 10 years ago. That is zero capital growth. It’s one example of many large multinationals with a similar financial performance.

So far the consumer goods industry has been quite lucky. They’ve been insulated from the effect the web has had. But this is all about to change. The squeeze is about to come, and unless they reverse their strategy over the last 50 years, the future is not bright. In fact they need to flip everything they currently do:

The new FMCG strategy (for those who want to thrive more than survive)

Innovate so that price is not an issue. Make stuff people will pay a premium for.

Open up new channels of distribution. Over invest. Compete against their retailers.

Make things people want. Focus on the design of the product, not compiling it. (Manufacturing)

Focus on revenue. Ignore volume. Remove it from all tracking and all documentation. Report everything in dollars.

Do not give the market forecasts. Report results on year end only once.

Innovate dramatically. Embrace failed launches. Most fail anyway, so get more to market.

Invest in brands without expecting a short term revenue boost.

Build your own brand media channels.

Set up startups in your category. Put them in a skunk woks facility. Different space for a new culture. Then sell the startup to your competitors. Do it again.

Do not do market research. Only research what can be done & know how to do it. Invent the future for the audience

Sack all global marketing & innovation teams. Innovate locally.

This wont happen in any large FMCG company ever. There is too much to protect. Things like reputations, executive bonuses and careers. But 10 years from now every FMCG will be asking what happened, just like information industries and the car industry did. The change is coming whether they like it or not.

twitter-follow-me13


5 Responses

Subscribe to comments with RSS.

  1. Dennis said, on July 7, 2011 at 2:59 pm

    Agree muchly. But also think it aint gonna happen… And I also think that is not just FMCG either…Great post.

  2. Sam Sabey said, on July 7, 2011 at 5:06 pm

    and you need to add at the bottom, perhaps things may take longer than 3 months to materialise, and there will be some discomfort and self doubt… ;)

    Good to see you getting that mojo back.

    Sam,
    @samotage

  3. Juan Ramos said, on March 14, 2012 at 12:54 am

    Great Post,
    I work for a FMCG COmpany in Mexico, we are pretty much a regional organization growing rapidly and looking to grow our brand. What you mentioned is totally true, i will try to picth some of the ideas you mentioned, just to see what executives would think…In advance i can tell they will think i am crazy.

    JR Mexico

  4. Bryan said, on July 15, 2014 at 3:40 am

    In my experience working for several FMCG companies, this is a bit overly critical. Although the point about short-term profit being the driver is dead-on and is responsible for many under-investments. However, recall that P&G went through an innovation phase in the early 2000′s which resulted in many losers, but a few big category-changing winners including Swiffer and Fabreeze. Both of which were extensively researched.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 1,162 other followers