Redrawing the Frontiers
Consumer packaged goods (CPG) companies are in need of an overhaul. Historically, it was logical to structure a multinational’s operations on the basis of geography, but this way of working is no longer fit for purpose due to factors such as globalization and different levels of digital maturity. At the same time, companies now require much more sophisticated approaches to engage and excite their customers.
Take a simple example. Australia and Indonesia are often grouped together due to geographical proximity, but the customers and consumers that companies target and how they are serviced in each country could hardly be more different. Similarly, Russia and Brazil are thousands of miles apart, but as emerging economic powerhouses, they have much in common in terms of their route to market and consumer base.
Ripping Up the Map
There is no one-size-fits-all solution to address this challenge, nor is it economically viable to treat every market individually. The more advanced CPG companies will increasingly think in terms of market archetypes. Market archetypes are groups of markets defined by characteristics, including channel (e.g. direct vs. indirect), customer type (e.g. organized vs. fragmented) and digital maturity (e.g. devices, connectivity and willingness to digitally engage). Some market archetype examples might be:
Low digital maturity, fragmented trade, indirect channel. Markets characterized by low penetration of digital connections, a fragmented customer base, indirect distribution models and large numbers of independent “mom and pop” stores. This group might include countries as far flung as El Salvador, Nigeria, Ghana and Indonesia.
Medium digital maturity, a mix between organized and fragmented trade, and a mixed distribution channel. Consisting of more digitally progressive countries with a mix of direct and indirect distribution, but with the need to service both organized and fragmented customer bases — for example, Brazil, Russia and Turkey.
Advanced digital maturity, organized trade, direct distribution channel. These might include countries with the highest digital penetration rates and markets where CPG companies are able to engage by getting much closer to target consumers — for example, the U.K., U.S., Japan, Australia and megacities such as Shanghai.
Whether the focus is around building strong customer relationships and a differentiated offering through timely and actionable insights (e.g. on price, promotion, place, product, package and proposition) or looking to effectively engage and operate in a fragmented customer base (e.g. driving coverage, distribution, visibility), the commercial capabilities required will vary widely from one market archetype to another.
A More Targeted Approach
Redrawing the frontiers is simply the start. In order to benefit from this new way of thinking, CPG firms must identify a distinct commercial success model for each group of markets. By understanding this, CPG firms can identify and then deploy the different solutions or services required by each market archetype — a critical factor in a firm’s ability to win in each market and to deliver against their target strategy.
CPG businesses that reorganize in these ways have the chance to cost-effectively reach new markets and segments, as well as to build new capabilities. Improvements will be seen in speed to market and operating efficiency. The offer to consumers and customers will become more relevant, and the most valuable opportunities can be prioritized.
Take a simple example. Australia and Indonesia are often grouped together due to geographical proximity, but the customers and consumers that companies target and how they are serviced in each country could hardly be more different. Similarly, Russia and Brazil are thousands of miles apart, but as emerging economic powerhouses, they have much in common in terms of their route to market and consumer base.
Ripping Up the Map
There is no one-size-fits-all solution to address this challenge, nor is it economically viable to treat every market individually. The more advanced CPG companies will increasingly think in terms of market archetypes. Market archetypes are groups of markets defined by characteristics, including channel (e.g. direct vs. indirect), customer type (e.g. organized vs. fragmented) and digital maturity (e.g. devices, connectivity and willingness to digitally engage). Some market archetype examples might be:
Low digital maturity, fragmented trade, indirect channel. Markets characterized by low penetration of digital connections, a fragmented customer base, indirect distribution models and large numbers of independent “mom and pop” stores. This group might include countries as far flung as El Salvador, Nigeria, Ghana and Indonesia.
Medium digital maturity, a mix between organized and fragmented trade, and a mixed distribution channel. Consisting of more digitally progressive countries with a mix of direct and indirect distribution, but with the need to service both organized and fragmented customer bases — for example, Brazil, Russia and Turkey.
Advanced digital maturity, organized trade, direct distribution channel. These might include countries with the highest digital penetration rates and markets where CPG companies are able to engage by getting much closer to target consumers — for example, the U.K., U.S., Japan, Australia and megacities such as Shanghai.
Whether the focus is around building strong customer relationships and a differentiated offering through timely and actionable insights (e.g. on price, promotion, place, product, package and proposition) or looking to effectively engage and operate in a fragmented customer base (e.g. driving coverage, distribution, visibility), the commercial capabilities required will vary widely from one market archetype to another.
A More Targeted Approach
Redrawing the frontiers is simply the start. In order to benefit from this new way of thinking, CPG firms must identify a distinct commercial success model for each group of markets. By understanding this, CPG firms can identify and then deploy the different solutions or services required by each market archetype — a critical factor in a firm’s ability to win in each market and to deliver against their target strategy.
CPG businesses that reorganize in these ways have the chance to cost-effectively reach new markets and segments, as well as to build new capabilities. Improvements will be seen in speed to market and operating efficiency. The offer to consumers and customers will become more relevant, and the most valuable opportunities can be prioritized.