Five Emerging Business Models for CPG

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KPMG LLP, the international audit, tax and advisory firm, produced the forward-looking report "New Dynamics, New Directions: Steering a New Path.” The 24-page report looks into the future of the food, drink and consumer goods industry and, in one section, came up with these "Five Emerging Business Model Implications":

1. From branding to unbranding: New economic, social, technological dynamics require new ways of branding. The report notes private label products — especially from megaretailers such as Walmart and Costco – no longer are inferior, lower-priced alternatives to national brands. And traditional, pure "branding” messages are being tuned out by consumers, some of whom are relying on (and simultaneously being overwhelmed by) social media and other digital forms of consumer information.

2. Interconnectivity: KPMG is not just talking about the digital world, although that's a big part of it. "Today, disruption in an oil pipeline as far away as Chad can have an immediate effect on a diverse array of consumables, from energy drinks to plastic goods, as companies manage the sharp rise in raw material and transportation costs." The perhaps overheated stock markets of two years ago and the subsequent crashes showed how economies across the globe are connected in not-so-obvious ways. Likewise, "In a tightly coupled market, productivity and efficiency gains must be balanced against the increased risk brought on by interdependencies between companies, supply chains and financial markets."

3. Disintermediation: The digital information age also brings transparency that is changing the power structure among consumers, retailers and processors. "Before [the] digital [age], big-name brands offered consumers not only a good product, but also served as a refuge of trust and security in the absence of readily available product information. Now that data is literally at every consumer's fingertips." But this increased access to information also gives retailers new leverage with processors, as they better understand food processors' real profit margins … and even how their products are developed and manufactured.

4. Super-consciousness: Demographic, economic, environmental and lifestyle considerations are changing where and how consumers shop, what they buy and how much they are willing to spend. Consumers want "what’s good for my world, good for my pocketbook and good for me."

5. Sources of innovation: Research and development typically has been one of the most proprietary of corporate endeavors. But that's changing due to advances in technology, time-to-market pressures and cost considerations. "Some are turning to crowd-sourcing and open innovation networks, in which key R&D, marketing and other challenges are shared with an outside community of scientists, researchers, technologists, and even home economists." But the report admits bringing "open" inside a company is no easy feat. The organizational change required often means a company must reformulate not only its product approach but its operational structure as well "… Companies must balance the potential of open innovation against other organizational considerations."

The full report is available on KPMG's website.
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