Top Five Trends in CPG & Retail for 2016

Adoption of evolving new technologies will be the theme for the year. Such as IoT, which is on radar of organizations for different aspects it can serve, be it, Inventory Management through incremental demand driven approach or Prediction based proactive applied decision science across value chain or influencing irrational & impulsive Consumer buying behaviour by increasing the perceived value through clustering of products across categories.

As per Retail Systems Research’s recent report, The Internet of Things in Retail: Great Expectations, 80 percent of retailers believe that the IoT will highly impact Consumer Goods and the way companies do business in the next three years. Plug & Play APIs coupled with advances in data analytics will drive the transformation of the CPG &Retail industry through seam less information transfer and setting the stage for crowd sourcing based innovations . Investments in niche supply chain tools in areas such as the

likes of Network design, S&OP, Logistics is the call of the day to improve & optimize fundamental metrics like Lead time variability & Out of stock at every nodal point from farm to shelf.

Re-invention of retail through investments in digital technologies will continue to be one of the biggest themes for the year. This encompasses the world of omni-channel. To compete with the reach of e-commerce, traditional retail companies have been investing in omni-channel initiatives to stay relevant. This has opened up a new avenue for them where the physical store connected to all channels becomes a universal center to provide a differentiated customer experience. A gamut of digital technologies and better understanding of customer preferences will help retailers to service customers well across all channels. Investments in Big Data will ride high to support these digital initiatives making retail truly seamless.

Evolution of new technologies to drive business growth

Blurring of Boundaries between CPG & Retail

2015 saw a lot of activity in the CPG & Retail space in the field of M&A and transformation. 2016 will certainly take this trend forward leading to further blurring of boundaries between CPG & Retail. In order to chase growth and predict consumer behaviour, CPG companies are engaging directly with and reaching out to end consumers. This can be seen in the form of interaction and innovative marketing on social media or gauging the success of a new product by launching it directly on a non-traditional channel such as an e-commerce marketplace. This on-going trend is also visible from the fact that many brands are opening company operated restaurants.

CPG companies have backed initiatives by Amazon where it has moved some products on a fulfilment model, where a press of specially designed physical Dash buttons, orders product on Amazon in case these items are recurring orders such as toothpaste, dish soap etc.

Similarly, retailers too don’t want to be left behind in reaching out to their consumers and grabbing a bigger pie of the consumption story. This has resulted in backward integration in the supply chain (generally associated with creating private brands) in the form of JVs and collaborations with brands with high traction looking for development of sales channels.

With COP21 just concluded, efforts from the CPG & Retail industry will focus on achieving their previously set sustainability goals and setting up of new targets. As most of these corporations are global in nature, they need to evaluate the new realities and commitments of each base of operation and come out with comprehensive action plans.

CPG & Retail has always been at the forefront of setting up and reaching ambitious goals in the field of sustainability and this move is expected to be carried forward in the coming year as well. Presence of CPG & Retail majors in RE100, a coalition of businesses intent on converting to

100% renewable energy, is a proof of this commitment. Taking into view consumer health concerns, Target has expanded the list of prohibited chemicals in its products. Similar moves as part of self-regulation are expected to be taken by the entire CPG & Retail industry in 2016.

Another area that will see a boost in 2016 due to focus on sustainability will be new product development as consumer preferences will move to goods that are sustainably produced, sourced and can be disposed-off/recycled with minimal damage to the environment.

Sustainability (moving towards a green and lean supply chain)

With different studies pointing out deficiencies in promotion management being undertaken by different CPG companies, the coming year will bring into focus an evaluation of trade promotion strategies adopted. Slowdown in demand and changing market dynamics will put additional burden on companies to focus on cost efficiencies. For the last few years, CPG & Retail companies have been playing catch up with market disruptions and investing in new channels of sales and marketing. Some of these initiatives have resulted in positive gains while some have been struggling. 2016 will be the year where companies will evaluate the performance of their initiatives and invest in course correction. In a nutshell, CPG companies have to come up with an aligned Optimization based Trade Promotion strategy which is more agile and can adapt to the challenges posted by not only the major global competitors but also from small, yet nimble & aggressive regional niche players.

Re-interpretation of trade management and evaluation of ROI

Counter to SlowdownCPG companies will enter into businesses that promise high growth as traditional sectors are slowing down due to economic slowdown and increased competition. One such segment that will see heightened activity is healthcare. Nestle plans to invest in nutritional therapy and Indian FMCG giant HUL is reviving its Ayurveda based health supplement brand – Lever Ayush. Other big names are also expected to follow suit. Another example of companies moving to big business segments is Pepsi Co India Snack business Frito Lay competing directly with Indian traditional snack companies by launching namkeens under its brand name Kurkure.

The following snapshot highlights the gamut of areas CPG & Retail industry is looking to work on to adopt and adapt to the above highlighted trends.

Figure 1: CPG Industry Landscape

Figure 2: Retail Industry Landscape

We believe that, in order to build next generation innovation and be able to ride this change wave,the CPG & Retail Industry should invest heavily in the following strategic initiatives in collaboration with their IT partners.

! PLM Implementations! Product Quality & Factory Compliance! NPI Optimization

! Digital Transformation! Internet of Things (IOT)! CPG Analytics, Advanced Analytics & Big Data! ERP Implementations! Middleware/EAI Intergration! Master Data Management! Sustainability Solutions! Infrastructure Services, Helpdesk & Store Field Services! IT Cost Reduction

! Trade Promotion Optimization! Outlet Segmentation & Retail Order

Recommendation! Sales-force effectiveness! New Product Launch Analytics! Pricing Analytics

! Demand Planning! Distribution! Inventory & Stock-Flow Management! S & OP! Network Design! Transportation & Route! Lean Fulfilment Services

! Purchase Order Processing! Trading Platforms - Commodity and Currency! Supplier Risk Management! Sourcing & Contract Management

! Consumer Promotion Optimization! Coupon Effectiveness Analytics & Optimization! POS Data Analytics! Social Media Analytics

! Throughput Inprovement! Capacity Augmentation Analysis! Production Inventory Tracking! Product Traceability! Manufacturing Compliance

Deeper Consumer Engagement

Cross Channel Strategy

Rapid Product Innovation

Cost Efficiencies

Value Chain Integration

Information & Performance

Visibility

Retail Technology Innovation

Compliance & Sustainability

Campaign & Loyalty Solutions

Omni-Channel CX Improvement

Framework

Customer Value

Management & SVOC

"IOT" for CX Solutions

CX

PLMProduct, Vendor

& Factory Compliance

Integrated Design

Sourcing & Global Buy

NPD Value Ready

Solutions

Managed Process Services

SCM"IOT" for

Supply ChainSupply Chain

Excellence

Supply Chain Visibility & Integration

SC Design & Optimization

DATA

Retain Enterprise

Performance Management

MDM (IDI/SVOC/

SVOI)

Big Data Use Cases

Advanced Analytics

Use Cases

ADM /Infra

Business IT Alignment

Target IT Operation

Model Design

IT Cost Reduction & Optimization

WorkEZ ManageNXT CloudSHYFT

! Electronic & Mobile Application Development

! Integrated Supply Chain strategy to service Direct to Customers

! Building Advance analytics solutions using consumer data for informed decision making

Focus on Digital Commerce

Create Enterprise Information Management Platform

Move towards Cloud based Master Data Platforms

Create Farm to Shelf Supply Chain Visibility & Integration

Managed Supply chain Services

Next Gen IT

Consumer Connect

Research & Product Development

Procurement

Manufacturing

IntegratedSupplyChain

Trade &Marketing

! Customised Performance management frameworks ( Strategic, Tactical & Operational levels) to help CPG companies move from Descriptive BI to Diagnostic BI

! Creating complete BI Analytics service bureau approach & Developing deep domain expertise to advise CXOs on integrated organizational dashboards highlighting key KPIs at every level

! Partnering with Master data experts to facilitate cloud based solutions to Increase data quality and efficiency by meeting all the needs in data migration, data analysis, data archiving, data cleansing and standardization with one single tool

! Development of partner ( Vendor & Customer) portals enabling the ease of doing business by creating transparent reporting dashboards & real time information systems

! Aimed at assisting Organizations in not only carrying out their day to day Supply chain Operations with increased efficiency and accuracy but create an intelligence power house that can help them identify process gaps and areas of improvement in their existing supply chain planning and operations practices.

With technology taking center stage and given the ever evolving distribution channels, the battle will be won by those companies who are agile enough to embrace the new rules of engagement and be ready to challenge the status quo. Employees need to be analytics driven and decisions across the hierarchy need to be more proactive rather than reactive. Few more pointers to look for in the near future –how companies can develop integrated channel loyalty programs to gain exclusivity and top of the mind awareness; investing in innovative packaging solutions including 3-D printing; moving towards a centralized consumer feedback redressal system and incorporating customer feedback across verticals in the value chain (R&D, Procurement, Manufacturing, Supply Chain and Sales) in a seamless and integrated manner.

The way forward

About the authorsAbhinav Verma is Principal Consultant at ITC Infotech, Business Consulting Group, specializing in CPG domain. He holds a degree in Management Science with M.B.A in Marketing & Finance with 12 years of experience in Territorial business planning & Logistics, Customer Analytics, ROI management, Profit centre management, Risk Management, Vendor development & Procurement, Key Account mgmt & Quality management in CPG sectors. He has built comprehensive Financial Benchmarking models, Redesigned the Demand estimation & Promotional Planning process, Set up the SOPs for Centralized Order Processing system & SKU rationalization and created Process Blue print for Distributor Management System (DMS) for CPG Sector companies.

Vineet Gulati is Associate Consultant at ITC Infotech, Business Consulting Group, specializing in Retail domain. He holds a degree in Management with specialization in Marketing and Finance with 4+ years of experience in Merchandise Operations Planning, Sourcing, Product Development, Vendor Management and Supply chain management in the apparel sector. He has handled buying operations for U.S. based retailers with a strong focus on developing a strong vendor base and reduced overall supply chain costs thus creating value for clients.

ITC Infotech is a specialized global scale - full service provider of Domain, Data and Digital technology solutions, backed by a strong business and technology consulting focus. The company caters to enterprises in Supply Chain based industries (CPG, Retail, Manufacturing, Hi-Tech) and Services (Banking, Financial Services and Insurance, Airline, Hospitality) through a combination of traditional and newer business models, as a long term sustainable partner.

ITC Infotech is a fully owned subsidiary of USD 8bn ITC Ltd – one of India’s most admired companies.

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