deloitte cb predictions seminar 2013 deloitte perspective on growth

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Consumer Business Predictions & Priorities Seminar 2013 Rotterdam, May 28 th 2013 New Foundations for Growth Randy Jagt Director Consumer Business

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In the long term there are four key predictions that provide growth opportunities for the Consumer Business Industry: - Increasing wealth in emerging markets - Companies that best understand the customer of tomorrow will win - We’re only at the verge of the data revolution - Only companies that manage to remain fit for the future will survive

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Page 1: Deloitte cb predictions seminar 2013 deloitte perspective on growth

Consumer Business Predictions & Priorities Seminar 2013

Rotterdam, May 28th 2013

New Foundations for Growth

Randy Jagt

Director Consumer Business

Page 2: Deloitte cb predictions seminar 2013 deloitte perspective on growth

© 2013 Deloitte The Netherlands

Bio

@ Deloitte since 2003

Leads Deloitte’s Food & Beverage Industry and

responsible Director for our Emerging Markets Taskforce

Focused on Realizing Strategic Business

Transformations

Combining Functional, Industry and Functional

knowledge

Responsible director for FrieslandCampina, Nike,

D.E MasterBlenders 1753 and Heinz

Consumer Business Predictions & Priorities Seminar 2013 1

Page 3: Deloitte cb predictions seminar 2013 deloitte perspective on growth

Where are we now?

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© 2013 Deloitte The Netherlands

A whirlwind of disruptive forces is in play in today’s marketplace

Rapid Technological Adoption and

Changing Channels

Increased mobility, enhanced usability,

and increased connectivity

Increasing Competition

Lower barriers of entry, new business

models, vertical and horizontal

integration

Changing Consumer Behavior

Overall, consumers spend less time,

want value for money, are comfortable

buying online and are less loyal

Challenging macro economic trends

Unsecure economy, shift to Emerging

Markets, low consumer confidence in

Europe

Consumer Business Predictions & Priorities Seminar 2013 3

Page 5: Deloitte cb predictions seminar 2013 deloitte perspective on growth

© 2013 Deloitte The Netherlands

Retail and consumer products companies face challenging global macro

economic trends

Europe

‒ Things get worse but do

so more slowly

‒ Imports fall as people

have less cash to spend

‒ Exports rise thanks to

improved competitiveness

United States

– US budget deficit is falling fast:

• Healthier economy

• Higher tax revenues

• Lower federal spending

– Unemployment expected to

stay high

Japan

– Partial economic

recovery in 2012 due

to tsunami 2011

– Stimulus by Bank of

Japan is boosting

consumer

confidence

China

– Slowing growth from

tightened monetary

policy

– Shift toward upscale

as income

distribution skews

– Shift toward

consumer led

growth

Africa

– High growth rates

expected

– Emerging middle

class

– Increased

spending power

SE Asia

– High growth

– Emerging middle

class

– Increased

consumption of

goods and services

South America

– Strong growth

– Thriving middle

class

– Raising service

sector

Consumer Business Predictions & Priorities Seminar 2013 4

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© 2013 Deloitte The Netherlands

Proliferation of choice, coupled with disruptive retail models, has resulted in

a consumer that is harder to “win” and retain than ever before

“With so many brands out there, why limit

myself to one or two?”

I keep my options open

“With so few brands to choose from, it’s

easy to decide which one fits my needs.”

I identify with brands

“If a store isn’t nearby, I can always buy its

products online...or through its app.”

I can buy anything, anytime, from anywhere

“I frequent stores that are near my home,

my work, or my local mall.”

A store can win me based on location alone

“I like to compare prices on my

smartphone before buying.”

I always know if I’m getting the best deal

“I like getting a great deal, but I don’t have

time to shop everywhere.”

I’ll shop around…to a degree

N O W… T H E N…

Consumer are connected, well-informed, demanding and self-aware Consumer Business Predictions & Priorities Seminar 2013 5

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© 2013 Deloitte The Netherlands

Established players need to defend market share against new

competitors

Consumer Business Predictions & Priorities Seminar 2013

Vertical or horizontal

expansion

Players expanding their

roles in the value chain

Technology disrupters

Left field competitors with

different business models

Emerging market players

Emerging market giants

entering western markets

Typical advantages:

1. Strong position in existing

space

2. Increases control

Typical advantages:

1. Proprietary technologies

2. No legacy costs, Leaner

organization

3. High valuations

4. Attractive to top talent

Typical advantages:

1. Low cost experience

2. Strong position in home

markets

3. Access to large talent

pools

4. Inherent flexibility

6

Page 8: Deloitte cb predictions seminar 2013 deloitte perspective on growth

Where are we going?

Page 9: Deloitte cb predictions seminar 2013 deloitte perspective on growth

© 2013 Deloitte The Netherlands

In the long term there are four key predictions that provide growth

opportunities for the Consumer Business Industry

Increasing wealth in

emerging markets

We’re only at the verge of the

data revolution

Companies that best understand

the customer of tomorrow will

win

Only companies that manage to

remain fit for the future will

survive

Consumer Business Predictions & Priorities Seminar 2013 8

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© 2013 Deloitte The Netherlands

Prediction #1: In three years time multinationals need to obtain more

than 30% of global revenues from emerging markets

Emerging Advantage

• Emerging markets play an increasingly big

role in the strategic plans of multinationals

• Companies which already have a foothold are

expanding and many who haven’t made the

move plan to do so soon

• Nearly 60% of the global GDP growth in

2030 is forecast to come from emerging

markets

• Companies are increasingly shifting focus

towards 2nd and 3rd tier emerging markets in

Asia, Middle East and Africa

• Growth in these markets has surpassed that

of the BRICs, driving consumer demand and

spawning competitive local businesses

Broaden scope of

investments in

Emerging Markets

In three years time:

Most companies will realize more than 30%

of their revenue from Emerging Markets

20%37%

37%

35%35%

15%

14%71% or more

31% - 70%

Expected in 3 Years

10% - 30%

Less than 10%

Last 12 Months

8%

Successful growth stories

• Today 55% revenues

come from EMs (85% of

its growth)

• Revenues from EMs to

increase to 75% by 2020

• 43% of its revenues from

EMs in 2012

• Sales mounted 9,7% in

Africa and the Middle East,

and 7,5 % in Asia Pacific

• 51% of revenues come

from EMs

• High growth in Asia,

LATAM, CIS, Middle East

and Africa offset poor W

European performance

• 40% revenues from EMs

• Planning to triple its sales

in Asia, Oceania and

Africa over the next

decade

% Global revenues from EMs

Consumer Business Predictions & Priorities Seminar 2013 9

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© 2013 Deloitte The Netherlands

Prediction #2: Omni-channel will become the new standard for shopping,

requiring insight through all consumer devices to enable customer centricity

Leveraging insight from digital devices

• The use of digital touchpoints will enable the best

companies to reach a higher level of customer centricity

• Companies will engage in better customer dialogue,

delivering improved customer experiences

More sales and increased brand loyalty

• Retailers can increase customer loyalty by ensuring

testing and improving their assortment ratings

Product feedback

• Early adopters are more critical about products than

consumers in general

Operational improvement

• To achieve excellence in brand loyalty, customer

service complaints must be driven to below 1% of total

customer feedback

Individually customised offers increase sales,

drive higher brand loyalty and companies flex to

customer needs faster than ever.

* Based on CEO survey (sample size 234 covering CB, automotive, tourism, hospitality and leisure)

Source: Deloitte Fortresses and Footholds Study; IMF; WB

Consumer Business Predictions & Priorities Seminar 2013 10

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© 2013 Deloitte The Netherlands

Key opportunities fuelled by Analytics

• Better tailored “next generation“ products and services

based on detailed analysis of customer behavior and

needs

• Optimized supply chain and process efficiency by using

sophisticated analytics

• New unprecedented opportunities by analyzing web

behavior, voice/video, sensor data etc.

Customer data is exploding

• This decade the global information set is growing at a

factor of 44 — from 0.8 zettabytes in 2009 and is

expected to reach 35.2 zettabytes in 2020

• A leading global retailer collects more than 2.5 petabytes

of customer transaction data every hour

• This data comes from the growing volume of existing data

(e.g., POS, shopper profile, etc.) as well as emerging

forms of data fueled by technological and digital

innovations (e.g., mobile eCoupons, sensor tags, video,

text, photos, audio).

Start building

big data

capabilities

A strong data and analytical maturity is the key

differentiator to successfully navigate through this

new era of innovation and exponential pace of change.

Prediction #3: The exponential pace of Big Data & Analytics

innovation will cause a disruption in the competitive landscape

Industry’s perceived “Change” pace

Consumer Business Predictions & Priorities Seminar 2013 11

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© 2013 Deloitte The Netherlands

Prediction #4: Companies will shift from “localized” operating models towards globally

integrated operating models to meet both their cost as well as their growth objectives

External drivers

• Increased market pressure (decline in organic growth)

• Differentiated consumer demand

• Increased consumer insight and

external data

• Shifting channel dynamics

• Competitor consolidation

Drivers for Operating Model changes

Consumer Business Predictions & Priorities Seminar 2013

Internal drivers

• Growth into suboptimal large scale businesses

• Numerous local autonomous organizations

• Struggle to reap scale benefits...

• ...and at same time being faced with scale challenges

• How to remain fit for purpose through

balancing global scale and local

relevance?

• Global companies are facing changing

industry dynamics and scale challenges,

driving a balancing act between global

scale and local relevance

Key Challenge

Key Question

Companies will shift from “localized”

operating models towards globally

integrated operating models to meet

both their cost as well as their

growth objectives

12

Page 14: Deloitte cb predictions seminar 2013 deloitte perspective on growth

What are our priorities?

Page 15: Deloitte cb predictions seminar 2013 deloitte perspective on growth

© 2013 Deloitte The Netherlands

As a result of these developments we identify four key priorities for the

Consumer Business Industry to realize long term growth

Growth &

Emerging Markets Digital

& Cloud

Analytics Future

Operating Model

1 2

3 4

New Foundations

for growth

Consumer Business Predictions & Priorities Seminar 2013 14

Page 16: Deloitte cb predictions seminar 2013 deloitte perspective on growth

© 2013 Deloitte The Netherlands

Define your Strategic Path to Growth, supported by a well balanced

portfolio of strategic initiatives

What is our

Growth

strategy?

Where will we

play?

How will we win

in chosen

markets?

What priority

initiatives and

investments?

How will we

configure?

The Strategy Cascade™

Consumer Business Predictions & Priorities Seminar 2013 15

Developing New Foundations for Growth following a structured approach

Primary Growth Levers (business of today)

Identify new uses

or users

Create new

markets

Extend to new

markets,

segments

Expand the

value chain

Change the

basis of

competition

Retain, acquire

customers,

optimize

pricing, improve

existing

products and

services

Extend

products

and services

Cu

sto

mers

/ M

ark

ets

No

n-c

on

su

me

rs

Ne

w t

o y

ou

E

xis

tin

g

Products / Business Models

New to you New to the world Existing

New Adjacent Core

Page 17: Deloitte cb predictions seminar 2013 deloitte perspective on growth

© 2013 Deloitte The Netherlands

Companies should deploy wider capabilities to pull, convert and retain

new consumers for repeat sales

Social

• Social interaction

• Product discovery

• Price-checking

• Online payments

• Mobile payments

• Self-checkout in-store

• Order management

• Fulfilment

• Service and loyalty

Data-driven

Insight

• Quick, convenient and

personal service

• “Frictionless” digital

loyalty system

• Personalise promotions

• Consumer-typed propensity

models (next best offers)

• In-house data & analytics

talent pool

• Secure storage and data

compliance

• Socially-driven product

discovery paths

• Improved SEO

• Centre of excellence for

online engagement

• Multiple product fulfilment

options

• Location independent

payment

• Optimised supply chain

• New in-store services

Pre-purchase Purchase Post-purchase

Pull consumers Increase conversion Keep them coming back

Omni-channel

shopping Digital Loyalty

Mobile devices are a central driver in the revitalization of customer shopping experiences

Consumer Business Predictions & Priorities Seminar 2013 16

Page 18: Deloitte cb predictions seminar 2013 deloitte perspective on growth

© 2013 Deloitte The Netherlands

Unlock the power of available data: Move from reporting historic facts

to anticipating consumer and business behavior

Traditional

Business

Intelligence

Increasing business value Transactional

An

aly

tical

Matu

rity

Strategic

• Data integrity & quality

• Basic employee lists & extracts

• Understanding business

parameters

• Visualizing transactions

• Integrated analytics

• Multiple sources of data

• Forecasting and

predicting future

outcomes

• Modeling and

understanding

correlations and

causalities

• Simulate and

experiment with

possible scenarios

What is happening?

Why is it happening?

What might be happening?

Basic KPI

Reporting

Visual data exploration

Segmentation

Predictive Modelling

Simulation & Optimization

• Understand groups and

outliers

• Discover white spots

Consumer Business Predictions & Priorities Seminar 2013 17

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© 2013 Deloitte The Netherlands

CPG companies need to move from “localized” models towards globally

integrated operating models to remain fit for purpose

Consumer Business Predictions & Priorities Seminar 2013

Companies do not only integrate their operating models for cost purposes

but also to unlock adjacent and new growth opportunities

Globally integrated operating model

Global Shared Services Organization

Finance/HR/IT and standard technology platforms

Global Centers of expertise

Standardized core value chain processes

Global R&D Supply Chain End Markets

Innovation Sales

Brand strategy

Business Strategy

18

Page 20: Deloitte cb predictions seminar 2013 deloitte perspective on growth

© 2013 Deloitte The Netherlands

As a result of these developments we identify four key priorities for the

Consumer Business Industry to realize long term growth

Growth &

Emerging Markets

Digital

& Cloud

Analytics Future

Operating Model

1 2

3 4

New Foundations

for growth

Consumer Business Predictions & Priorities Seminar 2013 19

Page 21: Deloitte cb predictions seminar 2013 deloitte perspective on growth

© 2013 Deloitte The Netherlands

Q&A

Consumer Business Predictions & Priorities Seminar 2013 20