natural allies in emerging economies
TRANSCRIPT
With shelf-centered collaboration, everyone wins
CPG and retail: Natural allies in emerging economies
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Contacts
Amsterdam
Marco KestelooPartner+31-20-504-1942marco.kesteloo @strategyand.pwc.com
Beijing
Steven VeldhoenPartner+86-10-6563-8300steven.veldhoen @strategyand.pwc.com
London
Viren DoshiSenior Partner+44-20-7393-3572viren.doshi @strategyand.pwc.com
Mumbai
Jai SinhaPartner+91-22-6128-1102jai.sinha @strategyand.pwc.com
Nikhil BhandarePrincipal+91-22-6128-1111nikhil.bhandare @strategyand.pwc.com
FICCI
Federation HouseTansen MargNew Delhi, India 110001+91-11-2373-8760/[email protected]
PwC Strategy& (India) Private Limited
252 Veer Savarkar Marg, Shivaji Park, Dadar (W)Mumbai, India 400028 +91-22-6669-1000www.strategyand .pwc.com/in
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About the authors
Nikhil Bhandare is a principal at Strategy& in Mumbai and co-leads the firm’s consumer and retail practice in India. He is also an active member of the FICCI fast-moving consumer goods (FMCG) and retail committees. Prior to joining Strategy&, Nikhil worked in investment banking in New York.
Pali Tripathi is a senior engagement manager at Strategy& in Mumbai and a key member of the consumer and retail practice in India. She also co-leads the firm’s organization, change, and leadership practice. She specializes in new market entry strategies, organization structuring, sales force effectiveness, leadership development, and culture-led business transformations.
Aparajita Kapoor is a senior consultant at Strategy& in Delhi and a member of the consumer and retail practice in India. Her focus areas are sales and distribution, transformational growth, and organizational DNA.
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Executive summary
Emerging markets offer consumer packaged goods (CPG) firms and retailers great untapped potential for profit. Yet the two sectors often act as each other’s worst enemies — competing for gains, but in the process endangering their own profits and reputation. Instead of viewing each other as rivals, the best way forward for CPG firms and retailers is to join forces.
Shelf-centered collaboration — collaborative analytics infrastructure and management practices based on point-of-sale data and shared by CPG firms and retailers — already exists around the world. It yields dramatic benefits wherever it is applied, especially when linked with strategy. But it is often overlooked in emerging economies. Because there isn’t yet much experience with it in these economies, collaboration of this sort has particularly high leverage potential.
After all, CPG companies and retailers are natural allies, sharing the common goal of fostering a more robust consumer economy, with the financial and operational infrastructure to match. They are far more likely to achieve that goal if they tackle it in partnership. By developing a collaborative strategy, CPG companies and retailers can not only reap quick wins and short-term benefits but ultimately transform the complex and fragmented consumer landscapes of many emerging economies into more sustainable, efficient business environments.
We recommend a two-phase approach. First, create circumstances that enable effective collaboration, working within each company and across the sector boundary and putting pilot projects in place. Second, ensure that these collaborative efforts are sustainable, by setting up robust and transparent systems together and involving third parties where possible.
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Working together for strategic advantage
In emerging nations, where great numbers of people are moving to cities and joining the global consumer economy, two types of companies have a natural opportunity — not just to grow, but also to help improve the quality of life for the people of those countries. The first type is the manufacturers of consumer packaged goods (CPG). These tend to be global enterprises bringing in packaged foods, cleaning products, and personal care products from outside the country. The second type is retail chains, often growing from one or two regions within the country and building a distribution infrastructure from scratch.
These two types of companies need each other; the more seamlessly they work together, and the more sophisticated the connections between them, the greater the potential for impact and profit. Yet the two sectors often act as each other’s worst enemies — competing for gains, but in the process endangering their own profits and reputation. For example, in 2010, Future Group, India’s largest retailer, pulled all Kellogg’s cereal brands off its shelves after the manufacturer refused to grant retailers the terms they wanted. “[Future Group and other retailers] retaliated,” reported the Economic Times, “by launching a series of products under their own brands and giving them more shelf space and pricing them lower than established competition.” Tugs-of-war like this are all too typical in emerging markets, and they serve no one, including the customer. The best way forward for CPG firms and retailers is to join forces, starting at the supermarket shelf. Future Group itself provided an example of this in 2011; it launched a partnership with Hindustan Unilever to co-develop and co-brand an entire line of bakery products sold exclusively at Future Group’s Big Bazaar outlets.1
CPG firms and retailers have much to gain by finding ways to work together for strategic advantage. They share many of the same objectives: increased sales, cost savings, optimized processes and systems, and happy customers. They are also dealing with the same increasingly complex and fragmented business environment. One Latin American grocery chain has four types of stores, forcing manufacturers to navigate at least four distinct supply chains and merchandisers.2
The best way forward for CPG firms and retailers is to join forces, starting at the supermarket shelf.
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Meanwhile, India’s consumer economy is characterized by widely varying national and international CPG firms, 30,000-plus modern trade stores, more than 8 million traditional trade outlets, and multitudes of rapidly emerging e-commerce players.3 Moreover, as they migrate to cities, people have busier lifestyles, higher technology usage, and a greater interest in products and services from other countries. Sales channels are proliferating, demographics are shifting, and with the growth of the Internet, individuals have greater access to information about companies and their products (see Exhibit 1, next page).
These challenges have taken their toll on revenue growth and profits. In India, for example, sales growth has leveled off since 2010, with operating margins in both the CPG and retail industries holding steady at best (see Exhibit 2, page 8).
In this context, even limited cases of collaboration between CPGs and retailers — such as on specific promotions — have led to positive, enduring industry-level changes. For example, in 2007 the consumer giant Unilever joined forces with Migros, one of Turkey’s largest retailers, and used consumer insights to increase sales of hair conditioner. Through an in-store survey, the firms learned that shoppers considered hair conditioner an unnecessary, expensive product. To challenge this belief, Unilever and Migros set up price promotions and reorganized shelf space to put conditioners next to shampoos, encouraging shoppers to view conditioner as a necessary companion product. Migros’s overall hair conditioner revenue grew by 25 percent, and Unilever’s by 36 percent.4
When collaboration expands to include the automated sharing of point-of-sale (POS) data, the results can be even more dramatic. In 2012, Godrej Consumer Products of India set up electronic data interchange interfaces to automate the exchange of such data with retailers. The revenues earned through these trade channels grew 28 percent during the second half of that year.5
To see how much more potential there might be, Strategy& worked with the Federation of Indian Chambers of Commerce and Industry (FICCI) to survey about 500 leading CPG firms and retailers in India (see “About our research,” page 24). We wanted to identify the collaborative efforts with the highest leverage — and the roadblocks and challenges that companies had encountered.
We assumed that the results would illuminate many more possible opportunities, not just in India but in emerging economies around the world. We found most companies at the starting gate. Ninety-one percent of the survey respondents said they had participated in at
Sales channels are proliferating, demographics are shifting.
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Exhibit 1Changing consumer behaviors in India
* Heather Timmons, “Thomas Friedman answers your questions,” New York Times, Feb. 18, 2013.
Source: Strategy&
New (online) channels, new categories, younger
demographic, busier lifestyles
New formats, access to technology, globalization
Connection to consumers
1990s Early 2000s 2015
Low
High
“[In 2003]: Facebook didn’t exist, Twitter was still a sound, the cloud was still in the sky, 4G was a parking space, LinkedIn was a prison, applications were what you sent to college,… and Skype was a typo.”
— New York Times columnist Thomas Friedman, 2013*
– Brand loyal – Need-based shopper – Influenced by community – Price-driven – Conventional tastes – Seeks standardization – “Savings” mentality
– Always connected (phone, email, Web)
– Brand conscious – Seeks customization – Demands variety and
differentiation – Experiential/research-
driven purchases
– Co-develops products through feedback
– Seeks personalization – Impulsive shopper – Open to experimentation – Convenience-driven – Willing to spend – Open to reuse/purchase
products secondhand
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1. Total net sales of 107 CPG companies have been used to arrive at year-over-year net sales for the consumer goods industry.
2. 1,000Cr = about US$16.
3. Weighted average of 107 consumer and 14 retail companies has been used to arrive at operating profit margins for the respective sectors.
Source: Company financials; AceEquity; Strategy& analysis
Exhibit 2Sales growth and operating margins in India since 2010
Net sales1: CPG Operating profit margin3: CPG and retail
0
300
250
200
150
100
50
400
350
FY13
376
FY12
347
FY11
282
FY10
222
FY09
Crore, in thousands2
202
-4
0
4
8
12
16
FY09
Operatingprofit margin %
CPG
FY11 FY13 FY12 FY10
Retail margins remain low at <5%
Recovery from recession
7% decline in CPG margins post–FY10
Industry slowdown
Retail
+8% +20%
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least one collaboration initiative. However, most of these ventures were one-offs rather than sustained relationships or long-term projects. Moreover, respondents reported that only 15 to 20 percent of collaborative projects had met their objectives.
The respondents were particularly aware of the potential value of data-driven, shelf-centered activities. The most promising included collaborative practices with shared infrastructure, involving inventory tracking, product development, demand planning, data capture at point of sale, and trade promotions. The respondents recognized a wide range of benefits that would result (see Exhibit 3, next page).
Most of the respondents agreed in principle about the value of more collaboration, but said they were held back primarily by lack of trust between manufacturers and retailers (see Exhibit 4, page 11). In most cases, this lack of trust compelled firms to avoid collaboration initiatives altogether, or led to early closure. Each side also stated that the other bore the primary responsibility for improvement and innovation — an attitude that could only lead to further breakdowns in trust and communication. When asked to identify the reasons that collaboration initiatives failed, respondents named poor execution capabilities, poor planning, and lack of metrics for tracking and measuring progress (see Exhibit 5, page 12).
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Source: Interviews with industry leaders; Strategy& survey conducted in association with FICCI (June–July 2014)
Exhibit 3Opportunities for collaboration across the value chain
Supply chainand logisticsR&D
Sales anddistribution
Product development Innovation and/or investment sharing
Marketing
Inventory tracking and managementReal-time stock movement, master data management, automated replenishment, etc.
Joint logistics Sharing of warehouses, trucks, distributors
Demand planning/sales forecastingTarget setting, resource requirements, issue resolution, etc.
Data capture at point of saleConsumer insights, complete information, etc.
Upskilling of customer-facing staffTraining programs for retail staff, for distributors’ “feet on the street,” and for outsourced sales personnel
E-commerceExclusive offers; products available via trading portals
Digital marketing Campaigns across websites, social media, apps
Traditional advertisingCampaigns on TV, print media, radio
Trade promotionsIn-store displays, price reductions, contests, rebates, etc.
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Source: Interviews with industry leaders; Strategy& survey conducted in association with FICCI (June–July 2014)
Exhibit 4Stated barriers to CPG–retail collaboration
Internal barriers
– Lack of trust
– Poor planning mechanisms
– Lack of leadership
– Poor technology capabilities
– Absence of evaluation metrics
– Substandard execution
– Lack of resources
– Inadequate communication
– Lack of internal cross-functional collaboration
– Lack of vision
External barriers
– Poor economic environment
– Political bottlenecks
– Social disturbances
– Union issues
– Natural calamities
– Industry landscape and standards
– Market volatility
– Lack of resources and capabilities of partner(s)
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Exhibit 5Reasons collaboration initiatives fail
Source: Strategy& survey conducted in association with FICCI (June–July 2014)
15%
30%
35%35%
40%
45%
55%50
40
20
30
10
60
Responses as % of total
Lack ofcommitment
from leadership
Inadequatecommunication
Technologicallimitations
Lack ofresources
Absence ofevaluation
metrics
Poorplanning
Poor executioncapabilities
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Ways to foster trust
The most significant collaborations are deliberately designed to foster trust between consumer products manufacturers and retailers — often by tackling the most daunting challenges, such as e-commerce. Although retailers typically view e-commerce as a competing channel, it can also boost in-store trade if it’s designed to do so. Amazon India is exploring a new in-store pickup model, whereby traditional trade stores serve as pickup points for Amazon consumers.6 Another example is the “bloggers club” collaboration between electronics retailer Croma and Toronto-based e-book publisher/tablet maker Kobo. This club invites Indian bloggers to post reviews of Croma products and outlets.7 It is designed to forestall complaints, provide customer support, and promote Croma through contests for Kobo merchandise. A third example in India is Metro’s Cash & Carry supplier relationship management portal — a Web-based tool that helps suppliers throughout India reconcile orders, track goods in transit, process invoices, and analyze consumer behaviors through category-level data.8
The use of real-time POS data in particular, especially when managed according to clearly articulated strategies, is reshaping how CPG and retail companies make decisions. A company might use it to choose where to expand activity, or to manage product availability in a different way so that consumers are more likely to find the products they want in their local community. Better access to data from inventory tracking and demand planning can help remove bottlenecks in the supply chain, direct R&D investment, improve marketing, and maximize supply chain efficiency, which all work toward increasing profits for both manufacturer and retailer.
Data-driven collaboration often includes sharing insights on market trends and consumer buying behavior. Our survey respondents said such sharing leads to better idea generation around products and trade promotions, savvier use of e-commerce platforms, and more effective workplace management (see Exhibit 6, next page). The most useful technologies for gathering this data are those that enable direct interaction with consumers: customer relationship management systems, Web 3.0 (which uses natural language search, data mining,
Although retailers typically view e-commerce as a competing channel, it can also boost in-store trade.
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Exhibit 6Data-driven collaboration opportunities
Source: Strategy& survey conducted in association with FICCI (June–July 2014)
10
20
30
40
50%
60
50
70
80
10.Traditionaladvertising
7%
9.Digital
marketing
33%
Responses as % of total
8.E-commerce
33%
7.Joint
logistics
41%
6.Trade
promotions
48%
5.Data
captureat pointof sale
56%
4.Upskilling
of customer-facing staff
67%
3.Demandplanning
70%
2.Product
development
70%
1.Inventorytracking
and management
74%
Degree of data dependency:
High Medium
Low
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and artificial intelligence technologies), online applications such as digital media campaigns, and contests on social networking sites like Facebook (see Exhibit 7, next page).
Collaboration on demand planning enables CPG firms and retailers to set realistic targets, meet market demand, and minimize stockouts. Godrej Consumer Products and Aditya Birla Retail’s More stores have invested in joint business planning as a way of working with their retail partners.9 In another example, a leading U.K. retailer engaged in collaborative business planning with a global market leader in oral care. These companies took a “one team” approach that began with a monthly meeting of the enterprises’ leadership teams to discuss short- and long-term opportunities. The cross-company team reviewed the performance against forecasts; planned the next month’s assignments and developed new forecasts for results; and agreed on changes such as promotions, shifts in service levels, and adjustments to shared benefits. The initiative has led to improved delivery rates, increased on-shelf availability, new targeted promotions, better margins, reductions in inventory levels, and easier agreement on other collaborative initiatives.
Co-branded advertisements enable CPG firms and retailers to visibly market products together. For instance, Indian e-commerce retailer Flipkart and Motorola recently splashed marketing campaigns across television and print media for the joint launch of the Moto G phone. Collaborative advertising may be extended to include distributors as well: Apple in India co-brands its iPhone advertisements with pan-India distributors Redington and Ingram Micro. By outsourcing its advertising this way, Apple saves on costs and engages more actively with distributors. The distributors in turn benefit from association with Apple’s brand along with the higher margins they can earn on its smartphones.10
Today, retailers as well as CPG firms want to optimize “shelf-back” activities (getting the right product to the right shelf), as well as “shelf-forward” activities (getting the product off the shelf and to the right consumer). The best vehicle for accomplishing this is shelf-centered collaboration: in-depth projects in which CPG and retail companies mutually design and operate analytics infrastructure and management practices based on POS data. This approach can offer wins throughout the value chain: in product development, demand planning, joint logistics, inventory tracking, data capture at the point of sale, e-commerce collaboration, upskilling, digital marketing, traditional marketing, and trade promotions, all shared by CPG firms and retailers (see Exhibit 8, page 17).11 Over time, by improving processes and systems together, CPG firms and retailers can address ongoing challenges, such as soaring supply chain costs, an inability to command premium prices, poor supply chain performance, and significant replenishment time.
Shelf-centered collaboration can offer wins throughout the value chain.
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Exhibit 7Questions for designing effective data capture at the point of sale
Source: Strategy& analysis
Examples of data capture in practice Questions
Which decisions to make? – Planning insights – Real-time performance monitoring – Evaluation – Settlement
With what data, from which sources? – Point of sale (direct and/or third-party) – Syndicated consumption and panel data – Shopper insights
At what level of granularity? – Items per store per day – Buying point
How are decisions made? – By role (which role, under what conditions?) – By function
How are insights acted on? – By internal sales, and by distributors – By merchandiser – By retailer operations systems – By retailer staff
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Exhibit 8Overview of shelf-centered collaboration
Source: Strategy& analysis
Shelf-centeredcollaboration
Value levers
– SKU rationalization– Network optimization– Rapid replenishment – Visibility on stock movement– Consumer behavior analysis – Demand segmentation– RFID
Benefits
– Cost reduction– Process streamlining
Benefits
– Revenue improvement– Consumer experience enhancement
Shelf-back
Shelf-forward
Value levers
– Right assortment – Right price–value trade-offs– Targeted selling– Display effectiveness– Self-service– Brand awareness– In-store communication
Productdevelopment
Jointlogistics
Data captureat POS
Demandplanning
Inventorytracking
E-commercecollaboration
Digitalmarketing
Tradepromotions
UpskillingTraditionalmarketing
Collaborationareas
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Selecting partners for collaboration
Although all CPG firms and retailers could benefit from cultivating more open relationships, it is not feasible to try this approach with every potential partner. The most likely candidates for collaboration may not always be the largest or most visible. For example, in some cases, a smaller or less prominent company may make a more committed and valuable collaborator due to its greater interest in partnering and its ability to devote more managerial attention to the process.
In selecting which partners to collaborate with, we recommend you base your choice on the size of the potential joint business and their strategic fit to your own key priorities. Look for “key accounts,” which have both a good fit with your business and a high level of potential financial payoff (see Exhibit 9, next page).
It is particularly important to get the strategic fit right. For instance, many companies are tempted to use collaboration as a way to make up for gaps in their own capabilities. In practice, however, the most successful collaborations build on strengths rather than compensating for weaknesses. A CPG firm that collaborates with a retailer to improve replenishment mechanisms has little to gain from the retailer’s POS data unless the firm possesses the analytics and other capabilities required to extract useful insights from the data.
Having found a collaborator — a retailer if you are a CPG company, or a manufacturer if you are in retail — the next step is to agree on a collaborative effort. You should generally divide the initiative into two distinct phases, which will help you overcome internal and external barriers and increase your odds of success. In the first phase, you establish conditions for effective collaboration. Then, in the second phase, you ensure that this collaboration is sustainable by turning to next-level priorities: linking benefits to key performance indicators (KPIs), building a culture of trust and transparency, and partnering with government agencies to support growth in the CPG and retail sectors.
The most successful collaborations build on strengths rather than compensating for weaknesses.
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Exhibit 9Segmentation of potential collaborative partners
Source: Strategy& analysis
Size of prize(incrementalsales, cost
savings)
Strategic fit (alignment of capabilities,
culture, strategy)
Low High
Low
High
2.High performers
– High-value traditional trade stores accessible directly or through distributors
– High-margin consumer goods
1.Key accounts
– Large modern trade retailers or e-commerce retailers
– High-margin consumer goods
4.Other companies
– Low-value traditional trade retailers
– Low-margin consumer goods
3.Like minds
– Small modern trade outlets
– Low-margin consumer goods
Evolution through upskilling programs to create brand loyalty as
well as boost sales
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Phase 1: Getting the basics right
Several separate measures combine to help you build the support and capabilities needed to collaborate successfully:
• Establish clear goals and criteria for mutual success. Create a shared view of your common opportunities and challenges. Lock in specific agreements on targets, responsibilities, and accountabilities as early as possible, along with explicit expectations. A retailer, for instance, would likely be unwilling to share category-level data with a CPG firm unless the firm promised something in return, such as helping to optimize the retailer’s product mix to increase category sales. By establishing targeted benefits up front, you will also build trust, which can help strengthen the relationship.
In a 2010 interview with DNA India, Thomas Varghese (then the CEO of Aditya Birla Retail) noted, “Whether it’s Unilever, whether it’s Godrej, or Pepsi, or Coke, or Nestlé and Marico, we have a clear goal. We meet twice a year; we review the joint business plan. So, unlike retailers who have been fighting with FMCG companies, we have started a very strong collaboration with them, to co-create value for both our businesses, and that’s working well.”12
• Gain buy-in at the top. Both collaborating companies need to find sponsors at the top leadership level. CEO and chairman–level endorsement is a key factor, positioning you and your partner company to achieve common strategic goals and establish accountability. Think together about long-term business improvement as well as short-term sales enhancement.
• Organize for execution. Set up cross-functional teams, led by a key account manager. These teams could be organization-specific or cross-organizational, depending on the depth of the collaborative relationship. Members should come from supply chain, logistics, marketing, and IT; most true shelf-centered collaborations will inevitably involve these functions.
• Align operational systems and processes. Wherever possible, set up common processes and technologies, with the goal of seamless integration, the incorporation of mobile devices, and a shared view of data. These can include common IT systems and back-end processes such as robust inventory tracking systems, to streamline the order-flow process and manage distribution information. Install master data management to synchronize disparate information and realize better efficiencies. You may also wish to streamline and align other systems such as those dedicated to billing, labeling, and electronic data interchange to enable real-time updates, the sharing of financial data (if feasible), and the cross-management of logistics.
CEO and chairman–level endorsement is a key factor.
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• Establish and track progress. By identifying a set of touch points, including monthly or quarterly joint account sessions, you can assess the performance of the collaboration and make midcourse corrections as needed. Companies pursuing multiple initiatives with a target partner may want to set up a project management office to oversee the projects or initiatives. To avoid ambiguous reporting lines or conflicting commitments, ensure that each initiative has a clear set of owners and a governance body — such as a steering committee or a higher-level council comprising CEOs of the two partners plus key members from both sides.
Phase 2: Sustaining collaboration
Once the effort is under way, companies can help the collaboration come to fruition through these measures:
• Establish and track KPIs. These help define and measure the progress of collaboration success. Teams containing representatives from both companies should identify joint metrics and KPIs to track and measure progress on each collaboration initiative. Make sure these KPIs are easy to measure and monitor. Link them to performance of the joint account team members, so they serve as incentives for variable pay (see Exhibit 10, next page).
• Work on developing talent together. In India, CPG manufacturing companies such as Coca-Cola, Dabur, Hindustan Unilever, ITC, and Marico have heavily invested in developing upskilling programs to help traditional retailers train their employees in specialized skills, such as operating credit card machines, maintaining inventory logs, and creating attractive merchandise displays. The goal is to create a dialogue with traditional stores, which make up 90 percent of India’s retail landscape. Thanks to such initiatives, these CPG companies have reached thousands of traditional retailers throughout the country.
• Use intermediaries to facilitate collaboration with traditional businesses. These intermediaries, which may include distributors, systems integrators, and resellers, can play a role in training and overseeing the retail staff. The Panasonic Partners program uses a “train the trainer” approach, in which distributors become trainers. Through the program, Panasonic introduces these intermediaries to new products, business opportunities, and special commercial offers. They use that knowledge to push sales independently with retailers, enabling Panasonic to build up its channel community.13
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Exhibit 10Sample KPIs for measuring in-store promotion effectiveness
Source: Strategy& analysis
Measurement Key performance indicator (KPI)
Share of shelf space vs. planogram – Percentage compliance with planogram (average)
vs. competition– Percentage share of visual inventory
Product availability – Availability in hot spots, aisles (vs. benchmark) – Number of inventory days (vs. benchmark)
Compliance with promotional sales price
– Percentage of selected products with price within the defined price band
Compliance with promotion execution – Promotional compliance requires correct location, product/s, mechanism, position, and pricing
Compliance with budget – Actual financial results vs. budget
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• Continually improve trust and transparency. Conduct regular conversations with your partners on the benefits, costs, and objectives of collaboration. Motivate and reward behaviors that foster trust; it should be clear to everyone that transparency with the partner company, adherence to agreed-on processes, and well-aligned incentives are highly valued. An up-front agreement on how to share data is essential, as is a clear understanding of what each partner brings to the table and how the benefits and costs of your joint initiatives will be shared.
• Encourage and reward behaviors that foster trust. These include candor, openness, and adherence to agreed-on processes. Building trust should begin with your own organization’s behavior, not just what you expect from others.
All of these imperatives will lead both companies to higher levels of maturity and competence. Indeed, the best way to view collaboration is as a joint growth opportunity — a chance to develop more distinctive, stronger capabilities together. Adopting this mind-set will take time and effort. But companies on both sides cannot expect to drive sustainable growth in the future unless they work with, rather than against, each other. Collaboration is no longer a choice; it is the new imperative — and industry players must move now to meet it.
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About our research
With the objective of exploring how CPG firms and retailers in India could work together to overcome similar challenges and obstacles, Strategy& and the Federation of Indian Chambers of Commerce and Industry (FICCI) set out in June 2014 to identify potential collaboration areas through a robust research methodology. The research consisted of a survey circulated across more than 500 FICCI FMCG and retail committee members and interviews conducted with leading decision makers across organizations in both sectors. The
research also included market visits to traditional and modern trade outlets as well as in-depth discussions with leading e-commerce players.
The survey was conducted across various categories in the CPG and retail sectors (see Exhibit A, next page). It assessed current collaboration initiatives, identified forward-looking opportunities, and enabled articulation of barriers to success. Interviews and market visits were used to further validate findings and recommend a way forward.
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Exhibit AProfiles of the survey respondents
Note: Respondents may belong to more than one category.
Source: Strategy& survey conducted in association with FICCI (June–July 2014)
Apparel
Consumer electronicsand appliances
Other
Other
Tobacco
Footwear
Cosmetics and toiletries
Household articles
Paper and related items
Food and beverages
Pharmaceuticals
CPG firms: Respondent profilePercentage of respondents
Food and grocery
Consumables(cosmetics, apparel, etc.)
Durables(furniture, equipment, etc.)
Retail firms: Respondent profilePercentage of respondents
28%
6%
6%
6%
6%
6%
6%
11%
11%
17%
38%
75%
38%
25%
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Acknowledgments
This study was undertaken by Strategy& India with support from the Federation of Indian Chambers of Commerce and Industry (FICCI).
We thank Kurush Grant, chairman of the FICCI FMPG committee, and Bijou Kurien, chairman of the FICCI retail committee, for their support and guidance in developing this report. We also thank the employees of FICCI, who worked closely with Strategy& in making this report possible.
We are grateful to all those who graciously participated in our survey and interview process; they contributed immensely to the creation of this report.
A special mention is extended to the Strategy& consumer and retail practice for providing valuable insights and examples from around the globe. In particular, we thank Jai Sinha, managing director at Strategy& India; Marco Kesteloo, partner and leader of the Strategy& global retail practice; and Kingshuk Sanyal, formerly a senior associate in the firm’s consumer and retail practice in India, for lending their invaluable expertise to the study.
We also thank all those who contributed to the editing, design, marketing, and production of this report.
We hope this report will be a stepping-stone for readers to explore the potential of collaboration across the CPG and retail landscape in India.
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Endnotes
1 Sagar Malviya, “Hindustan Unilever, Future Group to co-brand bakery products, items to be sold at select Big Bazaar stores,” Economic Times, Aug. 22, 2011.
2 Carlos Navarro, Juan Valero, Heberto Molina, and Jose L. Marzal, “Go-to-market strategies for emerging markets: How CPGs can better serve the so-called organized trade,” Strategy&, 2013.
3 “Indian retail market set to touch $865 billion by 2023,” Hindu Business Line, Jan. 28, 2014.
4 Simon Harper, Marco Kesteloo, Pertti Heinonen, and Amit Kapoor, “The collaboration game: Building value in the retail supply chain,” Strategy&, 2009.
5 Godrej Consumer Products, “Half yearly communication for the financial year 2013–14,” Nov. 11, 2013; found via www.godrejcp.com/investor-updates.aspx?year=2014.
6 Samidha Sharma and Boby Kurian, “Amazon takes kirana route to deliver goods,” Times of India, Apr. 24, 2014.
7 Arpit Verma, “Kobo announces interesting new tablets as Croma takes wraps off a club for bloggers,” TechProne, Jan. 9, 2014.
8 Sunil Kumar, “Metro develops SRM portal for suppliers,” CXOtoday.com, July 20, 2005.
9 Godrej Consumer Products, “Half yearly communication for the financial year 2013–14,” Nov. 11, 2013; Shailaja Sharma, “‘At Aditya Birla Retail, we have perfected the hypermarket model’”: interview with Thomas Varghese, DNA India, Dec. 28, 2010.
10 Akanksha Prasad and Indu Nandakumar, “Apple wakes up to India’s potential; iPhone witnesses four-fold rise in sales in 3 months,” Economic Times, Feb. 8, 2013.
11 Rich Kauffeld, Johan Sauer, and Sara Bergson, “Partners at the point of sale,” strategy+business, Autumn 2007.
12 Shailaja Sharma, “‘At Aditya Birla Retail, we have perfected the hypermarket model’”: interview with Thomas Varghese, DNA India, Dec. 28, 2010.
13 Rizhkant Zha, “Channel is integral part of Panasonic,” Varindia, May 20, 2013.
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