pwc 17th annual global ceo survey retail consumer goods key findings

8/10/2019 Pwc 17th Annual Global Ceo Survey Retail Consumer Goods Key Findings

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F i t f o r t h e f u t u r e

17t h An n u a l G l oba l CEO Su r veyKey findings in the retail and consumer goodsindustry

www.pwc.com/ceosurvey

February 2014


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Con ten t s

Page

Sector snapshot 3

Confidence in growth 6

The global re-balancing act 11

Transforming business 16

About PwCs 17th Annual Global CEO Survey 26

Contacts

2February 201417th Annual Global CEO Survey Key findings in the retail and consumer goods industry


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Sect o r sn ap sh o t



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Technology has the potential totransform retail and consumergoods businesses

Eighty percent of retail CEOs said thattechnological advances is the globaltrend that will transform theirbusinesses most over the next five

years. As for consumer goods CEOs,67% said the same. On the other sideof the coin, just 34% of consumergoods CEOs and 38% of retail CEOssee the speed of technological changeas a concern, compared to 47% ofCEOs overall.

Why is technological change viewed assuch a positive by these CEOs, giventhe daunting investment it takes todevelop and deploy the latest

enterprise-wide and consumertechnologies?

Perhaps because it makes the worldsmaller and potentially puts productsin the hands of millions of additionalconsumers. Take online shopping. Inthis year's PwC Total Retail survey ofglobal consumers, 41% of global

shoppers bought products usingtablets, compared to 28% in 2012, and43% of respondents purchasedproducts through smartphones,compared to 30% in 2012.

For retail andconsumer goods

CEOs, technologyis a conduit to newconsumers

Thats tech-savvy customers usingtechnology to improve and expandtheir buying experience a boon forconsumer goods companies and

their retail partners.



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Into Africa

Africa has some of the fastest-growingeconomies in the world, andconsumer goods CEOs, in particular,have taken notice. Eighteen percent ofconsumer goods CEOs planning ajoint venture or strategic alliance are

looking to Africa, while 12% of retailCEOs planning a deal are lookingthere, compared to 9% of CEOsoverall.

Reaching consumers is one thing understanding their shoppinghabits is another

Sixty-four percent of retail CEOs saidthey were concerned about shifts inconsumer behavior, with 28% sayingthey were extremely concerned.

One potential shift: Are consumersshopping with fewer retailers? Whenwe asked our Total Retail shoppers totell us how many retailers in a givengroup theyd shopped with in the last12 months, 15% of our global sampleresponded that they had shopped withjust one an increase of 7% from2012. That same trend held in the 2

to 5 favorite retailers range.

When it comes to businessthreats, high, volatile rawmaterials prices stand out

High, volatile raw materials pricesround out the top five concerns forboth retail and consumer goods CEOs.

Most believe theyll need to makechanges to their supply chains inresponse to global trends. On apositive note, consumer goods CEOsbelieve their procurement andsourcing departments are wellprepared to make those changes.Consumer goods

CEOs planning a

deal who arelooking to Africa

24%



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Con f i d en ce i n g r ow t h

GDP is too blunt an instrument: youhave to drill down and see what is andwhat is not driving that GDP.

Jan Joh an sson , CEO , Svenska

Cel l u l o sa A B (SCA)



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V i ew s o n t h e eco n om y a r e l o o k i n g u p

Retail and consumer goods CEOs are moreoptimistic than last year. Thirty-eight percentof them believe that the global economy willimprove in the next 12 months, compared tojust 17% last year.

And while a third expected to see the

economic situation worsen last year, this yearonly 9% are anticipating a global decline.

Many consumer goods CEOs areworriedabout continued slow or negative growth indeveloped markets (67%). Its higher on theirlist of concerns than a slowdown in growthmarkets (58%). And while retail CEOs arent

quite as concerned, the same gap applies.

38

17

9

24

2014

2013

Improve

Decline

%

Base: All respondents 2014 (Retail and consumer goods, 344)

2013 (Retail and consumer goods, 283)

Note: Stay the same and Dont know/refused not shown.

Source: PwC 16th Annual Global CEO Survey 2013Source: PwC 17th Annual Global CEO Survey 2014

Q: Do you believe the global economy wi ll improve, stay the

same, or decline over the next 12 months?



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Ret a i l an d consu m er goods CEOs a r e con cer n ed

abou t m an y o f t h e sam e i ssu es

58

58

60

67

67

70

70

71

74

74

Protectionist tendencies of

national governments

Lack of stability in capital markets

Shift in consumer spending and

behaviours

High or volatile energy costs

Continued slow or negative growth

in developed economies

Increasing tax burden

Government response to fiscal

deficit and debt burden

Exchange rate volatility

High and volatile raw materials

prices

Over-regulation

Consumer

56

57

58

63

64

64

68

69

74

76

Slowdown in high-growth markets

High or volatile energy costs

Availability of key skills

Continued slow or negative growth

in developed economies

Shift in consumer spending and

behaviours

Exchange rate volatility

High and volatile raw materials

prices

Over-regulation

Government response to fiscal

deficit and debt burden

Increasing tax burden

Retail%

Q: How concerned are you, if at all, about each of the following threats to

your growth prospects? Top ten choices listed

Base: All respondents (Total sample, 1344; Consumer goods, 199; Retail, 145)

Note: Respondents who stated extremely or somewhat concerned.

Source: PwC 17th Annual Global CEO Survey 2014


%


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43%

45%

19%

23%

Slowdown

in high-

growth

markets

M a t u r e m a r k et s a r e a g r ea t er ca u se f o r co n cer n

Ret a i l a n d co n s um er

goods CEOs a r e m o r e

m o r e w o r r i ed a b ou t

sl u g g i sh g r ow t h i n

devel op ed econom ies

t h a n a b ou t a sl o w d ow ni n h i g h -g r o w t h

m a r ke t s t h a t d i f f er s

f r om t h e o v er a l l

sam p le , w he r e CEOs

w o r r y n ea r l y eq u a l l y

a b o u t b o t h .47%

43%

9%

15%

Somewhat concerned Extremely concerned

Slow or

negative

growth in the

developedeconomies

Base: All respondents (Total sample, 1344; Consumer goods, 199; Retail, 145)

Source: PwC 17thAnnual Global CEO Survey

Q: How concerned are you, if at all, about each of t he following threats to your

growth prospects?

Consumer goods

Retail

Retail

Consumer goods



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W o r r i es a b ou t r a w m a t er i a l s p r i ces a r e l oom i n g

High and volatile raw materials prices are an issue

Nearly three-quarters of consumer goods CEOs and almostas many retail CEOs say they are somewhat or extremelyconcerned that a rise in those raw materials prices couldslow down growth. Thats far more than the total number

of CEOs in the sample who worry about the same thing.

More than two-thirds of consumer goods CEOs worryabout high or volatile energy costs too, although just 57%of retail CEOs say they are concerned.

Last year, 72% of consumer goods CEOs and 52% of retailCEOs were concerned about energy and raw material costs.

Consumergoods

74%

Retail

68%

Overall sample

55%



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The g l o ba l r e-b a l a n ci n g a ct



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Ret a i l a n d con su m er g ood s CEOs a r e expan d i n g i n

g r ow t h m a r k et s a n d d ev el o p ed m a r k et s a l i k e

Retail CEOs planning deals are

looking most often at WesternEurope

26%

W est er n Eu r o p e st i l l

h o l d i n g o n

Around a quarter of retailCEOs planningtransactions have their

eyes on Western Europe,making it their top dealdestination. That numberdrops to 21% for consumergoods CEOs.

No r t h Am er i ca a n d

Sou t h -E a st A si a r a n k

h i g h t o o

For consumer goods CEOs,Western Europe ties with

North America and South-East Asia as the mostimportant deal region,(21% each), followedclosely by Africa, with 18%.

Consumer goods CEOsexpecting transactions rateAfrica #4

18%

Retail and consumer goodsCEOs who rate China as onetheir top growth markets

34%

Ch i na i s t he st r o ng est

g r o w t h m a r k et ov er

t h e nex t 12 m on t h s

More than a third ofconsumer goods CEOs and

around a quarter of retailCEOs rank it in their topthree growth markets. Butfor both sectors, the USA isnext on the list.



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Ret a i l a n d con su m er goods CEOs ha ve a l o n g l i st

o f g r ow t h m a r k et s b ey o n d t h e BR I CS

The BRICS are important to retail andconsumer goods companies, but so are awhole host of other countries, fromtraditional consumer powerhouses likethe USA, Germany and the UK to a widerange of growth markets in Asia, Africa,and Latin America.

2

2

3

3

3

3

3

4

9

6

8

14

8

21

6

6

6

6

7

7

8

8

8

9

10

12

13

25

Thailand

Turkey

Korea

Nigeria

Vietnam

Colombia

Canada

Japan

UK

Other Africa

Mexico

Germany

Indonesia

USA

Consumergoods

Retail

Base: All respondents (Total sample, 1344 ; Consumer goods, 199; Retail, 145)


All countries with more than 5% from retail or consumer CEOs listed. Other Africa included

responses naming Zimbabwe, Morocco, Ethiopia, Uganda, Kenya, Zambia and Egypt.


Q: Thinking specifically about high gro wth markets beyond

the BRICs, which three markets excluding Brazil, Russia,

India, China and South Africa do you consi der most important

for your g rowth prosp ects over the next 3 to 5 years?


%


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Cost r ed u ct i o n i s t h e t o p t y p e o f r est r u c t u r i n g , a n d

ou t so u r ci n g st i l l b ea t s o u t i n so u r ci n g

6

8

12

18

19

29

39

58

8

12

17

18

19

23

32

65

End an existing strategic alliance or jointventure

Sell majority interest in a business or exited asignificant market

Insource a previously outsourced businessprocess or function

Complete a cross-border M&A

Complete a domestic M&A

Outsource a business process or function

Enter into a new strategic alliance or jointventure

Implement a cost-reduction initiative

Consumergoods

Retail

Q: Which, if any, of the follow ing

restructuring activities do you plan

to initiate in the coming tw elve

months?

Base: All respondents (Retail, 145; Consumer goods,199)



%


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On l y a r o u n d a q u a r t er o f co n sum er g o o d s CEOs

a r e a l r ea d y ch a n g i n g t h ei r d ea l st r a t eg i es

Most retail andconsumer goods CEOssee a need to changetheir strategies aroundM&A, joint ventures, or

strategic alliances, butrelatively few havegotten started. Just 24%of consumer goodsCEOs say a changeprogramme is underway

or completed. Thats stillslightly more than theoverall sample (17%) ortheir retail peers (18%).

16%

12%

21%

18%

21%

21%

18%

24%

Recognise need to change

Developing strategy to change

Concrete plans to implement change programmes

Change programme underway or completed

19%

A c t i o n

Base: All respondents (Total sample, 1344; Consumer goods, 199); Retail, 144)


Consumer

goods

Retail

Q: In order to capitalise on the two-three global trends which you believe will most

transform your business over the five years, to what extent are you currently

making changes, if any, in the fo llowing areas? (M&A, joint ventures or strategic

alliances ).

No need

to change

18%

A s p i r a t i o n



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T r a n sf o r m i n g bu si n ess



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Tech n o l o g i ca l a d v a n ces w i l l t r a n sf o r m r et a i l a n d

con su m er good s bu si n esses t h e m ost

Eighty percent of retail CEOs said thattechnological advances is the global trendthat will most transform their businessesover the next five years,with demographicshifts a distant second.

As for consumer goods CEOs, 67% alsochose technological advances.

34%

51%

59%

55%

80%

43%

59%

61%

57%

67%

Consumer goods Retai l

Technological advances

Demographic shifts

Shift in global economic power

Resource scarcity & climate change

Urbanisation

Q: Which of the followin g global trends do you

believe will transform your bu siness the most over

the next five years? (CEOs ranking #1, #2 or #3)



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Reta i l CEOs see ch an ges ah ead i n m ost a r eas , w i t h

t ech n o l o g y i n v estm en t s t o p p i n g t h e l i st

Q: To what extent are you currently making changes, if any, in the following areas?

Base: All respondents (Retail, 145)

Note: Dont know/refused not shown.


50

29

23

19

19

15

1212

12

10

10

10

8

26

38

39

51

58

56

5457

50

60

51

59

57

21

26

34

26

18

22

3229

35

29

38

29

31

60% 40% 20% 0% 20% 40% 60% 80%

Location of key operations or headquarters

Investment in production capacity

Corporate governance

Approach to managing risk

M&A, joint ventures or strategic alliances

R&D and innovation capacity

Supply chainChannels to market

Organisational structure/design

Use and management of data and data analytics

Customer growth and retention strategies

Talent strategies

Technology investments

No need to change Recognise need/developing strategy/concrete plans to change Change programme underway or completed

A s p i r a t i o n A c t i o n



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Con su m er goods CEOs a r e r esh ap i n g t h ei r

o r g a n i sa t i o n s; cu st om er s a n d d a t a a r e t o p p r i o r i t i es

Q: To what extent are you currently making changes, if any, in the fol lowing areas?

Base: All respondents (Consumer goods, 199)

Note: Dont know/refused not shown.


44

23

18

15

14

14

12

11

11

9

9

7

6

35

44

51

50

45

60

57

49

55

55

53

52

57

20

32

24

34

38

25

30

39

33

35

37

41

36

60% 40% 20% 0% 20% 40% 60% 80%

Location of key operations or headquarters

Corporate governance

M&A, joint ventures or strategic alliances

Supply chain

Investment in production capacity

Approach to managing risk

Channels to marketOrganisational structure/design

R&D and innovation capacity

Technology investments

Talent strategies

Customer growth and retention strategies

Use and management of data and data analytics

No need to change Recognise need/developing strategy/concrete plans to change Change programme underway or completed

A s p i r a t i o n A c t i o n



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A s f a st er eco nom i c g r ow t h sh i f t s t o

p l a c es i n A f r i c a , ac r o ss As i a , an d La t i n

Am er i c a , c onsum er g oods comp an i e s

h a v e t o a d a p t w i t h t h e r i g h t p r o d u ct s i n

t h e r i g h t s t o r e s a t t h e r i g h t p r i c es a t t h e

r i g h t t im e t o m eet t h e need s o f n ew

consum er s.

Muhtar Kent, Chairman and Chief ExecutiveOfficer, The Coca-Cola Company

Consu m er g ood s CEOs on t r a n sf o r m a t i v e t r en d s

It is a fact that consumer behaviourand spending patterns havechanged. It is paramount forretailers to take heed of consumerschanging behaviours and identifyways to meet their needs.

CHEN Long, Chairman, China

Resources Enterprise, Limited

The cost s fo r acqu i r i n g I CT

a n d i n f o rm a t i o n h a v e fa l l en

t o i n c r ed i b l y l ow l eve l s an d

w hoev er t a k es ad v an t a g e o f

i n f or m a t i o n i n n o va t i o n w i l l

w i n i n t h e ma r k et p l a ce.

Shigetaka Komori, Chairman andChief Executive Officer, FUJIFILMHoldings Corporation



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Ret a i l com pan i es m ay n eed t o ca t c h u p t o

co n sum er g o o d s com pan i es o n i n n o v a t i o n

Consumer goods CEOs in particular are placing their bets onproduct and service innovation 40% see it as their main routeto growth. For retail CEOs it comes in second, with 30% rating ittheir main opportunity to grow their business (after increasedshare in existing markets).

Retail and consumer goods CEOs are relatively confident in theirability to keep up with a changing world. Just 34% of consumergoods CEOs and 38% of retail CEOs are concerned about thespeed of technological change fewer than across the overallsample (47%).

Consumer goods CEOs are also somewhat more likely to believethat their R&D department is ready to cope. Thirty-five percent

say its well prepared, compared to 28% overall and 19% of retailCEOs.

In other research, weve foundthat the most successful CEOsare doing three things toindustrialise innovation i.e.,to make it repeatable,

dependable and scalable.Theyre focusing onbreakthrough innovation in allits forms; putting disciplinedinnovation techniques in place;and collaborating much moreactively.



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Po i sed t o ch an ge t a l en t s t r a t eg i es

Retail and consumer goodsCEOs agree theyll need tochange their talentstrategies to cope withfuture trends likedemographic changes andurbanisation.

Only a minority are alreadydoing so, althoughconsumer goods companiesare slightly ahead ofretailers in this area.

12%

11%

23%

18%

23%

25%

29%

37%





10 %

A c t i o n

Base: All respondents (Consumer goods, 199; Retail, 145)


Consumer

goods

Retail


transform your business over the five years, to w hat extent are you currently

making changes, if any, in the following areas? (talent strategies ).

No need

to change

9%

A s p i r a t i o n



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Bu t t h er e i s w o r k t o d o t o g et r ea d y

Less than 40% of retail andconsumer goods CEOs think theirHR departments are well preparedto execute on plans to capitalise ontransformative global trends.

Consum er goods

37%

Base: All respondents (Consumer goods, 199; Retail, 145)


Well prepared

Somewhat prepared, notprepared, dont know or

refused

Re t a i l

35%

Q: Thinking about the changes you are making to capitalise on transformativeglobal trends, to what degree are the following areas of your organization

prepared to make these changes? HR



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T r a n sf or m a t i o n a l so m ea n s i m p r o v i n g su p p l y

cha i n s

Around half of both retailand consumer goods CEOsworry that supply chaindisruption could threatengrowth.

What are they doing aboutit? Most see a need to makechanges to their supplychains, and around a thirdhave already gotten started.

9%

8%

21%

18%

23%

24%

32%

34%





12%

A c t i o n

Base: All respondents (Consumer goods, 199 ; Retail, 145)


Consumer

goods

Retail


transform your business over the five years, to what extent are you currently

making changes, if any, in the following areas? (supply chain).

No need

to change

15%

A s p i r a t i o n



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An d r et a i l a n d con su m er goods CEOs a r e

a l r ea d y g et t i n g p r ep a r ed

Only a tiny minority of retail andconsumer goods CEOs think theirprocurement and sourcingfunctions arent prepared at all tocope with transformative change.

Consumer goods CEOs inparticular are more confidenttheyre ahead of the curve in thisarea 45% say their departmentsare well prepared, compared to33% overall and 40% of their retailpeers.

Consum er goods

45%

Base: All respondents (Consumer goods, 199; Retail, 145)goods,


Well prepared

Somewhat prepared, notprepared, dont know orrefused

Re t a i l

40%

Q: Thinking about t he changes you are making to capitaliseon transformative global trends, to what degree are the

following areas of your organisation prepared to make these

changes? Procurement and sourc ing



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Ab ou t Pw Cs 17t hAn n u a l G l ob a l CEO Su r v ey

In Fit for the future: Capitalising on

global trends, we also explore threeforces that business leaders think willtransform their businesses in the nextfive years: technological advances,demographic changes and globaleconomic shifts. We show how thesetrends, and more importantly theinterplay between them, are creatingmany new but challenging

opportunities for growth throughcreating value in totally new ways;developing tomorrows workforce;and serving the new consumers.

We also show how, in responding tothese trends, CEOs have theopportunity to help solve importantsocial problems.

In short, the demands being placed on

business leaders to adapt to thechanging environment are increasingexponentially; CEOs are having tobecome hybrid leaders who cansuccessfully run the business of todaywhile creating the business oftomorrow.

This sector key findings report takes acloser look at responses from retail

and consumer goods CEOs. It is basedon 344 interviews with 145 retailCEOs and 199 consumer goods CEOsin 55 countries. We also cite more in-depth conversations with four sectorCEOs.

Retail and consumer

goods respondents

344In countries across theworld 55

We surveyed 1,344 business leaders

across 68 countries in the last quarterof 2013, and conducted further in-depth interviews with 34 CEOs.

Our overall survey sees a leap in CEOsconfidence in the global economy but caution as to whether this willtranslate into better prospects fortheir own companies. The search forgrowth is getting more and more

complicated, as opportunities in bothdeveloped and emerging economiesbecome more nuanced, leading CEOsto revise the portfolio of overseasmarkets on which theyll focus.



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Con t a ct s a n d a c k n ow l ed gem en t s

Acknowledgements

Our thanks to the following CEOs who are quoted in this document:

Jan Johansson, CEO, Svenska Cellulosa AB (SCA)

Muhtar Kent, Chairman and Chief Executive Officer, The Coca-Cola Company

CHEN Long, Chairman, China Resources Enterprise, Limited

Shigetaka Komori, Chairman and Chief Executive Officer, FUJIFILMHoldings Corporation

J o h n M a x w e l l

Global Retail & Consumer Leader+1 646 471-3728

[email protected]

Download the main report, accessthe results and explore the CEOinterviews from our 17th AnnualGlobal CEO Survey online atwww.pwc.com/ceosurvey

Cl i c k h er e t o ex p l o r e se ct o r da t a on l i n e

Cl i c k he r e t o v i s i t pw c .c om / r et a i l

27February 201417th Annual Global CEO Survey Key findings in the retail and consumer industry
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