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Eleven risks for consumer products companies - 1. Consumer dynamics and demographic shifts - EY - Global

Eleven risks for consumer products companies

1. Consumer dynamics and demographic shifts

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"If you are a strong global player now, will you continue to be if you don't have a presence in emerging markets?"
Andrew Cosgrove, Lead Analysis, Consumer Products, EY, LLP

Consumer products companies rank the potential negative impact of adverse consumer dynamics and demographic shifts as the most important risks they face.

Growth in mature markets is difficult

We're likely to see mature market consumers continue to rein-in their spending for the foreseeable future.

How can consumer products companies combat this recession-related stagnation? By pursuing volume in fast growing emerging markets.

Indeed, a focus on emerging markets is becoming a necessity rather than merely a source of additional growth.

If companies are going to participate in emerging markets with mass market products they can't simply roll out existing strategies. Competitive products need to be:

  • Relevant
  • Affordable
  • Easy to buy

Historic norms are coming under threat

As Bill Johnson, Chairman, President and CEO of Heinz has pointed out: "To say that consumers will return to historic norms is disingenuous."1

While in the depths of the recession, the consumer's dominant focus was on price. But perceptions of value are now broadening to encompass additional factors.

Companies need to reassure consumers they are "getting their money's worth."

Companies are sharpening segment and customer analysis

High-performing consumer products companies are tailoring their products to the needs of different segments. Price is a factor in segmentation, but there are other factors, too.

The benefits of knowing these segments include:

  • Aligning brands more closely with segments
  • Convincing retailers to collaborate to drive category growth

Leveraging opportunities in the demographic split

It's important to consider the nuances of the developed/developing world demographic split to take advantage of the youth market and the "graying" market.

In developed countries, the median age is rising, whereas in developing countries, the median age is falling.

Companies must think about building new product portfolios to satisfy these new demographic needs. They must also tailor marketing messages and packaging. For example, packaging aimed at older consumers should be easier to open.

Acting early on these shifting demographics can bring significant growth opportunities for your company.

1"Heinz CEO sees changed consumer habits," Reuters News, 21 December 2009, via Dow Jones Factiva, (c) 2009 Reuters Limited. .

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