7 minute read 28 Jan 2021
Digital strategies for brand revival

How digital transformation can revive consumer companies

By Pinakiranjan Mishra

EY India Consumer Leader; EY EMEIA Consumer Market Segment Leader

Photographer. Traveler.

7 minute read 28 Jan 2021

In the era of ‘new normal’, consumer companies must thrive into the future by adapting new business models to convert challenges into opportunities with speed.

Early lockdown in India helped contain mass transmission of COVID-19 as compared to other nations, however dented economic activity. After facing the immediate brunt of the outbreak, the Indian economy is now showing signs of resilience and recovery. However, it has also enforced consumer products (CP) companies to undergo structural changes and adopt revival strategies for a gradual shift to cautious optimism. The unprecedented nature of disruption has left a lasting impression on both consumer behavior and the business environment. There is a higher focus on health and wellbeing, spiraling adoption of e-commerce, as well as heightened demand for affordable, local, authentic and sustainable products. 

The latest EY study “Reframe your future beyond COVID-19: Revival strategies deployed by Indian consumer brands”, focusses on the need for consumer products (CP) industry to revisit existing business models to withstand future disruptions and boost their digital transformation efforts to simplify operations, increase agility and build consumer intelligence. 

COVID-19 disrupted the consumer products (CP) industry, but it is now showing signs of recovery

Prioritizing health and wellness, locally-made, sustainable and authentic products that have value-for-money

There is a need for consumer brands to focus energies on revival strategies as customer’s lean more towards healthier, locally made, sustainable and authentic products that have value-for-money. Brands need to prune their portfolios, innovate faster and alter communication to cater to changing consumer preferences.

Indian FMCG players have launched 30-50 new products during COVID-19, primarily in health, hygiene and nutrition segments

Companies must also innovate faster and alter communication to cater to changing consumer preference and speed up product development cycle by investing in advanced technologies like predictive modeling, Artificial Intelligence (AI) and 3D printing.

35% will consider authenticity as their #1 priority while shopping five years from now

Supply chains would need to become more resilient to withstand sudden, unplanned disruption

Companies need to build demand response networks to ensure end-to-end visibility, flexibility, speed and effective control. An integrated strong supply chain planning can help companies build demand response networks ensuring end-to-end visibility, flexibility, speed and effective control.

Transitioning from traditional channels

According to the report, channel dynamics would change significantly with exponential growth in online as consumers are likely to shy away from going to stores for a long time. Companies need to bolster direct-to-consumer offering and partner with online platforms to quickly bring their products to consumers.

Build own e-commerce platforms or tie-up with marketplace to ensure product availability during uncertain times

Remote working: A new world of work

Work practices would evolve as remote working becomes more accepted and office arrangements increase their focus on health and safety. Companies need to redesign workspaces and revisit talent management strategies to improve capability and agility. This can be achieved by making use of digital collaboration tools to build an agile remote working model and define new KPIs (like tracking results, not hours) to measure performance, creating new strategic roles by upskilling and hiring people with strong digital acumen to accommodate rise of online engagement and emerging consumer-facing technologies.

Cost and cash controls would need to become more agile to achieve higher financial resilience during disruption

The pandemic has led to high fixed costs along with accumulation of poor performing businesses, high built up of non-essentials inventory and delayed receivables impacting cash conversion cycle and hurting liquidity and inability to estimate enough contingency fund for disruption leading to non-availability of finances for business continuity. As a result, companies need to rationalize cost base and implement cash controls to improve their working capital while also hedging against future risks. There is a need to develop leaner fixed cost structure, revisit variable costs, build a more agile procurement strategy, focus on agile liquidity management and manage cash flow proactively.

Digital transformation would become critical to increase efficiency and innovation

Lack of advanced digital capabilities, non-agile supply chain due to technology gaps, rising cyberattacks and the absence of a dedicated digital control team are restricting companies to adjust and operate at optimal levels during disruptions like COVID-19. There is a need for companies to invest in advanced technologies such as RPA, cloud, IoT, AI and data analytics and boost their digital transformation efforts to simplify operations, increase agility and build consumer intelligence.

Timely transactions would be required to fill capability gaps and divest underperforming businesses

Companies need to explore M&As and divestitures to optimize portfolio, expand presence and gain additional capabilities quickly. The report suggests building partnerships in emerging or adjacent businesses to spur innovation, enter new markets and enrich portfolio mix and divest underperforming assets and non-core businesses to unlock funds for reinvestments.

65% of corporate leaders globally are actively seeking to reshape portfolio for the post-COVID-19 world

After disruption due to the COVID-19 crisis, the consumer products industry is entering an era of the ‘new normal’, hence, thriving into the future will require businesses to convert challenges into opportunities with speed. Building digital capabilities would entail investment in relevant technologies and data analytics to understand consumer sentiments, while also creating demand-responsive supply chains to withstand any future disruption.

Summary

Companies need to boost their digital transformation efforts to simplify operations, increase agility, build consumer intelligence and explore M&As and divestitures to optimize portfolio, expand presence and gain additional capabilities quickly. Companies that want to stay relevant — through the crisis and into the future — must be equally bold about the depth and pace of their own transformation.

About this article

By Pinakiranjan Mishra

EY India Consumer Leader; EY EMEIA Consumer Market Segment Leader

Photographer. Traveler.