Five priorities to help consumer goods companies emerge stronger post-pandemic

Consumer goods companies can create intelligent, nimble business models that respond to both sudden and long-term changes in consumer behavior.

It’s been a year. A year that tested resolve, required resourcefulness, and demanded individual and collective resilience. Societies are eager to find some semblance of stability and begin exploring the rhythms of life and commerce in a post pandemic world. This anticipation creates a window for consumer brands to reframe what comes next. Consumers are changing fast and the consumer industry faces opportunities and challenges that are now coming into clearer focus.

Now as the world starts to emerge on the other side of a global pandemic, what will define the leaders vs. laggards in the consumer goods (CG) sector are those willing to seize those opportunities and re-imagine how they deliver value, responding to both sudden and long-term changes in consumer behavior.

The EY Global Confidence Barometer indicates:

With that thought in mind, here are five immediate priorities emerging as we approach a more digital, consumer focused, value-driven era for the consumer goods industry.

1. Address imbalances between supply and demand 

It’s no secret that an imbalance between supply and demand occurred as a result of COVID-19 and it will continue as consumers adapt to evolving shopping and buying channels. In some areas, demand dropped substantially and virtually overnight; in others, there was a massive boom, and, in most, they shifted online. This left CG companies without a clear demand signal as they scrambled to work with suppliers and retail partners to adapt.

2. Mitigate near-term inflationary pressures  

The same digital tools that can help minimize supply disruption and monitor demand trends should also mitigate near-term inflation threats. In the current environment, scarcity in shipment capacity and parts availability is likely to result in cost increases. When consumers or customers can’t get something they need, they look elsewhere to find it. When they find it, that product suddenly becomes in great demand, and the price goes up. 

Additive to a market of scarce goods is the recent economic stimulus passed by the US government, which injects $1.9 trillion in aid to families and provisional governments. Remembering the deep recession of 2009, government policymakers made the decision to “go big” rather than risk an anemic recovery, resulting in higher inflation risk. 

For consumer goods companies accustomed to a long period of low inflation, the capabilities to mitigate oncoming, inbound cost pressures may be a bit rusty.  We recommend modernizing two practices:  

• Hedging and future commodity price management: Hedging instruments is sometimes seen as a dark art, known by only those who are inducted into the order. Our experience suggests that increased transparency on hedging methods and alignment with finance and supply chain leaders can drive tangible benefits quickly.
• Procurement contract review: Supplier contract adherence to penalties and incentives for pricing continuity and material availability has preserved hard-won margin gains.

The duration and depth of inflation’s power, post pandemic, is under debate. On top of this, we are seeing affordability of consumer goods becoming an increasingly important factor in purchase decisions, reducing elasticity in many consumer segments.

One of the greatest enduring lessons from the pandemic is that companies can get work done far more effectively and efficiently on a virtual basis than they ever envisioned. Post-pandemic strategies for productivity, especially within the Global Business/Shared Services ecosystem, include:

• Accelerating the use of automation and leveraging the full breadth of IT enablers, beyond RPA, to include IA, Analytics and Blockchain (e.g., many companies are now pros at executing a financial close with a virtual workforce) 
• Increasing services scope, both in “newer” areas being supported (e.g., Legal, Sales and Marketing) and additional value to existing processes from a decision support and analytics perspective
• Defining a compelling career path for employees in addition to accessing talent globally in a virtual environment
• Proactively managing your ecosystem of partners, including captive centers, outsourcers, the “retained/local” aspects of processes and IT vendors

However, as you look to become more efficient and drive costs out of the system, there are specific areas to pivot investment. 

4. Modernize logistics  

Automation and end-to-end planning to support real-time demand and increase speed-to-market will be the priorities moving forward. Consumer demand for transparency, availability and delivery will continue to drive the need for agile operating models. In this environment, complexity is the enemy of logistics. 

Driving this complexity are an accelerated shift to e-commerce, which constrains outbound distribution capacity, and higher service levels driven by large retailers, backed by hefty fines and the potential for de-listing.

Responding to these pressures using the existing distribution infrastructure risks significant cost increases. Expedited shipments, labor overtime, expanding workforce and carrier premiums will all contribute to an increasing cost of goods sold. This is especially important, given that many CG companies were able to expand their margins in the last year due to increased throughput — and therefore face tough quarterly comparisons of finance performance post pandemic. Investigate the following tactics:

5. Employ consumer-focused digital, data and analytics 

During the pandemic, many CG companies found renewed purpose in connecting with consumers who had previously interacted with their brands through only retailers. The EY Future Consumer Index suggests that consumers have become more brand conscious and health aware during their pandemic shopping, with a few areas driving motivation (among many others) for CG companies to invest in greater digital engagement capabilities. There is a crucial need to both (a) identify what consumer segments value their brands and (b) understand the right time and the right message to engage along the consumer journey.  

This requires:

Successful CG organizations are transforming culture from “Digital Also” to “Digital First.” It’s now imperative that consumer brands have a much greater digital share of voice with the consumer. The focus should no longer be on simply implementing the packaged good to the best of your ability with your partners. The future of CG go-to-market strategy is about using data to identify the right consumers and then applying digital technologies to meet them at the right place, with the right message at the right time on their journey to help ensure your brand’s value in the lives of your consumer segments.