Through a special arrangement, presented here for discussion is a summary of a current article from the monthly e-zine, CPGmatters.
The rise of pure-play retailers and manufacturers selling brands directly to consumers is threatening the traditional go-to-market success of CPG vendors.
“At the heart of this disruption, there is a new consumer-centric paradigm that’s challenging completely the cost-of-goods scale and the value scale as we know it,” Jorge Mesquita, EVP, worldwide chairman, consumer, Johnson and Johnson, recently said at Barclays Global Consumer Staples Conference in Boston.
“New companies can now sell directly to consumers profitably in most markets,” he explained. “Innovation used to also be a big barrier for entry, but again you have an ability now through a network of external partnerships to access innovation, even crowd sourcing. And then financial firepower for companies like J&J is not as critical as it used to be because new start-up entrants can access capital relatively easy through VCs.”
He listed five principles that J&J will follow to compete:
- Broaden the scope of the innovation model. “We need to take our best technologies and roll them out across the world.”
- Build brands ambidextrously: “We’ve got to make them intensively locally relevant, one market at a time.”
- Win traditional and emerging channels: “We have a very large driving business in our core FDM category. So, you have Walmart, Target, Kroger, CVS, Walgreens. And that’s a business we’re committing to continue to grow. But in the last few years, we see at both ends of the spectrum very fast-growing channels. E-commerce, of course, led by Amazon at one end, but perhaps another channel that is growing equally fast in a perhaps less heralded way is the discounted channel with companies like Lidl and Aldi. And you have to have the capabilities to compete across all of these channels before that actually gets a scale.”
- Keep the pedal to the metal on productivity and cost agenda: “Over the last two years, we’ve taken well over $1 billion out of our cost structure through strategic pricing or revenue growth management.”
- Evolve work processes and culture: “We should be organized as a big multinational company to compete with the small players and the large ones.”