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Why the CPG Company of the Future Runs on (high-quality) Data

Penelope Stockinger

By Penelope Stockinger

On September 27, 2018

The Consumer Packaged Goods (CPG) Industry faces an array of challenges and players will need to embrace new resources to stay competitive in the long run.  Digitally savvy customers are demanding more transparency, authentic brand connections and seamless purchasing experiences.  The market situation has provided an excellent opportunity for smaller brands, such as Warby Parker or Dollar Shave Club, which cater to the needs of today’s customers and are viewed as trendier and more trustworthy than their larger counterparts. Larger retailers, themselves feeling the pressure of the digital economy and other market forces have focused on reducing costs to increase profits, but this alone is not enough. To truly thrive in today’s environment, CPG brands will want to focus on investing in cultivating and utilizing customer and product data as well as growing their broader digital presence.

Trends in CPG – Three major trends are driving the largest changes in the CPG market:

1 – Consumers are more digital and more demanding than ever before

E-commerce has become the main accelerator driving growth in CPG companies, with verticals like beauty, pet-care and healthcare showing the fastest growthBy 2020, 10% of all CPG sales are expected to take place online and this year 90% of fast-moving consumer goods (FMCG) growth came from digital channels. Along with the ease of online ordering, which is becoming increasingly effortless due to subscription services like Amazon Dash, the internet has also impacted CPG consumption by empowering more informed and demanding consumers. Digital research already impacts over half of in-store spending and that figure will only continue to rise. CPG customers also look to purchase from value-oriented businesses, with 66% of customers saying they are willing to pay more for sustainable brands. A whopping 71% demand that businesses provide greater transparency, wanting simpler products with recognizable ingredients.

2 – Smaller startups are biting into the market share of larger CPG brands

Along with increasing demands from the digital customer, larger CPG brands are losing their market share to small, internet-based startups. With only 23% of consumers saying they have a relationship with a brand and 77% saying they switch brands faster today than they did three years ago, large CPG brands cannot be complacent about their traditional market dominance. Small digital startups such as BirchBox, Harry’s and The Honest Company are displacing larger CPG brands. The agility and digital savvy of such businesses enables them to build brand recognition without requiring physical shelf-space at large brick and mortar retailers. This allows smaller companies to bypass the middleman by going direct to the consumer. While larger CPG brands can attempt to stay in the game by acquiring their smaller rivals, in the long run large-scale change is necessary for them to stay truly relevant. For large CPG corporations, growth will result from embracing digital transformation and incorporating direct-to-consumer strategies into their own business models.

3 – The balance of power has shifted

Along with the challenges of rising competitors and demanding consumers, CPG manufacturers are losing power to the retailers. As retailers are themselves squeezed by the need to lower prices to compete with discount and e-commerce channels, they pass additional costs and more labor-intensive tasks on to the manufacturers. Reduced profit margins are leading retailers to negotiate more aggressively with manufacturers while also expanding their own private-label lines at the expense of many CPG companies. Additionally, larger CPG brands are at a disadvantage when negotiating with retailers, while retailers used to rely on CPG companies for valuable customer data, today they can gather this data themselves. As a result, CPG companies have lost a large piece of the added value they used to offer retailers.

 

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Master Data Management for Consumer Packaged Goods

Why CPG brands need an MDM Solution

Along with these three market challenges, CPG brands are struggling to cope with the immense growth in data volume, variety and velocity and to use it effectively. In 2025, the world is predicted to create 180 zettabytes of data, in comparison with 2.7 zettabytes in 2017. 80% of that enterprise data is said to be unstructured, making it harder to process and use effectively. Along with these difficulties, data is mounting up at unprecedented speeds. Every 60 seconds, 5.5 million Google searches are processed and 510,000 Facebook comments, 300,000 Facebook statuses and 136,000 Facebook photos are added.

 

The result is that the average company is storing more data than ever before – at least 100,000 gigabytes – while also becoming less capable of making use of it. 1 in 3 business leaders do not trust the data they use to make business decisions. Integrating and harmonizing data across many sources is challenging and product information from partners and internal systems may be incomplete, non-standardized or rendered unreliable in some way, making it almost impossible to obtain clean data. Furthermore, siloed and inaccessible data prevents internal teams and external partners from accessing the timely, relevant and accurate information they need to make business decisions and better understand their consumers.

 

This is where a Master Data Manager (MDM) solution steps in. An MDM solution is a centralized and accessible data repository that enables CPG companies to feel confident about the accuracy of the data they share. With an MDM, CPG companies can harmonize data across multiple sources that may have incomplete or non-standardized information, allowing for a more accurate and holistic view of their business. In this way, CPG companies can better understand their consumers, competitors and category trends, which is crucial in an industry where customer intelligence captures market share. Clearer and more holistic insights into the business empower CPG companies to make smarter decisions about issues such as new product introductions, partnerships, pricing and promotions. Using this reliable data, CPG companies can also create and maintain direct-to-customer websites and provide retailers with market-ready content that will help secure preferred vendor status.

How Riversand can help traditional CPG companies by giving them back control of their brands’ data

In the face of the triple challenge of demanding digital consumers, new competitors and a shifting balance of power in the CPG ecosystem, traditional CPG brands need to move quickly to master their data. Riversand is highly equipped to help large CPG brands to leverage data to speed up time to market, reduce errors, improve compliance and make smarter business decisions.

Riversand data management solutions provide CPG companies the ability to regain control of their data and harness it for ongoing success. By processing, consolidating and analyzing data in real time and at high scale, the Riversand MDM solution enables CPG companies to understand consumer needs, create more engaging products and make smarter business decisions now and into the future.

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