FOCUS 5
Recently, we have seen some organisations focus exclusively on cost-reduction and managing profi t at the expense of the investment necessary to develop their European business. There is a real danger that Europe will be ignored in favour of more attractive regions, although the continent remains a substantial source of profi t, has a signifi cant talent pool and has driven much innovation historically. We have also seen many corporations responding to these challenges aggressively, as they realise that radical structural and cultural change is required to realign their organisations to this ‘new normal’.
Critical to success in this new reality will be an organisation’s ability to differentiate and unleash resources that can be invested to support the ‘power’ brands that will help win the hearts and minds of consumers and make a difference to the bottom line. To achieve this, organisations must defi ne strategies that enable a better allocation and prioritisation of resources, increase their agility and fully leverage the scale that Europe provides.
Having worked with many of Europe’s leading branded consumer goods organisations in recent years, we’ve identifi ed fi ve areas that CPGs will need to address if they are to win in Europe:
1. Simplify the portfolio EUROPEAN
CONSUMER GOODS COMPANIES WILL
NEED TO MOVE FAST TO STAND STILL. BOLD STRATEGIES ARE GOING TO
BE REQUIRED TO DELIVER THE TOP AND BOTTOM LINE GROWTH THAT AGITATED SHAREHOLDERS DEMAND.
Simon Harden, Director, Strategy Group
The drive to maximise growth (both organic and through M&A) during good times has left organisations with complex and sub-optimal brand portfolios, an infl ated and unmanageable number of SKUs, and supply chain organisations struggling to operate effi ciently in the face of such complexity.
Organisations must take bold steps to simplify their businesses and create a more agile organisation that can respond quickly to the ever-changing dynamics of the European market. They must review their brand and SKU portfolios and, in most cases, radically reduce the number of product variants they manufacture. The obvious and most common approach to this is ‘cutting the tail’, which – although a step in the right direction – is not enough. More important is how organisations ‘manage the middle’ and make the tough decisions around which products they harmonise across category and geographic boundaries to further simplify the portfolio and thus reduce complexity and cost.
Doing this sustainably requires robust processes and regular reviews to monitor and assess the portfolio against the latest market changes and make the tough decisions required to win in the marketplace. In some cases, a reduction of up to 30-50% in the size of the portfolio may be needed. Equally important is managing the input of new innovations. Innovation must remain at the heart of the business, but too often we see organisations compromising thresholds, allowing innovation from too many quarters and thus limiting the resource and backing against the big ideas.
© 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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