The Winner-Take-All Digital World for CPG

The Winner-Take-All Digital World for CPG

          
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The Winner-Take-All Digital World for CPG

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  • Many companies do not realize it yet, but the consumer packaged goods (CPG) industry is facing a winner-take-all world. A world in which about half of all growth is online (more in certain categories and markets), brick-and-mortar market share and shelf-space prominence do not translate into digital sales, and nimble new competitors with disruptive strategies (as well as a few established players) stake out leadership positions and are then hard to dislodge. A world in which long-standing retail relationships are upended and new retail sales models take hold. In which companies have to earn their market positions with very different approaches and skills.

    In this rapidly transforming world, the difference between winning and losing for a $10 billion company with a 30% brick-and-mortar market share could reasonably reach $1.65 billion—approaching 20% of sales. (See Exhibit 1.) A winner-take-all world.

    exhibit

    In 2014, BCG published a report about how CPG companies needed to plan for a “1-5-10” market in the US over the subsequent five years. (See “About This Report.”) In this market, the 1% penetration rate of e-commerce will most likely expand to 5% but could quickly accelerate to 10%—or even more in certain categories and locations. The most likely sector-wide scenario is for e-commerce in the US to average 5% of the mix by 2018, or some $36 billion in annual sales, which would represent about half of total expected CPG sector growth. (See Exhibit 2.) As a result, companies without effective digital capabilities risk stagnation, share loss, or, in some categories, shrinking sales. At 10% penetration it’s an entirely new paradigm. A little more than one year after that report, not only is the industry well on track, but penetration is accelerating.

    exhibit

    ABOUT THIS REPORT

    This report is the first in a series of publications to be produced in the coming months by BCG and the Grocery Manufacturers Association (GMA) on the winner-take-all world in consumer packaged goods (CPG). The series builds on the work done for the report The Digital Future: A Game Plan for Consumer Packaged Goods, produced by BCG, the GMA, Google, and IRI (August 2014). The series will look in-depth at the coming changes in the consumer goods sector and present potential strategies in multiple areas that CPG companies can pursue in response. These areas are gaining “digital shelf space” prominence; winning with Amazon; developing the capabilities for click and collect; mastering other new retail models; and leadership in the digital age. The series is based on research conducted collaboratively by BCG and the GMA as well as BCG client experience. The results have been discussed with executives from GMA member companies, but BCG is wholly responsible for all analyses, conclusions, and recommendations.

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