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.
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.