As sales growth in the consumer packaged goods market has declined to 3.4 percent (nearly half of what it was five years ago), large companies have been looking to mergers and acquisitions as their primary source of revenue growth, while overlooking the massive opportunity to digitize their physical products at scale to drive innovation and transformation.
Buying Innovation and Growth
Despite overall industry growth, large CPG firms are growing slower than the industry as a whole. Instead, the CPG industry is being led by smaller companies, with whom bigger brands are struggling to compete. Between 2011 and 2015, $18 billion in market share shifted away from large CPG companies to smaller industry players, and in 2015, 90 percent of the top 100 CPG brands lost market share. In that same year, mergers and acquisitions by the top 50 global consumer goods companies totaled $226 billion (more than the previous four years combined). Attempting to accelerate growth, many large companies are looking at mergers and acquisitions, paying top dollar for disruptive startups making an impressive splash in the CPG market. Instead of allocating more budget to innovation and research, many of the established companies are essentially buying their way to innovation by swallowing their smaller counterpart or investing in startups like meal-kit delivery services.
Getting Ahead of Disruption with Product Digitization
While M&A and VC investment offer a short-term gain for CPG companies, neither are a wise long-term growth strategy. Indeed, the speed at which a company’s core business degenerates will not be offset by investment or acquisition. In addition to investment and M&A, CPG should leverage their existing businesses to grow organically, enhance profitability and counteract the disruptors that are after their market share. In order to get ahead of disruption, consumer packaged goods companies should consider a massive, overlooked opportunity to digitally transform the very core of their business: their products.
The biggest lever big CPG brands have at their disposal is the sheer number of products they put into the market every day. It’s one of the major advantages these established companies have over the upstarts, and one they’ve yet to fully leverage. By bringing digital intelligence to their mass product offerings, consumer goods companies can enable their products to do more for them–unlocking new value throughout their lifecycle, both in the supply chain and in their sales and marketing efforts, to drive innovation and transformation.
When a product is given digital intelligence, it becomes more valuable to companies and consumers alike. A smart product is in a constant state of capturing and sharing data throughout its lifecycle. It is able to tell all end-users throughout its journey where it is, where it’s been, what it’s made from and who’s using it. It can be a direct channel for commerce and customer relationships, unlock new revenue models and drive operational efficiencies.
EVRYTHNG plays a role in the product digitization that is available today, helping consumer goods brands transform their physical products into smart, digital assets at scale, thanks to our strategic partnerships at the root of the supply chain with global packaging leaders. Through smart products and smart packaging technology, companies can trigger real-time applications such as direct-to-consumer, product authenticity and supply chain traceability.
Product digitization is a unique, transformative muscle that consumer goods companies can flex against the competition to continuously adapt in a rapidly changing business landscape. Since 2000, fifty-two percent of the companies in the Fortune 500 have disappeared; in the next ten years, forty percent of today’s Fortune 500 companies will face a similar fate.
History has taught us: It’s the businesses that constantly reinvent themselves that survive. And product digitization is the next big reinvention catalyst for consumer goods companies.
It is the art of the possible—at scale.