Our annual analysis of the financial performance of more than 100 consumer packaged goods (CPG) companies benchmarks metrics such as growth, returns, income, liquidity, shareholder return, and balance sheet results. We uncovered five key themes common to top performers in our analysis. These themes represent a combination of leading practices and aspirational approaches that high performers are planning and implementing.
As external forces—such as technology, globalization, changing tastes, resource scarcity, and urbanization—continue to disrupt both process and product at CPG companies, many are realigning internal resources to combat these external forces of disruption.
From strategy to execution, CPG companies that build a collaborative workforce across disciplines are breaking down silos to build powerful capabilities across the enterprise, leveraging organizational change to become more agile and adaptive.
How well a company harnesses and profits from technology — its digital IQ — can be elusive to measure. In fact, the past few years have shown that fewer companies are now convinced of their ability to track digital value. In our 2017 Digital IQ Survey, slightly more than half of the companies surveyed—52%—rated their digital IQ as strong; in our two previous surveys, almost two thirds of companies did.
In today’s “I want it now” world, customers have quickly become accustomed to a dizzying array of products via their channel of choice. In fact, CEOs have told us that customers far and away represent the most disruptive force to business today.
CEOs at CPG companies told us innovation is essential for growth. Over the past few years, however, many CPG companies have emulated the best of investor 3G Capital’s cost-cutting practices—from zero-based budgeting (ZBB), with its unflinching focus on justifying every expense, to shuttering laggard facilities—in an effort to get ahead of industry-wide austerity measures. With already-slim margins and uneven growth in a world of fluctuating consumer tastes, this focus on cutting costs could dampen innovation.
PwC analysis of 115 CPG megadeals (valued at $3 billion or more) between January 2011 and October 2016 found that 16 of the 20 largest exceeded $10 billion, while six exceeded $20 billion. Between January 2014 and October 2016, the average megadeal size more than tripled, from about $4 billion to more than $14 billion.
This dramatic rise in deal value comes as the number of megadeals remains fairly constant year to year. The increasing number of high-value deals, the majority of which target aggressive cost-cutting, means even the largest CPG companies may well be takeover targets, as the past year has shown.