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During the chaos of the pandemic, CPG companies often found themselves reacting to external forces because they did not have time to pause and rethink their strategy. In fact, execution became their strategy.

Pandemic-induced disruption has pushed CPG companies deeper into reactionary mode, when they should be setting their own agenda to lead. Going forward, they need to balance long- and short-term perspectives while leading with strategy. It’s time to reclaim the strategic high ground.

Customers, investors, regulators and employees are increasingly demanding environmental, social and governance (ESG) values in action. As CPG companies navigate this new reality—compounded by the pandemic and evolving supply chain issues—they should:

• Recognize the importance of crafting a strategy specific to their individual company’s needs.
• Start with a clear-eyed view of the cost-benefit ratio of a robust ESG program.
• Communicate ESG goals transparently to suppliers.
• Glean verifiable data from their own and supplier sources.
• Start small and build on successes.

For CPG companies, the path ahead is tech-enabled: They need to be more proactive about deploying technology across the board, from innovative technology-enabled packaging solutions to automated collection and reporting of ESG data. Meanwhile, the bar for ESG continues to rise as investor-grade ESG reporting is expected to be an SEC requirement by 2023.

We already know that customers are more likely to buy products and services from companies that illustrate ESG values. While CPG companies are beginning to address the issue, they are well-advised to take the long view: Devise a robust strategy that flips the challenge of ESG into an opportunity to create value for all stakeholders.

In an age when retailers are gaining greater control of consumer relationships via digital channels that provide omnichannel interactions and a wealth of direct consumer data, the consumer relationship is at stake for CPG companies. To address the growing sophistication of retailers — and get closer to consumers—CPG companies need to combine the data they collect directly from consumers with third-party data to help drive privileged insights and personalization.

Consumer data offers a trove of insights for consumer engagement while protecting customer privacy. CPG companies are better positioned than ever before to connect directly with consumers, who are eager to hear from brands in a variety of digital channels.

Next-generation consumer engagement also allows brands to personalize products, as L’Oréal has demonstrated. Starting with individual consumer data, the cosmetics company uses automation, collaborative robots, AI and computer vision to produce haircare, skincare and cosmetics products customized to individual needs.

In a fast-changing omnichannel landscape, CPG companies need to prioritize the supply chain as an investment in resilient growth. Many are already:

• Diversifying suppliers and manufacturers across geographies to bolster inventory.
• Keeping tax implications in mind when making changes to their global supply chain while optimizing tax benefits.
• Designing and implementing a connected, autonomous supply chain.
• Gaining greater end-to-end supply chain visibility.
• Analyzing data to drive more responsive supply chains.

Concepts of supply chain value continue to evolve. Explosive demand for omnichannel experiences offering convenience and variety, coupled with unprecedented supply constraints and labor volatility have added complexity to how CPG companies serve both retail customers and ultimate consumers.

Today, the supply chain is often the last function to interact with the consumer in an omnichannel environment. At large retailers, teams that support physical and digital channels continue to integrate with the goal of providing consumers with a seamless omnichannel experience. CPG companies will need to do the same; leading companies are already making progress.

For example, a luxury apparel and accessories manufacturer achieved 400% to 500% e-commerce growth during the pandemic—which exacerbated both human and system errors across order management, inventory and warehouse management and transportation. The company overhauled key processes and systems to enable end-to-end supply chain visibility at scale while digital tools helped increase efficiency and reduce errors.

Changing consumer preferences and behaviors, accelerated by the pandemic, continue to render current operating models obsolete in an omnichannel consumer environment. CPG companies need to rethink their commercial operating models for sales, marketing, innovation and new product development—with a view to meeting consumers in the channels they prefer.

For example:

• Should a CPG company have an Instacart account team within the overall sales team?
• How should media planning and buying change to accommodate increasingly demanding retailers and digital marketing platforms?
• How best should a CPG company go about building an omnichannel account team, now that retailers are starting to integrate digital and physical operations?

CPG companies have been slow to respond to these changes, causing friction and impeding organizational agility. Preparing the organization for an omnichannel world should be a priority.

Buffeted by economic forces over the last several decades, many CPG companies have adopted a continuing cost-reduction mindset. This approach is not sustainable.

The next wave of cost reduction required to unlock value will likely hinge on digital transformation, enabled by a systematic, factory-like approach that produces products, a reimagined experience, streamlined ways of working and enhanced productivity. This type of holistic transformation employs new ways of working to enable real and accelerated impact: a production hub—complete with playbook—as well as standard tools and repeatable solutions to build, automate and optimize processes.

At a global CPG company, PwC built a bespoke digital hub: an end-to-end ecosystem of experience, design, development and service teams to identify opportunities, design products and reconstruct the value chain for various front-, middle- and back-office functions. The change management component accelerated digital adoption among customers and employees. Outcomes included increased headcount efficiency, streamlined processes and an uptick in revenue.