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The Emergence of the Chief Growth Officer in Consumer Packaged Goods

 



Methodology

Russell Reynolds Associates analyzed the profile of the CGO in CPG companies today—Colgate-Palmolive, ConAgra Foods, Constellation Brands, Coty, Kellogg Company, Mondelēz and Tyson Foods—in order to understand the rationale behind the creation of this role and what companies were facing at the time. Given this is an emerging role and our sample size, therefore, is limited, our statistics should be interpreted as directional only.

We held conversations with most of these CGOs to get a textured view on challenges they face, what is on their agenda and factors they consider critical to their success.

The Emergence of the Chief Growth Officer in Consumer Packaged Goods

A great deal has been written about the transformation occurring in consumer-facing companies and their quest to remain relevant and provide value to consumers and shareholders. In a sector that continues to revamp and consolidate, CPG companies face myriad trials as they forge ahead: sluggish product categories, rising operating costs, increasingly powerful retailers, digital disruption, activist investors, and highly empowered and segmented consumers with fast-changing tastes and a wide variety of purchasing channels from which to choose.

These challenges require companies to abandon the status quo in order to be more agile and flexible, characteristics not typically associated with the large, complex organizations within the sector. This requires company leadership to adopt a holistic and synergistic point of view—breaking down organizational and functional silos and allocating limited resources to categories and channels with the most market potential. In several cases, these forces have led to the emergence of a new role—the chief growth officer.

A handful of CPG companies have introduced a first generation of chief growth officers, charged with creating new pathways to growth by optimizing limited resources, maximizing impact of investment and keeping an eye on the future. At its core, this role, arguably one of the most powerful in the company after the CEO, ultimately must increase global coordination and ensure that all business units are moving toward the same goal in an organized and meaningful way.

In an attempt to understand this role further, Russell Reynolds Associates set out to answer the following five questions:

  • Why now? What is driving the need for a CGO, and what do companies seek to gain? 

  • Where do CGOs come from? What is their route to the top?

  • How is the CGO positioned within CPG companies?

  • What are the key challenges faced by the CGO?

  • What are the critical success factors and outcomes from implementing this role?

 

Why a Chief Growth Officer?

The days of easy growth in CPG companies are gone. Companies no longer can rely on traditional methods of incremental expansion and innovation—be it a new category, market, acquisition or distribution channel. In today’s market, growth depends on a longer term vision and enterprise-wide execution of strategy. This requires that organizational complexity is not merely minimized but is managed in a comprehensive manner, often challenging the prevailing way of doing things and altering corporate culture. Priorities and mandates on the agenda of the CGO include:

 

Who Is the Chief Growth Officer?

Our analysis of the first generation of chief growth officers suggests they play three critical roles in the organization:

1) The Trusted Advisor and Culture Challenger

Big CPG companies tend to have a strong corporate culture and a fairly static definition of success. While someone with external experience is needed to drive change, internal connections and credibility are essential to get buy-in from key stakeholders and, more broadly, to challenge the existing company culture. Serving as a trusted advisor to the CEO and receiving his or her sponsorship also is critical for credibility and achievement of growth goals. Given the importance of trust, it, perhaps, is not surprising that in this first wave of CGOs, the majority are internal appointments; when an external hire, the appointee often has a significant prior working relationship with the CEO of the company he or she joins.


2) The Accomplished Brand Builder with P&L Experience

Vital to the effectiveness of this role, CGOs must have the marketing and brand building expertise to make the consumer the focal point of the business and the P&L experience that brings credibility and commercial grounding. In our analysis of the current class of CGOs, all have a background in both, as well as experience in other meaningful functions.

 

3) The Internal Connector for External Impact

This role aligns and enables internal capabilities around the pulse of where the market is going and the consumer needs that remain unmet by the product portfolio. As the focus shifts from legacy brands to a seamless consumer experience, CGOs need to break organizational siloes; connect category heads with each other; and ensure that innovation, insights and R&D are informing routes to market and new product development. This connector role particularly is relevant for multi-category CPG companies where each category has a different channel and end consumer.

 

How Is the Chief Growth Officer Positioned at CPG Companies?

By placing the chief growth officer as a direct report to the CEO, CPG organizations are signaling the power of the role and challenging existing structures. While positions reporting into the chief growth officer, like the chief marketing officer, may remain on the executive committee, they no longer are reporting directly to the CEO, indicating a new standard.


Aside from the formal organizational structure illustrated above, the CGO role embodies a few key qualities that distinguish it from category heads. A CGO has: 

A consumer-centric portfolio approach to organic and inorganic growth: The CGO adopts a portfolio-based approach to investment and growth, aligning resources around “big bets”— high-growth categories where the company has low investment. Further, this includes both organic and inorganic growth. Our conversations revealed that while CGOs may not formally oversee M&A, a majority have a strong say in the company’s M&A activity. The CGO funds growth by divesting shrinking or sluggish categories where the company might currently be investing heavily. This optimizes resources and eliminates duplication of efforts within individual brands. It also focuses the company on where the market is going rather than where it has been.

A strategic vision for long-term growth: While category heads focus on short-term revenue targets, a CGO focuses on a three- to five-year strategic growth agenda for the company, often without any direct P&L accountability. It is through internal credibility and influence that the CGO’s vision gets operationalized across categories and geographies.

An end-to-end view of the business: A CGO is responsible for the development and delivery of the strategic plan and needs to ensure that newly built capabilities impact accountability and that disruptive innovation is a precursor to commercialization across the company.

 

What Are the Key Challenges Facing the CGO, and What Are the Factors Critical to Success?

A newly appointed CGO has an uphill task, especially given the existing culture and bureaucracy in large CPG companies. Based on conversations with CGOs, we found the following to be key challenges:

  • Aligning conflicting agendas and increasing cross-category collaboration: One of the first things Mark Clouse did post his appointment as CGO at Mondelēz was to take inventory of initiatives across the company and eliminate repetitive or conflicting ones, which were approximately 20% of the total number. Further, he needed to ensure that the growth agenda was aligned with the cost agenda. Our conversations revealed that CEO sponsorship and internal credibility and influence are critical to a CGO achieving these goals for the company.

  • Evaluating the portfolio based on the demand landscape: Upon his appointment to the CGO role at ConAgra Foods, Darren Serrao set out to analyze where consumer demand is going in the future, assess whether the company was in promising categories, and determine whether it was a good competitor in those categories. Based on this, he moved resources to the most promising categories by freeing up resources being poured into shrinking ones. Our conversations with multiple CGOs highlighted that previous P&L or operational experience is essential to achieving this.

 

What Benefits Does This Role Bring?

In addition to the tremendous benefit of fueling company-level profitable growth in high-potential categories, the creation of the CGO role, along with the structural and cultural shift it brings, leads to a number of added benefits:

Speed: Sally Grimes, CGO at Tyson Foods, attributes agility to less duplication of activities, lower bureaucracy and company-wide sharing of best practices.

Increased impact of investment: For instance, as CGO at Mondelēz, Tim Cofer governs the CGO growth council, sets the agenda and highlights key check points for the regional presidents, category teams and the C-suite, bringing about greater accountability and structure to the growth agenda.

Governance: The CGO brings a higher level of transparency to the company’s operations and agenda due to the breakdown of siloes and the increased level of accountability.

Resilience: Due to the deliberate focus on building long-term capabilities and investing in categories with a high market potential, having a CGO reorients even large companies with high inertia due to legacy brands toward what they need for the future rather than what they have built in the past.

 

Conclusions—Learnings from the First Generation of CGOs

Our conversations highlighted a number of interesting themes, as well as some unanswered questions about the role:

  • Marketing and P&L are both critical experiences on the route to the top, but the CGO is not a glorified CMO: While academy marketing experience is essential, a pure functional specialist is unlikely to succeed in the role. P&L and operational experience were repeatedly cited as vital to a CGO’s success, as what is most often needed is a proven commercial leader with marketing acumen and a strategic mindset.

  • There are differing perspectives on whether a CGO should have direct P&L accountability: A portion of CGOs have dual P&L responsibility with either categories or regions reporting into them and see this as an advantage in operationalizing the growth agenda. However, a majority of CGOs feel that the lack of direct P&L responsibility allows them to build capabilities for the future rather than get caught up in the day-to-day activities of the business.

  • The temporal nature of the role is being acknowledged as a question mark: While there is debate about whether this position is a point-in-time role vs. here to stay, consensus is that the concept of the role and the structure it brings are definitely enduring given macroeconomic realities. CPG companies need to organize around growth opportunities rather than legacy brands or risk becoming irrelevant.

  • The role is a reaction to disruption that’s already happened but also is the cause of further disruption within highly structured companies: Our findings pointed to the CGO role being a vehicle for large CPG companies to win in a disrupted and fast-changing marketplace, but, in addition, the role sets off further internal transformation.

  • The role may be a stepping stone to the CEO position: In many cases, the role is considered a conscious attempt at CEO succession planning. In other cases, the CGO is at the very least a span breaker for the CEO to focus on strategic tasks and a peer to category and regional heads in helping them operationalize a company-level growth agenda.

    

Considering the Chief Growth Officer Role for Your Company

The trend of companies appointing a CGO is on the rise. That said, there still are a number of companies that do not have the role, structure or culture in place and might be considering it. Companies considering the creation of the CGO role should consider the following guidelines:

Does your company culture reflect today’s market reality?

  • Are best practices shared across your company?

  • Is there duplication of activities across your company?

  • Are you bureaucratic rather than agile?

  • Is your innovation additive rather than disruptive?

  • Do your insights and R&D teams inform your new product development and routes to market?

Do your products and services serve evolving consumer needs?

  • Do the bulk of your revenues come from legacy brands in shrinking or sluggish categories?

  • Are you losing market share to products from new categories?

  • How diverse are your business categories in terms of consumer base and channel?

Are your financial and human capital investments future-proof?

  • Do your investments reflect your growth agenda?

  • Are business leaders focusing on short-term targets over long-term profitability?

  • Do you have a strong bench of talent when it comes to CEO succession?

     
AUTHORS

JIM HINDS is the firm’s Regional Coordinator for Europe, Middle East and Africa and a member of the European CEO & Board Practice and Consumer Sector. He is based in London.

ANDREW HAYES co-leads the firm’s global Consumer Products Practice and is a member of the CEO & Board Practice and Leisure and Hospitality Practice. He is based in Houston.

RICHARD SANDERSON is a member of the Consumer Sector and also co-leads the firm’s Marketing Officers Practice. He is based in Chicago.

HARSONAL SACHAR is a Knowledge Associate in the firm’s Consumer Sector and a member of the Diversity and Inclusion Practice. She is based on Toronto.

MALLORY SAMSON is the firm’s Global Knowledge Leader for the Consumer Sector, inclusive of chief marketing officers. She is based in Chicago.

 

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The Emergence of the Chief Growth Officer in Consumer Packaged Goods