While past years have been tumultuous, companies expect greater stability in the coming year. That said, headwinds remain — many highlighted friction in supply chains, inflationary pricing pressures, and continued geopolitical uncertainties. Despite these challenges, organizations were clear that brand investment levels will be maintained or even increased. The strong growth expectations suggest that organizations are not anticipating significant global shocks in 2023, and most companies approached their presentations with cautious optimism and a significant focus on topline growth. As L’Oréal indicated, topline growth allows companies to improve profitability and reinvest in in their brands and business. Companies seem committed to maintaining or increasing marketing and advertising spend, while also re-investing in their teams.
Russell Reynolds Associates highlighted key themes from CAGNY, including:
Jon Moeller, Chairman, President and CEO, P&G
Consumer centricity has been at the forefront of CPG organizations over the last few years. While CPG organizations were working towards this prior to the pandemic, COVID-19 enhanced its importance and consumer centricity has quickly become a priority across all industries and verticals. Despite a return to normalcy, compared to prior years, consumer centricity remains a top priority as companies focus on maintaining and growing market share. With continued pressure on discretionary spend, the most successful companies passionately described how they are connecting with consumers and bringing their brands to consumers around the world, while backing up those claims with data.
Organizations also focused on providing value. Value encompasses brands’ efforts to provide a high performing product at the right price, while providing frictionless experiences in an effort to increase brand loyalty. Nestle indicated its plan to introduce value for consumers via new business models. For example, they are driving consumer loyalty via an app for their Purina pet care brand. The app is a one stop shop for consumers, providing a frictionless experience and expertise, while also increasing loyalty to the brand. CPG organizations are also delivering value through the utilization of data and analytics. Companies showcased how the use of data and analytics enables them to generate more insights while also meeting consumer needs. Data mining allows companies to understand what’s going in the industry, the attributes that drive growth, and how best to incorporate them into their brands.
Consumer centricity was the driving force of many of the other themes we saw in this year’s CAGNY presentations, including a focus on innovation, increased marketing & advertising spend, and data driven approaches.
Jeff Harmening, Chairman and CEO, General Mills
Most companies underscored the role that innovation plays for their organizations and their future growth. Coca-Cola noted that innovation will be responsible for ~25% of its 2023 gross profit growth. There are many different ways that CPG organizations think about innovating within their organizations, including:
CPG companies have always looked to product innovation to meet consumer demands, and this year was no exception. Product innovation encompasses both improving established product lines, as well as introducing entirely new products and brands. Product “premiumization” emerged as a common theme. Conagra, in particular, showcased innovation’s impact on its frozen foods profits via newly launched items and a massive rebranding and premiumization of existing brands via packaging, improved marketing, and price changes.
Ivan Menezes, CEO, Diageo
Sustainability is not a new agenda item for CPG companies. All of the companies that participated in CAGNY last year covered their ESG commitments, and ESG maintained a similar stage presence this year. Sustainability is acknowledged across the CPG industry as a key part of business strategy, with most companies discussing their commitments and forward looking plans regarding sustainability. However, we have yet to see a majority of CPG organizations share actual progress they have made towards the sustainability agenda, indicating there is still a long way to go.
Operating in a purpose-led, environmentally friendly way and providing sustainable products is something that CPG organizations have been working on for some time. McCormick cited efforts to lead the way in sustainable sourcing, with a goal for five of its iconic ingredients to be 100% sustainably sourced by 2025. While ESG has become a necessary issue to discuss, some companies also showcased tactical results; Diageo, for example, highlighted links between revenues and ESG efforts.
We have also seen the evolving definition of ESG reflected in company behaviors. Sustainability, which was once primarily defined as operating in an eco-friendly manner, has come to mean so much more. It goes beyond the environmental impact to also encompass the social and economic impact that an organization has across its value chain. For example, Mondelez discussed the four different pillars of its sustainability approach, which included a focus on sustainable sourcing of ingredients, human rights, reduction of CO2 emissions, and reducing packaging waste.
Sean Connolly, President and CEO, Conagra
The importance of people and culture was emphasized across many of the presentations. More so than previous years, people and culture were featured heavily in CPG’s strategic priorities. JM Smucker indicated two of its five strategic priorities were centered on this theme: “Nurturing and investing in our culture” and “Improving diversity and fostering inclusion and equity.” Sysco included “Customer teams” as part of its strategy, indicating that their greatest strength lies in their talent. Imperial Brands discussed a focus on building a performance-based culture and an immersive program at the heart of its culture change agenda involving all 26,000 of their colleagues.
There has been a major shift in the work paradigm. From ‘The Great Resignation’ to ‘Quiet Quitting’, tight labor markets and the pandemic-driven hiring booms gave substantive power to employees. Organizations have taken note. Retention plans are being reworked, with companies keeping talent motivated and happy through a healthy and ethical workplace culture. There was also talk of workforce rebalancing, with companies looking to simplify their structures, particularly across geographies, and leveraging these efficiently to provide opportunities to elevate top talent. PepsiCo, for example, reorganized with more empowered local structures, delayered to enable connectivity, speed-to-market and elevated diversity. PepsiCo also discussed seven different ways it helps evolve and foster a positive culture:
With a focus on people & culture, priorities have shifted in the last 12 months from recruiting and finding talent in a tight labor market to now developing, harnessing and retaining talent.
Ramon Laguarta, Chairman and CEO, PepsiCo
While pandemic-induced disruptions have not been fully resolved, the tone at the event was optimistic and did not anticipate a major economic recession or a material decrease in global consumer spending. That said, organizations are still forming contingency plans and the following questions remain: