‘All in all, a very complex situation for CPG companies ...’

CHAIN

RETAILING 3.0

For CPG, Time to REWIRE

Daniel W. O’Connor

President & CEO with Keith Anderson and Tim O’Connor, Vice Presidents RETAIL NETWORK GROUP (RNG)

TODAY, WHAT IS HAPPENING AT RETAIL IN THE US IS NOTHING LESS

THAN A FUNDAMENTAL REPOSITIONING OF FOOD.

In the next 100 weeks, the authors say, the CPG manufacturer’s challenge will be to find new ways to prosper in the fastest-changing food retail environment we’ve seen in a generation. Below, they summarize the current CPG selling environment, then speak with the GMA FORUM about what it means to CPG leaders.

Today’s operating environment is characterized by these realities:

■ Overall retail growth is under two percent –– and perhaps is negative when inflation-adjusted. Compare that to the five-, 10- and 20-year average ranging from 4. 5 percent to 5. 5 percent. The big difference today is that we are competing in what is effectively a zero-sum environment.

■ Inflation is rising, especially on basic food commodities, and is driving retailers to divert products again. Examples abound in coffee, dairy and other categories where price increases are widespread.

■ Consumer liquidity is declining. According to a recent Goldman Sachs analysis, the average US household today spends approximately $1,500 more than it can access through earnings, debt and asset sales. Many people are paying debt with debt. Houses built after 2000 represent 75 percent of the homes in bankruptcy; the related liquidity issues are well understood.