An overwhelming majority of CPG companies report effective strategic collaboration efforts with retailers, according to new data from The Nielsen Company.
Almost All CPG Companies Consider Collaboration Effective
Nielsen conducted a survey of CPG companies which defined strategic customer collaboration as joint initiatives between manufacturers and retailers that go well beyond the normal course of business. These initiatives are designed to deliver impact in multiple dimensions: sales lift, cost savings, ROI, and the impact captured by the retailer.
Ninety-five percent of CPG manufacturers think their retail collaboration efforts have been either extremely effective (30%) or somewhat effective (65%). A mere 5% consider them somewhat ineffective, with no respondents considering them extremely ineffective.
2 in 10 Collaborations Produce Significant Impact
While most manufacturers believe that their collaboration efforts are effective, few deliver winning results. Survey data indicates 50% have only modest impact, with category performance at participating retailers slightly better than the baseline, and 30% yield no measurable impact.
However, a small group of CPG manufacturers (20%) is realizing the full potential from these collaboration initiatives.
Winners Seek Strength, Growth
Nielsen examined the collaboration activities of CPG manufacturers achieving full potential (or “winners”) and found that 100% place both high importance on sales profit and strong growth outlook, compared to 94% and 83% of other CPG companies, respectively.
In addition, 80% of winners collaborate with retailers generating $1 billion or more in sales, compared to 42% of other CPG companies. On average, winners also collaborate with retailers that show two-year growth percentages, two-year category growth percentages, and percentages of CPG sales in focus categories that are double or close to double those of retailers other CPG companies collaborate with.
Winners Ambitious, Proactive
Eighty-eight percent of winning companies, compared to 62% of others, include 90% of total category sales in collaboration efforts. Top performers also have a proactive rationale to develop strategic collaboration efforts. For example, winners are much more likely than other companies to view collaboration as an opportunity to increase access and influence on merchandising and marketing initiatives or to build a “preferred” relationship with retailers, as opposed to reacting to performance issues.
Winners Collaborate More Closely
Winners align with retailers on common performance goals at the start of a given initiative that go beyond basic data-sharing. Nielsen analysis indicates other collaboration habits that set winners apart from other CPG companies include dedication of more resources, investment in areas such as supply chain, IT and new product development, and joint tracking of performance metrics and sharing of incentives.
CPG Winners Measure Price Elasticity More
Other study data indicates that overall, 82% of respondents categorized as CPG winners consider consumer price elasticity when setting prices, compared to 67% of other respondents. In addition, winners are far more likely to consider price elasticity at the national (82% compared to 63%) and especially regional (55% compared to 20%) levels. However, winners are slightly less likely to consider price elasticity at the market area (9% compared to 10%) and category (36% compared to 40%) levels.
Winners are also more likely to measure price elasticity at the SKU level (64% compared to 53%), but less likely at the brand level (55% compared to 57%). Only 9% of CPG winners don’t measure price elasticity at all, compared to 13% of other CPG companies.
About the Data: Approximately 220 CPG executives from more than 50 companies with close to $160 billion in US manufacturer sales in the food, beverage, personal care, and home care categories were surveyed in spring 2010.