Challenges

Consumer companies face major challenges, due to slow or negative growth in people’s disposable income and due to changing consumer attitudes toward products and brands. Even where economies are starting to perform better, the squeeze on after-tax wages, especially for the middle class, younger people, and families, is depressing consumer spending. Continued weakness in consumer disposable income regardless of which way macro GNP uncertainties break is expected in the upcoming years. Meanwhile, what we call the great fragmentation is manifested in consumer behavior and market response. In both developed and emerging markets, there is a wider variety among consumers now than at any time in the recent past. Growth is evident both at the top of the market (where more consumers are spending for higher-quality food and other packaged goods) and at the lower end (where an increasing number of consumers are concentrating on value). But the traditional middle of the market is shrinking.

Consumer companies in response must dramatically shift the route they take to reach consumers in terms of distribution and communications. Actions such as building a comprehensive data set of sources on consumer, brand, product, and competitive behavior, developing analytical skills, tools, and routines that use the data in the ways that are critical for the specific business, translating those insights into actions at the product, brand, and retail level, planning the portfolio of brands and products to efficiently cover full market variety and using this as a lens for M&A plans, managing the expanding portfolio of retail channels to provide the right incentives, reflecting differences by channel in how consumers and retailers interact, managing the interactions between the retail channels and managing complexity rather than merely trying to minimize it, are more than required.