European consumer-goods (CG) companies are facing strong market headwinds. Inflation in the euro area has reached record highs, fueled by rising energy costs and supply chain disruptions exacerbated by the ongoing effects of the war in Ukraine.1 At the same time, fundamental shifts in consumer behavior—from increased price sensitivity to the rise of e-commerce—are generating new expectations from European brands and retailers. In this challenging landscape, CG companies must reassess their commercial strategies to put themselves on the path to delivering profitable and organic growth.
Profitable growth is directly tied to value creation. Between 2016 and 2019, CG companies that outperformed their peers in both EBIT margins and organic growth delivered average TSR of more than 18 percent, compared with 2 percent for all others. However, only 28 percent of the CG companies in our database achieved both top-line and bottom-line growth.2 What differentiates these companies from the rest?
Execution—defined as gaining or losing market share within a country and category—emerged as the primary driver of profitable growth, and its importance has only increased over time. Our latest survey provides insight into how leading European CG companies are able to sustain commercial excellence and execute better than their peers (see sidebar, “About the research”). The results confirm that these companies adopt distinct and ever-evolving practices across five commercial capabilities that set them apart from the rest.
1. Gain deeper and more granular consumer insights
Winning CG companies strive for an increasingly granular understanding of their consumers’ behaviors, needs, and emotions, and they use this knowledge to provide personalized experiences and offerings to their customers. Compared with other companies, winners deploy a broader set of capabilities to collect more data from more sources—including demographic data, traditional quantitative techniques (such as usage and attitude surveys and brand tracking), and agile rapid-research techniques.
These consumer insights allow winners to identify microsegments and manage them at scale, which informs everything from their portfolio strategy to customer segmentation and in-store excellence. While most CG companies develop consumer insights at national, channel, and retailer levels, winners go one step further: they are 30 percent more likely to develop insights at the format, banner, and individual store levels to drive tailored sales execution and marketing activities, resulting in higher lifts.
2. Reallocate resources toward critical capabilities
Winners understand and align their leadership around the critical capabilities that deliver a competitive advantage and allocate their resources accordingly. For example, 86 percent of these companies have a stand-alone e-commerce team and 50 percent have a stand-alone direct-to-consumer team (compared with 63 percent and 40 percent of other companies, respectively), reflecting shifts in consumer behaviors and market trends. Moreover, winners are more than three times as likely as their peers to have a team dedicated to revenue growth management (RGM).1 Deploying RGM resources at country and regional levels, as opposed to a global level, enables them to execute with more speed and precision and reallocate resources more rapidly in response to fluctuating needs and changing strategic priorities.
3. Measure and optimize real-time execution
Even the best-laid plans change. Winners continuously adjust their marketing and sales plans based on near real-time and full-funnel performance tracking so they can develop a clear picture of what is working and what is not. For example, leading CG companies are two times as likely as others to conduct analyses of event-level ROI on at least a quarterly basis, whereas others tend to do so semiannually or less frequently. And winners are two times more likely to collect both general and e-commerce-specific KPIs and apply them to commercial teams and other enabling functions. By tracking significantly more data (for example, brand health and equity and social sentiment) on their marketing dashboards, these companies can measure their effectiveness and rapidly adjust their marketing mix and budgets as needed.
4. Leverage data and digital tools for decision making
A robust data and technology strategy enables winning CG companies to execute better than their competition. Winners are more likely to invest in a fit-for-purpose technology stack, a culture of data-based decision making, and leading digital and analytics capabilities—and to integrate these elements into the core of their business. By leveraging advanced tools and technologies—such as sales execution software, image recognition software, and geolocation—and digital platforms, these distinctive CG companies are able to drive segmented execution at the store level and prioritize the most effective sales and marketing activities.
When defining their RGM strategies and tactics, winners draw from a robust set of data sources—such as consumption trends, channel performance, and category profit pools—and have the capabilities to use these data to their full potential. Eighty-three percent of winners have a strategy to build out first-party marketing data, and 33 percent are skilled at stitching together data from multiple sources (compared with 50 percent and 0 percent of others, respectively).
5. Adopt agile ways of working
Agile marketing has emerged as a clear differentiator between winners and the rest. One hundred percent of winners have implemented agile ways of working into their marketing teams, compared with only 50 percent of their peers. Seventeen percent of winners have achieved agility at scale across the majority of marketing activities, compared with none of the other companies.
Taking its inspiration from agile software development, agile marketing emphasizes rapid iterations and experiments, testing and data, individuals and interactions, and cross-functional collaboration, which enable companies to respond quickly to change. As an example, winners frequently bring in strategic, cross-functional expertise during customer negotiations—including in category management, revenue-growth management, and consumer insights teams—while others prioritize digital, e-commerce, and brand marketing specialists. Winners are also 40 percent more likely to involve both global and local leaders in developing a long-term portfolio strategy, ensuring enterprise-wide alignment and integration.
For European CG companies, commercial capabilities matter now more than ever. The road ahead will differ depending on each company’s maturity level. Those that are just planting the seeds may need to embark on a holistic transformation across all domains to catch up to the competition or build up selected capabilities with operating model pilots. CG companies with a spike in a few commercial areas can focus on filling in the gaps and honing their strengths to retain a competitive advantage. Commercial-excellence leaders can drive continuous improvement by increasing granularity, evolving the agile operating model, and setting new standards for data and technology. Regardless of their starting point, CG companies that harness the full potential of their commercial capabilities will be able to execute better than their peers and deliver profitable growth in the years to come.
