Deloitte cb predictions seminar 2013 deloitte perspective on growth

Consumer Business Predictions & Priorities Seminar 2013 New Foundations for Growth

Randy Jagt Director Consumer Business

Rotterdam, May 28th 2013

Bio

@ Deloitte since 2003 Leads Deloitte’s Food & Beverage Industry and responsible Director for our Emerging Markets Taskforce Focused on Realizing Strategic Business Transformations

Combining Functional, Industry and Functional knowledge Responsible director for FrieslandCampina, Nike, D.E MasterBlenders 1753 and Heinz

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Consumer Business Predictions & Priorities Seminar 2013

Š 2013 Deloitte The Netherlands

Where are we now?

A whirlwind of disruptive forces is in play in today’s marketplace

Challenging macro economic trends Unsecure economy, shift to Emerging Markets, low consumer confidence in Europe Changing Consumer Behavior Overall, consumers spend less time, want value for money, are comfortable buying online and are less loyal Rapid Technological Adoption and Changing Channels Increased mobility, enhanced usability, and increased connectivity

Increasing Competition Lower barriers of entry, new business models, vertical and horizontal integration 3

Consumer Business Predictions & Priorities Seminar 2013

Š 2013 Deloitte The Netherlands

Retail and consumer products companies face challenging global macro economic trends Europe

‒ Things get worse but do so more slowly United States

‒ Imports fall as people – US budget deficit is falling fast: have less cash to spend • Healthier economy ‒ Exports rise thanks to • Higher tax revenues • Lower federal spending

– Unemployment expected to stay high South America – Strong growth – Thriving middle class – Raising service sector

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China

– Slowing growth from tightened monetary policy

– Shift toward upscale improved competitiveness as income Japan distribution skews – Partial economic – Shift toward Africa recovery in 2012 due consumer led to tsunami 2011 growth – High growth rates – Stimulus by Bank of expected Japan is boosting SE Asia – Emerging middle consumer class – High growth confidence – Increased – Emerging middle spending power class

Consumer Business Predictions & Priorities Seminar 2013

– Increased consumption of goods and services

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Proliferation of choice, coupled with disruptive retail models, has resulted in a consumer that is harder to “win” and retain than ever before

T H E N…

N O W…

I identify with brands

I keep my options open

“With so few brands to choose from, it’s easy to decide which one fits my needs.”

“With so many brands out there, why limit myself to one or two?”

A store can win me based on location alone

I can buy anything, anytime, from anywhere

“I frequent stores that are near my home, my work, or my local mall.”

“If a store isn’t nearby, I can always buy its products online...or through its app.”

I’ll shop around…to a degree

I always know if I’m getting the best deal

“I like getting a great deal, but I don’t have time to shop everywhere.”

“I like to compare prices on my smartphone before buying.”

Consumer are connected, well-informed, demanding and self-aware 5

Consumer Business Predictions & Priorities Seminar 2013

© 2013 Deloitte The Netherlands

Established players need to defend market share against new competitors

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Vertical or horizontal expansion

Technology disrupters

Emerging market players

Players expanding their roles in the value chain

Left field competitors with different business models

Emerging market giants entering western markets

Typical advantages:

Typical advantages:

Typical advantages:

1. Strong position in existing space 2. Increases control

1. Proprietary technologies 2. No legacy costs, Leaner organization 3. High valuations 4. Attractive to top talent

1. Low cost experience 2. Strong position in home markets 3. Access to large talent pools 4. Inherent flexibility

Consumer Business Predictions & Priorities Seminar 2013

Š 2013 Deloitte The Netherlands

Where are we going?

In the long term there are four key predictions that provide growth opportunities for the Consumer Business Industry

Increasing wealth in emerging markets

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Companies that best understand the customer of tomorrow will win

We’re only at the verge of the data revolution

Only companies that manage to remain fit for the future will survive

Consumer Business Predictions & Priorities Seminar 2013

Š 2013 Deloitte The Netherlands

Prediction #1: In three years time multinationals need to obtain more than 30% of global revenues from emerging markets

Emerging Advantage

• Emerging markets play an increasingly big role in the strategic plans of multinationals • Companies which already have a foothold are expanding and many who haven’t made the move plan to do so soon • Nearly 60% of the global GDP growth in 2030 is forecast to come from emerging markets • Companies are increasingly shifting focus towards 2nd and 3rd tier emerging markets in Asia, Middle East and Africa

• Growth in these markets has surpassed that of the BRICs, driving consumer demand and spawning competitive local businesses

Broaden scope of investments in Emerging Markets

% Global revenues from EMs 35%

15%

Less than 10%

35%

10% - 30%

37%

31% - 70%

37% 20% 8%

14%

Last 12 Months

Expected in 3 Years

71% or more

Successful growth stories

• Today 55% revenues come from EMs (85% of its growth) • Revenues from EMs to increase to 75% by 2020

• 51% of revenues come from EMs • High growth in Asia, LATAM, CIS, Middle East and Africa offset poor W European performance

• 43% of its revenues from EMs in 2012 • Sales mounted 9,7% in Africa and the Middle East, and 7,5 % in Asia Pacific

• 40% revenues from EMs • Planning to triple its sales in Asia, Oceania and Africa over the next decade

In three years time: Most companies will realize more than 30% of their revenue from Emerging Markets

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Consumer Business Predictions & Priorities Seminar 2013

© 2013 Deloitte The Netherlands

Prediction #2: Omni-channel will become the new standard for shopping, requiring insight through all consumer devices to enable customer centricity

Leveraging insight from digital devices • The use of digital touchpoints will enable the best companies to reach a higher level of customer centricity • Companies will engage in better customer dialogue, delivering improved customer experiences

More sales and increased brand loyalty • Retailers can increase customer loyalty by ensuring testing and improving their assortment ratings

Product feedback • Early adopters are more critical about products than consumers in general

Operational improvement • To achieve excellence in brand loyalty, customer service complaints must be driven to below 1% of total customer feedback

Individually customised offers increase sales, drive higher brand loyalty and companies flex to customer needs faster than ever. * Based on CEO survey (sample size 234 covering CB, automotive, tourism, hospitality and leisure) Source: Deloitte Fortresses and Footholds Study; IMF; WB

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Consumer Business Predictions & Priorities Seminar 2013

© 2013 Deloitte The Netherlands

Prediction #3: The exponential pace of Big Data & Analytics innovation will cause a disruption in the competitive landscape

Customer data is exploding

Industry’s perceived “Change” pace

Start building big data capabilities

• This decade the global information set is growing at a factor of 44 — from 0.8 zettabytes in 2009 and is expected to reach 35.2 zettabytes in 2020 • A leading global retailer collects more than 2.5 petabytes of customer transaction data every hour • This data comes from the growing volume of existing data (e.g., POS, shopper profile, etc.) as well as emerging forms of data fueled by technological and digital innovations (e.g., mobile eCoupons, sensor tags, video, text, photos, audio).

Key opportunities fuelled by Analytics • Better tailored “next generation“ products and services based on detailed analysis of customer behavior and needs • Optimized supply chain and process efficiency by using sophisticated analytics • New unprecedented opportunities by analyzing web behavior, voice/video, sensor data etc.

A strong data and analytical maturity is the key differentiator to successfully navigate through this new era of innovation and exponential pace of change.

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Consumer Business Predictions & Priorities Seminar 2013

© 2013 Deloitte The Netherlands

Prediction #4: Companies will shift from “localized” operating models towards globally integrated operating models to meet both their cost as well as their growth objectives Drivers for Operating Model changes External drivers • Increased market pressure (decline in organic growth)

• Differentiated consumer demand • Increased consumer insight and external data

Key Challenge • Global companies are facing changing industry dynamics and scale challenges, driving a balancing act between global scale and local relevance

• Shifting channel dynamics • Competitor consolidation Key Question

Internal drivers • Growth into suboptimal large scale businesses

• How to remain fit for purpose through balancing global scale and local relevance?

• Numerous local autonomous organizations • Struggle to reap scale benefits...

• ...and at same time being faced with scale challenges

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Consumer Business Predictions & Priorities Seminar 2013

Companies will shift from “localized” operating models towards globally integrated operating models to meet both their cost as well as their growth objectives

© 2013 Deloitte The Netherlands

What are our priorities?

As a result of these developments we identify four key priorities for the Consumer Business Industry to realize long term growth

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2

Growth & Emerging Markets

Digital & Cloud

New Foundations for growth

Analytics

3

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Consumer Business Predictions & Priorities Seminar 2013

Future Operating Model

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Š 2013 Deloitte The Netherlands

Define your Strategic Path to Growth, supported by a well balanced portfolio of strategic initiatives Developing New Foundations for Growth following a structured approach

Non-consumers New to you

Existing

Customers / Markets

Primary Growth Levers (business of today)

Identify new uses or users

The Strategy Cascade™

Create new markets

What is our Growth strategy?

Where will we play?

Extend to new markets, segments

How will we win in chosen markets?

Expand the value chain

Change the basis of competition

Retain, acquire customers, optimize pricing, improve existing products and services

Extend products and services

Existing

New to you

How will we configure?

What priority initiatives and investments?

New to the world

Products / Business Models Core 15

Adjacent

Consumer Business Predictions & Priorities Seminar 2013

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Companies should deploy wider capabilities to pull, convert and retain new consumers for repeat sales Mobile devices are a central driver in the revitalization of customer shopping experiences

Pre-purchase

Purchase

• Social interaction • Product discovery • Price-checking

• Online payments • Mobile payments • Self-checkout in-store

Pull consumers

Increase conversion Omni-channel shopping

Social • Socially-driven product discovery paths • Improved SEO • Centre of excellence for online engagement

• Order management • Fulfilment • Service and loyalty

Keep them coming back

Digital Loyalty

• Multiple product fulfilment • Quick, convenient and personal service options • “Frictionless” digital • Location independent loyalty system payment • Optimised supply chain • New in-store services

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Post-purchase

Consumer Business Predictions & Priorities Seminar 2013

Data-driven Insight • Consumer-typed propensity models (next best offers) • In-house data & analytics talent pool

• Personalise promotions • Secure storage and data compliance

© 2013 Deloitte The Netherlands

Unlock the power of available data: Move from reporting historic facts to anticipating consumer and business behavior

What might be happening?

Why is it happening?

Simulation & Optimization

Predictive Modelling • Simulate and experiment with possible scenarios

Analytical Maturity

Segmentation

What is happening?

Visual data exploration • Understand groups and outliers • Discover white spots Basic KPI Reporting

• Integrated analytics • Multiple sources of data • Forecasting and predicting future outcomes • Modeling and understanding correlations and causalities

• Understanding business parameters • Visualizing transactions

Traditional Business Intelligence

• Data integrity & quality • Basic employee lists & extracts

Transactional 17

Increasing business value

Consumer Business Predictions & Priorities Seminar 2013

Strategic © 2013 Deloitte The Netherlands

CPG companies need to move from “localized� models towards globally integrated operating models to remain fit for purpose Globally integrated operating model

Business Strategy Brand strategy Standardized core value chain processes Global R&D Innovation

Supply Chain

End Markets Sales

Global Centers of expertise

Global Shared Services Organization Finance/HR/IT and standard technology platforms

Companies do not only integrate their operating models for cost purposes but also to unlock adjacent and new growth opportunities 18

Consumer Business Predictions & Priorities Seminar 2013

Š 2013 Deloitte The Netherlands

As a result of these developments we identify four key priorities for the Consumer Business Industry to realize long term growth

1

2

Growth & Emerging Markets

Digital & Cloud

New Foundations for growth

Analytics

3

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Consumer Business Predictions & Priorities Seminar 2013

Future Operating Model

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Š 2013 Deloitte The Netherlands

Q&A

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Consumer Business Predictions & Priorities Seminar 2013

Š 2013 Deloitte The Netherlands