Consumer goods are tough. You have so many customers that you cannot threaten them or negotiate with them. You have to think about segments, trends and act indirectly with a lot of marketing and indirect sales. That’s why consulting projects devoted to consumer goods are so much fun. You can do there plenty of interesting things and increase the value of the business. However, they also tend to be pretty complicated. Today we will talk about how consulting projects in consumer goods business looks like. I will also share some tips how to conduct such projects efficiently.
What type of business you are in?
Consumer goods are a very big group of diversified businesses that require different actions. Before you start any analysis you should try to define the business you are supposed to improve / develop. This will help you later on to identify the main challenges and set priorities.
When it comes to the type of business the first division is around the nature of the way you consume, use the product. We can divide the consumer goods into 2 main groups:
- FMCG – Fast Moving Consumer Goods (FMCG) – goods that you consume frequently and use fast. In this category we have food, beverages, drugs, some clothes etc.
- SMCG – Slow Moving Consumer Goods (SMCG) – here we have all goods that you consume infrequently during your life. In this category we have cars, domestic appliances and other similar products
FMCG is, to some extent, easier as you have constant contact with your customer. On the other hand he can move fast from one brand to another. In SMCG on top of that you have to deal with older versions of your products. If somebody has bought a car from you he will be using it for some years and you cannot sell him a new one if he does not want to get rid-off of the old product
The second question you should ask yourself is whether you are dealing with branded goods of private labels producer. This distinction is extremely important. If you are private label producer than in fact your business is much simpler – you are just a B2B provider of products. If you are providing private labels to brand owners you don’t have to worry that much about the sales and marketing (most customers – the brand owners, are known and you will have with them stable relations). In the case of private label producer you have to concentrate on operations (supply chain and production) to lower costs and have fast reaction time. In many cases private label providers also invest heavily in R&D that helps them create new products and improve the existing ones. In this case you would also do a lot of market research and segmentation to understand well the end-customers (the individuals that buy the products produced by you but branded with some other brand). If you are owner of the brand than the main focus shifts to marketing, sales, customer bases growth and development. In some cases you may not even produce the good that has your brand (like Apple).
To make things a bit more complicated you will come across many FMCG or SMCG firms that operate a mixed model – they sell under their own brand some products but also produce for other brands. You can also have the opposite situation when the FMCG or SMCG firm produces some of its products and buys others from 3rd party suppliers for example in Asia. With the mixed model always analyses the business assuming that you have 2 business units: branded goods produced by you & private labels (or branded goods produced by 3rd party)
Below a movie showing the main challenges in SMCG
and in FMCG businesses.
I hope this will help you understand the difference between those 2 business models.
What is the scope of the project?
Consumer Goods producer are one of the biggest customers of consulting firms and buy a wide range of projects. Below I will mention some of them that you have big chance coming across:
- Strategy. Quite often FMCG and SMCG ask consulting firms to help them define the strategy for the whole company or specific business unit. In some cases they order consulting projects that help them define the strategy of entering new markets: should you buy existing brand on specific market or enter with your own brand and grow organically, which markets you should enter, what you need to enter, what are the costs of operating on specific market. If you come across projects like that I would recommend checking my post on Strategy Creation
- Due Diligence Projects. FMCG and SMCG companies hire consulting firms also when they want to make sure that they buy a good firm at fair value. Your aim on these projects is to check what is the value of the firm your client considers buying. This requires you to answer the questions like: how strong the brand they want to buy is, what is the potential to grow it on existing markets, can you move their products on markets that the purchasing company is strong, what are the production capacities, do you have to further develop them to grow, what is the sales structure (channels) and how different it is with the situation on developed markets, what are the competitors on the market, what is the marketing strategy and how efficiently they spent money on this, how efficient is the supply chain against best practices etc.
- Post-mergers. Sometimes consulting firms stay after the acquisition of the firm and they help integrate newly acquired firm. The task is to make sure that the identified value is delivered.
- Performance Improvement Projects. The most often occurring projects in consumer goods are all sorts of performance improvements projects. Most of them are not spanning the whole company but rather address specific area for example:
- Pricing in one of the business units
- Implementing lean manufacturing / theory of constraints in production
- Implementing lean manufacturing / theory of constraints in supply chain
- Changing production planning
- Improving sales force efficiency
- Building own sales channels i.e. retail or direct-to-customer sites
- Changing motivation / bonus system
- Changing the organizational structure
Examples of analyses in consumer goods businesses
The analysis you will conduct obviously will depend on the type of the business you are analyzing as well as the scope of the project. To give you a flavor of what to expect below some examples of analyses:
- Creating framework for increasing sales in consumer goods business
- How to find white spaces for your cosmetics product – in order to increase sales
- How to find the ideal spot for a new factory
- Where you can find savings in logistics
- When it makes sense to introduce new service or a product?
- How to improve the efficiency of sales force?
- How to decide which customer you should remove?
- Modeling of financial model for FMCG firm – fixed and variable costs
For detailed information on Fast Moving Consumer Goods (FMCG) check the presentation below:
For detailed information on Slow Moving Consumer Goods (SMCG) check the presentation below:
What things you should learn to be great at consumer goods
As said consulting projects in consumer goods businesses are very demanding. Therefore, make sure that you are well prepared to handle the big load of work that you will have to face during the consulting project. Below what I suggest mastering.
- Market Research. During projects in consumer goods you will have to do a lot of market and consumer research to understand what segments of customers there are, what are the sales channels, what competitors your client has to face and how do they differ. Make sure that you are familiar with the ways to get the information and analyze it. For more check my post on How to conduct market research during consulting projects
- Excel. Excel is always a must, regardless of the project. In the case of consumer goods especially the FMCG you will be doing plenty of analyses in Excel and you have to be extremely efficient to handle the number of analyses that you will have to deliver in a very short time
- Good understanding of SMCG and FCMG. Consumer goods as we said require a different approach than B2B businesses or Retail. You quite often work with plenty of middlemen and you have to somehow optimize the way you sell, produce and send goods to customers. To learn more on FMCG check my online course FMCG for Management Consultants and Business Analysts. To learn more on SMCG check my online course SMCG for Management Consultants and Business Analysts
- Lean Manufacturing and Theory of Constraints. In the case of the production and supply chain indispensable will be the lean manufacturing techniques and ways to remove bottlenecks. You can use them to improve pretty fast the profits of the consumer good business. On top of that you will also improve their liquidity by freeing some inventory and other assets. To learn more what techniques you should master check my post Essential Lean Manufacturing Techniques.
- Project Management. As said consumer goods project are time consuming so you have to organize your work in a specific manner: do a lot of work ahead of time, ask for data in a structured manner, and provide the end-product very fast to have time to get a buy in. More on that you can find in my post How to manage consulting projects
That’s in short. Check all the presentation and related posts. If you have any questions just let me know