CPG industry - Case studies Flashcards
Number of brands P&G owns
65
Price unilever paid for dollar shave club
$1B
P&G’s US ad spend
5B$+
Costco private label revenue (Kirkland)
~$60B
Avg number of diapers per baby per year
2,200
Overview
The consumer packaged goods (CPG) industry is highly competitive and rapidly evolving.
It includes companies that produce and sell everything from ketchup to shaving cream. It’s highly acquisitive (companies like P&G buy to expand their portfolio) and very focused on distribution (if your product isn’t on the shelf, no one can buy it!).
That said, innovation in business models brought about by e-commerce and DTC are shaking things up and will make the future decades interesting.
A few examples of CPG case topics:
M&A cases (e.g., “Should we buy this hot new product?”)
Cost cutting cases (e.g., “How can we reduce unit costs?”)
Revenue growth cases (e.g., “Evaluating a new health trend opportunity”
Players
Large multinationals: These are the largest and most established companies in the CPG industry, with a global presence and extensive portfolios of brands across multiple categories. (Unilever, P&G, nestle)
Emerging brands and startups: These are smaller, often niche companies that are focused on innovation and differentiation. They may specialize in a particular category or market segment, and are often known for their agility and ability to respond quickly to changing consumer preferences. Examples: The Honest Company, Halo Top, RXBAR.
Private label and store brands: These are brands that are owned and sold exclusively by retailers, rather than by traditional CPG companies. Private label brands are often less expensive than national brands, and may be positioned as a value option for consumers. Examples: Amazon Basics, Kirkland Signature (Costco), Great Value (Walmart).
Contract manufacturers: These are companies that specialize in manufacturing and packaging products for other companies, rather than selling products under their own brand names. They may offer services such as research and development, formulation, and packaging, and may work with a variety of CPG companies across different categories. Examples: Johnson & Johnson Consumer Health, Contract Pharmacal Corp, Ropack Pharma Solutions.
Major trends
E-commerce: The rise of e-commerce has transformed the way consumers buy CPG products, with online sales expected to account for 10% of all CPG sales globally by 2025. To date, this has put more pressure on the retailers themselves (e.g., Walmart, etc.) but it is starting to impact CPG companies themselves. For example, Unilever acquired Dollar Shave Club, a subscription-based e-commerce company that sells razors and other personal grooming products directly to consumers. By acquiring Dollar Shave Club, Unilever was able to expand its presence in the men’s grooming category and reach a new customer base through the e-commerce channel.
Health and wellness: Consumers are increasingly focused on health and wellness, leading to a rise in demand for products that are perceived as healthier, more natural, and more sustainable.
Sustainability: Consumers are increasingly aware of the impact of their purchasing decisions on the environment, leading to a rise in demand for sustainable and eco-friendly products
Mergers and acquisitions: The CPG industry has seen a wave of consolidation in recent years, with large companies acquiring smaller, innovative startups to stay competitive and maintain growth. For example, P&G has a long history of acquisitions as part of its overall business strategy and has acquired Gillette, Iams pet food, Old Spice, Native and Wella among others.
Forces shaping the future
Direct-to-consumer: The rise of e-commerce and changing consumer behaviors are driving CPG companies to increasingly sell their products directly to consumers, cutting out traditional retail channels. DTC brands are able to build stronger relationships with customers, gather more data on consumer behavior, and offer more personalized experiences, which could ultimately disrupt traditional CPG companies and retail models
Health and wellness: The trend towards health and wellness is set to continue, with consumers demanding more natural, organic, and healthier products from CPG companies. For example, P&G acquired Native, a direct-to-consumer (DTC) natural personal care brand, in 2017 as part of its strategy to expand its presence in the fast-growing natural products category
Personalization: CPG companies are increasingly using data and technology to personalize their products and marketing to individual consumers, meeting their specific needs and preferences. However, this trend is still in its infancy and the impact at scale remains to be seen. One example is P&G’s collaboration with Skinsei, a personalized skin care brand that uses AI and data analytics to create customized skin care routines for each customer
What are the revenue drivers
Brand recognition
Product innovation
Distribution channels
Supply chain efficiency
What are the cost drivers
Raw materials
Packaging
Distribution and logistics
NOTE: The above three categories (raw materials, packaging and distribution) often make up COGS at CPG companies and often will account for around 50% of revenue.
Marketting and advertising
Research and development
