“Growth is a must”- this is what the retail and industry say with one voice. Its leaders unveiled their fears but also their vision for regaining growth, at the ECR Conference in Bruxelles, in front of 800 people gathered from all around the world between 5-6 of April.

But how can companies stimulate the categories development in a global market impacted by tremendous political turbulences, natural disasters, spiking commodities and energy prices, in the context of a shaking economic recovery worldwide? “Just a few weeks ago I received a note from one of the best geopolitical risks experts in the world, highlighting that we are facing a global environment with the broadest, most volatile and impactful political risk that we have ever seen in the 20^th century. We live in paradoxical times: many of us see enormous challenges ahead, in the next 10 years, but in the same time we see tremendous opportunities for reinforcing our brands and our companies. We want to embrace the future and make it better than how we found it”, said Muthar Kent, the President and Chief Executive Officer of The Coca-Cola Company.

In the globalisation area, demographic changes and the redistribution of the wealth generated by the rise of the emerging economies are now reshaping the fast moving consumer goods industry. They are dictating retailers multi-channel strategies and a closer collaboration in the supply chain.

Probably the most impactful megatrend for the consumer goods industry is that there are about a billion of people around the world entering the middle class by 2020 and 50% of this new wealth will come from emerging nations. “This fundamental change, including the rise of the new generation and global competitive companies emerging from these new markets, will have huge implications for all of us”, outlined Muthar Kent. As well as the massive urbanization, as the world moves from farms and agriculture areas to big cities. Going further, the forecast for 2050 is that three-quarters of the world’s population will live in cities at that time. When people move to cities they also change their diet, and this might be an opportunity for the manufacturers and retailers.

Another fundamental shift that will impact the industry is the consumer reset: priorities, values and expectations will change in the next decade. By 2020, it is estimated that one third of the consumer purchases will be conducted online. In FMCG sector, the weight will be smaller than the average, but the trend is the same.

What will never change is the aspiration for a better lifestyle, even if time pressure is dramatically increasing. “Consumers expect an engage with the brands in a dialogue, as opposite to the monologue we used to see in the past. Therefore, we need to develop our platforms which allow consumers to express themselves, to create content about our brands”, completed Muthar Kent.

But with more people in the urban areas and more wealth in the world, manufacturers will have to face a constant scarcity of energy and natural resources. Furthermore, outside of Europe the population is still rising. “Up to now it used to be cyclical, now I think it is becoming constant. Many of the supply chain disruptions we see today are the result of natural disasters and political events”, added Muthar Kent.

IGD data shows that over the last decade, world oil consumption increased by 17% and the demand is still rising. China is now the world’s biggest market for cars and, yet, there are still only 30 cars per thousand people there, compared with 750 in the United States. According to Shell, by the end of this decade oil companies need to find four new Saudi Arabias to keep up with oil demand.

“But there’s one resource even more precious than oil and that is freshwater. Only one part in five thousand of the world’s water is usable freshwater. And the demand has been growing at more than twice the rate of population”, highlights Joanne Denney-Finch (IGD).

In this more complex environment, companies need a new vision of the value chain, they we need to create inspiration to grow together with their business partners, according to Muthar Kent. “Collaborative strategies across the value chain have never been more important as they are now”, he added.

The representative of the bigest retailer in Europe raised the same question: “The real issue is: How can we drive growth? How can we do a better business with our suppliers?”, said Lars Olofsson, Carrefour Group Chief Executive Officer.

Not only BRIC is the playground for growth

“Our age of prosperity is under threat. What big retailers and manufacturers try to do now is to keep an opened mind about what are the best options to drive growth”, declared Joanne Denney-Finch, IGD Chief Executive Officer. Is BRIC the answer for growth, the great Bonanza? “In the media, we always see BRIC (Brasil, Russia, India and China) mentioned. But if we look at all big global retailers, it is quite clear that they consider a lot of different expansion opportunities, whether they look to BRIC or to other emerging markets, such as South Africa or Indonesia”, she added.

Ignacio Gonzalez, Commercial and Group Merchandise Director at Carrefour, has pointed out the increasing importance of Africa in the global industry. “India and China are two of our key markets for expansion. Furthermore, many of our supply sources are located in Asia. But Africa is waking up and we see it more active “.

In Europe, most of the big retailers and manufacturers are now finding big challenges in getting the level of sales growth they have experienced before. For a 12 year period from the mid ‘90s, European consumption grew by almost 4% a year. Now, it is striving to return to growth.

Retailers rely on the eastern European emerging markets, such as Russia and Czech Republic „which are still developping well”, according to Lionel Souque, Chief Representative Supermarkets & Hypermarkets Germany at Rewe Group. These emerging markets are seen as the solution to ease the pressure on sales growth coming from the Western part of the continent.

“Europe is not dead. There are still growth opportunities here, but we need to work hard to grab them”, said Laurent Freixe, Executive Vice-President and Zone Director Europe at Nestle.

“If Chinese people are getting richer, that doesn’t mean Germans are getting poorer. I am confident that we can grow the European market”, argued Jan Zijderveld, President Western Europe at Unilever.

Nevertheless, European companies must not ignore the increasing competition of BRIC investors in their home markets. Just as companies like Toyota, Sony and Samsung first learned from the West and then took Western markets, the same could happen in FMCG sector. “Consumer goods companies from China, India, Russia and Brazil have the potential not just to win at home but also here, in Europe. Our companies will have to compete hard to win”, warns Joanne Denney-Finch (IGD).

Better focus in expansion

It is most likely that global retail groups take into consideration all the world regions for their development, but the focus is clearly defined in their expansion strategies.

“Wall Mart – the number one food retailer worldwide – is very focused on areas such as Latin America and China, but it is also looking at South Africa. Tesco, the biggest British food retailer, has a very consistent strategy: there are some key countries targeted, such as Czech Republic (where the retailer recently acquired a convenience stores chain). Convenience is another key element of its international strategy”, declared Joanne Denney-Finch.

Mergers and acquisitions are redistributing retail powers. In the recession, it is easier to get better deals when you acquire companies. For X5 Group – the bigest Russian retailer – mergers and acquisitions were the key element for its fast development in a challenging economic environment. Now, Eastern Europe is the stake in its journey to becoming the number one European retailer. The region is, at present time, on the spotline for Delhaize Belgian group as well, which recently acquired the Serbian giant retailer Delta.

Big retailers think small

In Western Europe, convenience stores segment is growing faster than the overall market, due to shopper preferences. “First of all, there are challenges driven by the increasing oil price. This is why we see the growing number of shoppers online. The convenience stores are now attracting more shoppers in Western Europe because they want to buy what they need, not “just in case I will need that product”, explains Joanne Denney-Finch. Consumers are now looking for value and convenience, according to Andrew Morgan, the President of Diageo Europe. This is why those retailers involved very much in the hypermarkets segment, such as Carrefour, are now looking more at ways to develop convenience stores and on-line platforms.

When it comes to new markets expansion, flexibility in stores format is the word for big retailers. “We see many experiments in stores format all across Europe”, outlines Joanne Denney-Finch.

What’s on the sustainability agenda

In the retailers sustainability agenda, increasing productivity is amongst top priorities and reducing waste is the key element. “We need to talk about waste in the supply chain. The industry leaders must take the sustainability issues seriously, as Governments and Non-Profit-Organizations cannot act alone to reduce CO2 emissions and to preserve row materials sources”, declared Chris Tyas, Head of Supply Chain Europe at Nestle. Nestle concrete actions taken in this respect include identifying the sustainable row materials sources for each category in the company’s portfolio and finding ways to reduce row materials consumption in the production process.

In UK, there are retailers and suppliers initiatives to reduce the number of vehicles on the road and some collaborative projects, as well, aiming to improve and reduce packaging materials.

“The good news is that companies collaborate more on the strategic level (therefore on long term), and not only on the operational level”, declared Chris Tyas (Nestle).

One of the key targets of the strategic collaboration between retailers and suppliers in Europe is finding ways of increasing categories. In Eastern Europe, such projects are just at the begining phase, according to Xavier Hua, Manging Director at ECR Europe. “ECR Europe purpose is to stimulate the collaboration between manufacturers, distributors and retailers and there are two main directions of our actions: category management and supply chain. We see big opportunities to develop our presence in Eastern Europe by adapting project already implemented in Western markets. In the next 2-3 years I expect to see many projects implemented fast and easily in these emerging markets”, he added.

Mihaela Popescu