Exercise for SS analyst

Fulfilled by Maksym Shmalii

Exercise 1
Provide short overview of 3 McKinsey insights relevant for
FMCG industry

Digitizing the value chain

http://www.mckinsey.com/insights/manufacturing/digitizing_the_value_chain

Key ideas:

1. Digital manufacturing and design change the way how things are designed, made
and serviced. They also allow to generate, securely organize and draw insights from data.
2. To unlock the digital manufacturing potential, information systems should be open,
interoperable and user-friendly.
3. Successful implementation of digital manufacturing
Makes production more cost efficient
Facilitate innovations
Directly improve the top line.
4. Digital manufacturing creates value at points beyond the design phase for both big
corporations and SME:
Coca-Cola (Share a Coke),
Daimler (Mercedez me),
Micro-manufacturing (Etsys wholesale program) etc.

Turning pricing power into profit

http://www.mckinsey.com/insights/marketing_sales/turning_pricing_power_into_profit

Key ideas:

1. Pricing excellence is about combining effective analytics with relevant capabilities.

2. Systematic improvement of pricing capabilities leads to an increase in ROS of
2% to 7%. However, analytical rigor and practical know-how are essentials to drive both
the top and bottom lines.
3. Five steps for turning pricing into profit (growth through pricing):
Provide meaningful transparency into pricing data
Understand what customers really value
Move from sales reps to value negotiators
Provide on-the-job training to build confidence
Change the culture

Why yesterdays channel practices wont

win over emerging-market consumers

http://www.mckinsey.com/insights/marketing_sales/why_yesterdays_channel_practices_w
Key ideas:
ont_win_over_emerging_market_consumers
1. Winners rely more on quantitative and advanced data-analytics approaches to
determine their pricing strategy.
2. Success story of top 25 % consumer-product companies in Latin America:
- maintained higher-than-average unit-price growth while increasing sales at a rate above
the market average
- were around 1.5 to 3.0 times more likely than their peers to deploy quantitative and
advanced data-analytics approaches to set price levels
3. Sophisticated channel approaches are essential to stay ahead.

Exercise 2
Provide short information on specific search request

Tough choices for consumer-goods

companies
In recent decades, the consumer-

The CPG industry will look very different in just a few years. Resource constraints, new technologies, regulation and government affairs will play an increasingly central role in business.

packaged-goods industry has seen

four distinct value-creation cycles.

Today, digital technology is shaping all marke

Source: http://www.mckinsey.com/insights/consumer_and_retail/tough_choices_for_consumer_goods_companies

Changes

Implications

1. Global granular 4.2 billion people will

be part of the
growth
consuming class by 2025
discretionary income
people will

volatility
in
2. Volatile commodity
exceed
lower
middle
commodity
costs
costs
class
is going to continue
the prices of soft
commodities
50 percent of retail purchases
3. Transformative
could increase by 50 to
will be made on mobile devices by 2025
technologies
450 percent
digital marketing accounts for 22%
of ad spending (27% by 2017)

Opportunities

Recommendations

markets
niche opportunities in developed
take a more data-driven app
potential to quickly become industry
understand
shapers competitors and ow
ability to allocate resources q
in the fastest-growing markets
a key point to yield the highest

making operations more

efficient
better revenue
management

undertake rigorous risk analy

commodities across its entire su
drive a more circular econo
greater use of recycled materia

be
in a few years CPG companies will
tousing
invest in building the relev
including digital-content creatio
sensors to track consumers use of products,
marketing
and advanced data a
customize marketing or revolutionize
their
manufacturing and logistics processes

50 percent of retail purchase

global giants will
new M&A wave goes to
will be made on mobile devices
consolidate categories
be global
digital marketing accounts fo
that benefit from economies
many CPG categories
of ad spending (27% by 2017)
of scale;
remain
small, agile innovators will
both within
companies must earn the s
5. Regulatory riskfragmented
more companies
will choose tointroduce
be companies
CPG
and
new
and across
CPG companies must decide
and the expanding
proactive
and countries
collaborative
industry
associations
business
models
and capture
leading role or wait-and-see po
role of government
have
formedniches.
coalitions to
premium
tackle issues such
as front-of-package labeling
Source: http://www.mckinsey.com/insights/consumer_and_retail/tough_choices_for_consumer_goods_companies
4. Global merger
mania

Exercise 3
Keep updating files of special companies on key areas

Overall strategy has 2 distinctive

features:
combines standard and adaptive
approaches at regional markets
brands have own marketing mix and
promotional strategy
Organization
Nestle is organized in a matrix system, by
products and geography
every product line has its manager, but
also is coordinated with a manager in
charge of a specific geographical area
Foreign expansion
mainly associated with foreign direct
investment in dairy and other food
businesses
involves striking strategic partnerships
with large local companies
balances sales between low risk but low
growth developed countries and high risk
and potentially high growth markets of
Africa and Latin America

Marketing mix
Product:
different products sizes and flavors help
better provide customers with diverse
choices
newly-introduced to the market products
are being screened through high profile
research and R&D
Price:
flexible prices in global markets
highly dependent on packaging variety
Place:
general route-to-market looks like
Manufacturer Distributor
Wholesaler/Retailer - Consumer
products are available at as many as
possible wholesaler and retailer channels
distribution strategy involves breaking
the bulk
trade discounts are regularly introduced
to keep channel motivated

digital goals are achieved through 4 key

strategies:
embracing the fundamentals (creating
online communities tied to a brand or a
well-executed service app on mobile)
media productivity (various platforms for
creation different types of advertising)
external focus and innovation
rapid scaling of knowledge across the
company (viral digital communication
among employees across the globe)
separate Digital Acceleration Team works
on social media, damage control and
reputation management

Creating long-term positive value for society

cornerstone of CSR policy:
Promotion of healthy nutrition and
lifestyle
Facilitating of water catchment
sustainable management
Partnership with global organizations
(IFRC, WWF)
Nescafe IdeaX (fostering
entrepreneurship)
Nestle Needs Youth (extending new jobs
opportunities for Youth)