Thoughts on FMCG marketing today

GraduationLeading FMCG companies (or CPG as they’re called in the US) are regarded as ‘universities of marketing’, drawing the brightest and most ambitious graduates. But is the fast-changing FMCG world still so attractive? Here’s some insightful commentary by , president, Smith Brothers Agency…[it has an American focus, but global relevance Ed]

Fifty years ago, Mike Nichols’ The Graduate hit American movie theatres. The film’s protagonist, Benjamin Braddock, played by Dustin Hoffman, is provided with some career advice in a penultimate moment when his parents’ smugly successful friend suggests — “One word: plastics.

The moment captured the disillusionment of Baby Boomers and the desire to drop out instead of embracing a steady paycheck — and a seemingly spiritless life in chemical manufacturing.

As mortarboards fly once again skyward, what might the reaction of 2017 graduates be to a similar admonition — “Three letters: CPG“? 

While “plastics” is just funnier for some strange reason, Braddock’s disillusionment would be there if his neighbour had suggested banking, retail or engineering. There’s a universality to that moment where one asks, “Is this all I’ve prepared for?” 

If you didn’t live 1967, you probably have gleaned from Mad Men that those days were pretty heady times for CPG marketing.

Leo Burnett was churning out Tony the Tiger and Snap, Crackle and Pop for Kellogg, D’Arcy Masius Benton & Bowles created Mr Whipple for Charmin, and Doyle Dane Bernbach was helping us “Think Small” and buy VW Beetles.

TV brought the entire nation together on three channels and CPG brand building peaked. CPG stocks were valued for both their high growth and high profits.

Not so much today. Why would the best talent coming out of business school want to go into an industry most shaped by 3G’s model of consolidation and cost cutting?

While one might learn in business school that there are profits to be made on both puts and calls, I think it’s safe to say that most graduates enter business with the idea of using their skills to grow something.

And hope for a career where they can look back proudly for having created jobs – not eliminated them — to create profits.

I would harken back to Bernbach’s famous VW headline as my admonition for 2017 graduates considering a career in CPG — “Think Small.”

If growing a business is what inspires you, Nielsen’s “2016 Breakthrough Innovation Report” is a pretty good road map for where to go. Consider this highlight – of the $35-billion in CPG category growth from 2011 to 2015:

  • 3% of growth came from the Top 25 food and beverage companies
  • 23% of the growth came from Private Label
  • 49% of the growth came from the 20,000 companies below the Top 100

Innovation is inherently risky. Nielsen’s numbers show that while the preponderance of big CPG ideas are clearly coming out of small companies when you spread that growth over 20,000 businesses, the risks of riding the winner are high. But who better to take a risk and place a big bet on themselves to create their own futures than recent grads?

CPG feels very divided these days. Top companies like P&G, Unilever, and Kimberly-Clark are highly valued by a class of safer investors for the high dividends they pay. And big, risky bets in innovation are the enemy of consistent, high dividends.

3G’s Bernardo Hees, CEO of Kraft Heinz, is chafed by his reputation as a cost-cutter extraordinaire and longs for more credit as an innovator. But Hees recently told financial analysts during an earnings call, “We like renovation a lot more than innovation because the payback is a lot faster.”

It shouldn’t be a clear choice for the 2017 graduate – renovate mustard, or innovate the next Chobani.

The truth is big CPG companies need to pursue both the renovation (largely line extensions) of current brands that provides the faster payback for dividend-hungry investors and the big, disruptive innovations that attract the best talent in the world.