WEBCAST 23 FEBRUARY 2011 THE EVOLUTION OF THE FUTURE VALUE CHAIN 2 2020 Future Value Chain Building Strategies for the New Decade © 2011 The Consumer Goods Forum, Capgemini, HP. Microsoft . All rights reserved 2020 Future Value Chain: Objectives and Principles Objectives - Bring a collective vision to the CP&R Industry - Ensure the Industry is best prepared to continue to meet the needs of shoppers and consumers in a changing world Principles - New report every two years - 10-year perspective - (Executive) industry expertise via workshops - Not a consultant project 3 2020 Future Value Chain Building Strategies for the New Decade © 2011 The Consumer Goods Forum, Capgemini, HP. Microsoft . All rights reserved 2020 Future Value Chain: The Future Value Chain Genesis 2016: A Vision of the Future Value Chain 2018: Succeeding in a Volatile Market 2020: Building Strategies for the New Decade 80 executive participants Two global workshops (Utrecht, NL & Chicago, USA) Follow-up: ‐ 2016 Future Supply Chain ‐ Information Sharing report ‐ New Ways of Working Together 130 executive participants Global workshop (Utrecht, NL) Asian workshops: ‐ Hong Kong (Asian region) ‐ Mumbai (Indian market) ‐ Tokyo (Japanese market) Follow-up: ‐ Succeeding in a Volatile Market 200 executive participants Global workshops (Chantilly, FR) Regional workshop ‐ GS1 in Europe (Antwerp, BE) Country workshops: ‐ Australia (Melbourne) ‐ France (Paris) ‐ Netherlands (Utrecht) ‐ US (Chicago) ‐ Mexico (Mexico City) 4 2020 Future Value Chain Building Strategies for the New Decade © 2011 The Consumer Goods Forum, Capgemini, HP. Microsoft . All rights reserved © 2011 The Consumer Goods Forum, Capgemini, HP. Microsoft . All rights reserved 2020 Future Value Chain Framework: Trends, Objectives and Tactics 6 2020 Future Value Chain Building Strategies for the New Decade © 2011 The Consumer Goods Forum, Capgemini, HP. Microsoft . All rights reserved TRENDS: WHAT IS DRIVING OUR OBJECTIVES 7 2020 Future Value Chain Building Strategies for the New Decade © 2011 The Consumer Goods Forum, Capgemini, HP. Microsoft . All rights reserved We see rapid changes in societies around the world… Increased urbanization Aging population Today: Half the world‟s population (3 billion people) lives in urban areas ‐ Close to 180,000 people move into cities daily, adding roughly 60 million new urban dwellers each year Older consumers ‐ Have substantial ecomomic power ‐ Devote greater portion of total expenditure to necessities ‐ May soon represent majority of voting public in many countries 2015: Doubling of cities > 8 million 2020: 8 Megacities (>20 million) 2050: 70% of world population lives in urban centers Example consequences ‐ Shift to smaller-footprint stores ‐ No room for unproductive inventory ‐ Supply and logistical challenges ‐ New infrastructures required 10 Example consequences – Changes to business models to meet needs of different population – Review products and processes (e.g. wider aisles, largeprint labels) – Shrinking workforce challenges 2020 Future Value Chain Building Strategies for the New Decade 11 Increasing spread of wealth 2020 Future Value Chain Building Strategies for the New Decade Shifting of economic power Middle class is rapidly expanding (mostly in developing regions) 2000: 56 % of global middle class in developing countries 2030: 93 % of global middle class in developing countries Economic powers like China, Brazil and India continue to rise China overtakes US as world‟s largest economy in 2017 India overtakes Japan as world‟s 3rd largest economy in 2012 Volatile global economy will remain the norm for coming decade Example Consequences ‐ source of growth for manufacturers and retailers ‐ Implications for availability and prices of commodities ‐ Potential protectionistic country policies 12 2020 Future Value Chain Building Strategies for the New Decade 18 8 2020 Future Value Chain Building Strategies for the New Decade 2020 Future Value Chain Building Strategies for the New Decade © 2011 The Consumer Goods Forum, Capgemini, HP. Microsoft . All rights reserved …changes in consumer and shopper behaviour… Increase in consumer service demands Increased impact of consumer technology adoption Shoppers continue to become more empowered using technology Explosive growth of mobile features and device convergence ‐ 2013: over 2 billion mobile users globally will have purchased via handsets Significant changes in consumers‟ behavior and buying behavior Crucial role of social media Exponential growth and adoption of consumer technologies drives new levels of service demands Rise of stronger web-based service economy Consumers demand 24/7 service Online sales will grow to 25 % to 30% of total retail sales (now: 4 % to 15%) Example consequences ‐ Growth of mobile interaction and commerce ‐ Consumer technology used in stores ‐ Addressing social communities ‐ Leveraging huge amounts of data ‐ Dealing with privacy ‐ Becoming more transparent and collaborative towards shoppers 13 Example consequences ‐ More demanding consumers ‐ New service models needed 2020 Future Value Chain Building Strategies for the New Decade 15 Increased importance of health and wellbeing Growing consumer concern about sustainability Shoppers want more healthy products and a healthier lifestyle Emerging consumjer segments like LOHAS (Lifestyles of Health and Sustainability) LOHAS In US are approximately 19% of adult population: 41 million consumers Sales from LOHAS expected to quadruple in five years Consumers‟ carbon footprint awareness increases significantly Regulation carbon footprint increase significantly Consumers expect governments and companies to play major role US Green marketplace grows from $420 billion in 2010 to $845 billion by 2015 Food, beverage and personal and household goods sectors particularly exposed Waste becomes key focus sustainability discussion 17 2020 Future Value Chain Building Strategies for the New Decade 16 2020 Future Value Chain Building Strategies for the New Decade 9 2020 Future Value Chain Building Strategies for the New Decade 2020 Future Value Chain Building Strategies for the New Decade © 2011 The Consumer Goods Forum, Capgemini, HP. Microsoft . All rights reserved …. and other changes in our environment Increase in regulatory pressure Scarcity of natural resources Demand larger than supply 2030: World population 8.3 billion ‐ Demand for food +50% ‐ Demand for energy +50% ‐ Fresh water demand +30% Regulatory pressure expected to increase Hot button areas: ‐ Environment ‐ Sustainability ‐ food safety Example consequences ‐ Energy revolution ‐ New Water policies ‐ Impact on food prices ‐ Pressures on food quality & Safety 20 21 2020 Future Value Chain Building Strategies for the New Decade Rapid adoption of supply chain technology capabilities 2020 Future Value Chain Building Strategies for the New Decade Impact of next-generation information technologies More synchronized value chain with greater visibility and traceability ‐ Improved collaboration ‐ New supply chain / logistics technologies ‐ Information transparency Information Technology shifts from indispensable support function to the way to become adaptive ‐ New ways of business due to next generations of IT ‐ New ways of managing business processes ‐ Major new opportunities for innovation ‐ Freeing up from current IT constraints Example consequences ‐ Need to improve visibility and traceability ‐ Need to share information over company boundaries ‐ Need to adopt right technologies 22 2020 Future Value Chain Building Strategies for the New Decade 10 23 2020 Future Value Chain Building Strategies for the New Decade 2020 Future Value Chain Building Strategies for the New Decade © 2011 The Consumer Goods Forum, Capgemini, HP. Microsoft . All rights reserved OBJECTIVES: WHAT WE WANT TO ACHIEVE 11 2020 Future Value Chain Building Strategies for the New Decade © 2011 The Consumer Goods Forum, Capgemini, HP. Microsoft . All rights reserved 2020 Future Value Chain: Four Strategic Objectives Make Our Business More Sustainable From Niche to Norm Optimize a Shared Supply Chain Collaborate Differently, Compete Differently Engage with Technology-Enabled Consumers The Consumer in the Driver’s Seat Serve the Health and Wellbeing of Consumers Focus on Quality of Life 12 2020 Future Value Chain Building Strategies for the New Decade © 2011 The Consumer Goods Forum, Capgemini, HP. Microsoft . All rights reserved 1. Make Our Business More Sustainable: From Niche to Norm Success means consumers trust our industry Retailers and brand manufacturers collaborate ‐ Tackling big challenges (e.g., deforestation) ‐ Helping consumers understand their role in living an environmentally friendly lifestyle Common measures, language and consistent messaging ‐ Helping consumers understand their role ‐ Helping to make the right decisions, enabling a significant change in consumer behavior Competitiveness delivered by ‐ Brand and store performance ‐ Breakthrough innovations improving sustainability Working with upstream suppliers to extend our influence over many other contiguous industries 13 Success will come when consumers begin to trust our industry 2020 Future Value Chain Building Strategies for the New Decade © 2011 The Consumer Goods Forum, Capgemini, HP. Microsoft . All rights reserved 2. Optimize a Shared Supply Chain: Collaborate Differently, Compete Differently The 2020 future supply chain reconsiders assumptions ‐ New parameters include: • Reduced CO2 emissions • Energy consumption ‐ Driven by consumers; they are the trigger for an optimized collaborative supply chain flow Success will come when supply chain optimization is treated from a total value chain perspective rather than from individual company perspectives 14 2020 Future Value Chain Building Strategies for the New Decade © 2011 The Consumer Goods Forum, Capgemini, HP. Microsoft . All rights reserved 3. Engage with Technology-Enabled Consumers: The Consumer in the Driver‟s Seat Consumer technology ‐ Changes lives of consumers ‐ Changes shopping journey ‐ Increases marketplace transparency Consumers ‐ Demand personalized dialogues and offerings anytime, anywhere ‐ Embrace technology quicker than the industry ‐ Digital natives are increasingly big consumer base ‐ Digital immigrants also heavily use consumer technologies The industry ‐ Needs to figure out how to effectively interact ‐ Needs to be viewed as a trusted source for information ‐ Will be more successful when companies engage consumers in new product and service development 15 Success will come when we understand how to maintain a true dialogue with consumers via their preferred channels and technologies 2020 Future Value Chain Building Strategies for the New Decade © 2011 The Consumer Goods Forum, Capgemini, HP. Microsoft . All rights reserved 4. Serve the Health and Wellbeing of Consumers: Focus on Quality of Life Health and wellbeing of consumers: physical, emotional, spiritual, intellectual and sustainable wellbeing Positive changes in consumer behavior ‐ Healthy choices available for all budget levels ‐ Information/education to make informed choices Improved availability and quality of water and hygiene ‐ Reduce diseases and infant mortality rate To be established via a new way of working together ‐ Governments, consumer goods companies, pharmaceutical companies and NGOs ‐ Enabling new business models ‐ Enabling a dialogue to collaboratively work on concrete solutions 16 Success will come when we focus on “better lives through better business” 2020 Future Value Chain Building Strategies for the New Decade © 2011 The Consumer Goods Forum, Capgemini, HP. Microsoft . All rights reserved TACTICS: HOW WE WILL ACHIEVE OUR OBJECTIVES AS AN INDUSTRY 17 2020 Future Value Chain Building Strategies for the New Decade © 2011 The Consumer Goods Forum, Capgemini, HP. Microsoft . All rights reserved 2020 Future Value Chain: The Consumer Goods Forum‟s Strategic Pillars 18 2020 Future Value Chain Building Strategies for the New Decade © 2011 The Consumer Goods Forum, Capgemini, HP. Microsoft . All rights reserved HOW TO USE THE FUTURE VALUE CHAIN IN YOUR COMPANY 19 2020 Future Value Chain Building Strategies for the New Decade © 2011 The Consumer Goods Forum, Capgemini, HP. Microsoft . All rights reserved You can already be inspired by a lot of good example initiatives across the industry Illustrative Examples Make Our Business More Sustainable Optimize a Shared Supply Chain Unilever Collaborates with Walmart (ASDA) to Create Awareness and Educate Customers on Sustainable Living Colgate-Palmolive (as many other Companies) Uses Global Data Synchronization to Standardize Business Processes, Drive Efficiency and Enable Faster Innovation METRO Group Develops a Sustainable Aquaculture Program for Fish in the Mekong Delta in Vietnam United Biscuits and Nestlé Collaborate to Generate Significant Environmental and Cost Savings Many Consumer Product Companies are Committed Towards Sustainable Production of Palm Oil Mars and Kuehne + Nagel Measure and Visualize Order Placement Impact to Gain Environmental Benefits and Improve Efficiency Coca-Cola Hellenic Runs Energy-Efficient Plants that Reduce CO2 Emissions Albert Heijn Uses Dynamic Pricing and Digital Signage to Reduce Waste on Fresh Produce Danone Works with Carrefour to Improve On-Shelf Availability and to Leverage Supply-Driven Shopper Insights Kraft Develops “Eco-Calculator” to Optimize Packaging and Track and Reduce Energy Usage for Its Products 20 2020 Future Value Chain Building Strategies for the New Decade © 2011 The Consumer Goods Forum, Capgemini, HP. Microsoft . All rights reserved You can already be inspired by a lot of good example initiatives across the industry Illustrative Examples Engage with Technology-Enabled Consumers Serve the Health and Wellbeing of Consumers PepsiCo Successfully Engages a Large Customer Base to Interact in Product Development CFBAI Initiative Seeks to Address the Problem of Childhood Obesity by Self-Regulating Advertising to Children under 12 Years Product Recall Service of GS1 in U.S. and Canada Has Helped to Build an Efficient Process for Handling Product Recalls Coca-Cola in Japan Uses Interactive Vending Machines to Increase Consumer Engagement Nestlé Helps Raise Awareness about the Importance of Proper Nutrition and Health and Wellness to Children through Its Healthy Kids Global Program Starbucks and L‟Oreal Interact with Customers through an Innovative Mobile Marketing Solution Offered by O2 Mobile in UK Hindustan Unilever Limited Educates Rural Women to Enter the Growing Consumer Market in Rural India Unilever and Albert Heijn Jointly Work on Strategic Activation Platforms, Using Shopper Insights to Drive Joint Growth Walmart Collaborates to Make Technology More Accessible and Affordable for Small Health Practices 21 2020 Future Value Chain Building Strategies for the New Decade © 2011 The Consumer Goods Forum, Capgemini, HP. Microsoft . All rights reserved How Robust Is Your Strategy? Make Your Business More Sustainable Will you drop product lines that are fundamentally not sustainable? Do you have a contingency plan for an unexpected ecodisaster or climatic disruption? Do you have programs in place to address, for example, restrictions on truck emissions, access to urban zones and noise pollution? Are you prepared to transparently report the detail of your company‟s environmental impact? Engage with Technology-Enabled Consumers Do you know how to survive a negative social network viral fan page? Is your company really differentiating between a “shopper” and “consumer”? Do you know who else is providing information about your brands or stores to consumers or shoppers? How do you create transparency with consumers while maintaining control? Optimize a Shared Supply Chain Do you still see your supply chain as a source of competitive advantage? Would you share a truck or a warehouse with a competitor? Is your supply chain able to cope with the impact of oil returning to its 2008 historical high of $147 a barrel? Or even exceeding that, and hitting $200? Are you willing to share non-competitive information with trading partners – including competitors – about product movements along the supply chain? Serve the Health and Wellbeing of Consumers Are your products creating the health crisis rather than solving it? Are you prepared to meet the new demands of older consumers? Do you know where you will get your labor force once your current labor force retires? How will you efficiently serve the underserved customers in developing markets? 22 2020 Future Value Chain Building Strategies for the New Decade © 2011 The Consumer Goods Forum, Capgemini, HP. Microsoft . All rights reserved Q&A We welcome your Questions … Three Ways Companies Can Leverage the Future Value Chain in their Own Business 1. Apply the Future Value Chain framework inside your company What are the trends that impact my company‟s objectives? What strategic objectives should we have inside our company? What tactics do we need to put into place to achieve the objectives? 2. Implement the relevant tactics and ideas from the Future Value Chain initiative Existing company programs address strategic objectives 3. Challenge yourself to see how robust your strategy really is to: Make your business more sustainable Optimize a shared supply chain Engage with technology-enabled consumers Serve the health and wellbeing of consumers 24 2020 Future Value Chain Building Strategies for the New Decade © 2011 The Consumer Goods Forum, Capgemini, HP. Microsoft . All rights reserved The program sponsors can help you with a „Future Value Chain Discovery Day‟ workshop that will lead you from Inspiration toward a concrete Roadmap Future Value Chain Discovery-day ‘Building Strategies for the New Decade’ Building Strategies for the New Decade Inspiration by concrete business solutions and best-inclass reference examples Blending with companyspecific issues and initiatives in an unconventional facilitated process Resulting at the end of the day in a high level roadmap that fits your business context © 2011 The Consumer Goods Forum, Capgemini, HP. Microsoft . All rights reserved Contact details The Consumer Goods Forum Sabine Ritter The Consumer Goods Forum +33 1 82 00 95 80 s.ritter@theconsumergoodsforum.com Capgemini Kees Jacobs Capgemini +31 653 292 832 kees.jacobs@capgemini.com Marc van der Liet The Consumer Goods Forum +33 1 82 00 95 84 m.vanderliet@theconsumergoodsforum.com Brian Girouard Capgemini +1 952 212 0417 brian.girouard@capgemini.com HP Mario Vollbracht HP +1 404 551 5872 mario.vollbracht@hp.com Microsoft Ted Combs Microsoft +1 630 725 4319 tedcombs@microsoft.com www.hp.com/go/retail www.hp.com/go/consumergoods David Bailey Microsoft +44 118 909 4566 davidbai@microsoft.com 26 2020 Future Value Chain Building Strategies for the New Decade © 2011 The Consumer Goods Forum, Capgemini, HP. Microsoft . All rights reserved www.FutureValueChain.com www.theconsumergoodsforum.com www.capgemini.com www.hp.com www.microsoft.com ©2011 The Consumer Goods Forum, Capgemini, HP, Microsoft. All rights reserved.