Developing a digital strategy becoming more important

by Keith Nunes
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The rapid pace of change in the digital marketplace is proving challenging for many food and beverage companies. Whether related to the potential for on-line sales, engaging consumers and customers through mobile technologies or social media, or developing an information technology infrastructure with the scale to support such endeavors, companies are struggling to find the best path forward in a rapidly evolving marketplace.

Two reports published this past December bring clarity to the issue. The consultancy Deloitte L.L.P. released a study titled “Digital commerce in the supermarket aisle” that revealed that while both executives and consumers anticipate on-line sales of food, household and personal care products will grow in the next year and over the next three years, consumer plans to purchase the products on-line far outpace industry expectations for both time periods. Executives expect 35% growth in the next year and 76% growth in three years. In contrast, consumers expect their on-line purchases to increase by 67% in the next year and 158% in three years, according to the report.

At the company level, the study indicates that while 92% of consumer packaged goods executives agree e-commerce is a strategic sales channel there is a lack of consistency between the expressed opinions of the executives and the readiness of their companies to execute. Only 43% of the executives think their company has a clear, well-understood digital commerce strategy.

A second report published by the Grocery Manufacturers Association in conjunction with the Boston Consulting Group indicates C.P.G. companies may be following a less than optimal approach in their information technology strategies. The report, “G.M.A. information technology benchmarking 2013: The new mission for I.T. in C.P.G.” outlines the shifting role in information technology at consumer goods companies as the pressure to support and even drive growth intensifies. According to the survey, nearly 75% of C.P.G. company chief information officers cite supporting business growth as a top I.T. objective, up from fewer than 20% who identified growth as a primary I.T. goal in 2010, the last time the benchmarking study was conducted.

For years, the mission of chief information officers at consumer packaged goods companies was to deliver efficient and reliable systems at the lowest cost. Information technology was viewed as a cost center. That view, however, is becoming outdated, according to the report.

With the emergence of new technologies — from social media to mobile devices to big data — C.P.G. companies have a rapidly expanding number of options for reaching and interacting with consumers to better understand consumer behavior. This is triggering a rethinking of the role information technology should play in capitalizing on the opportunities. And with the impact of the recession fading, companies are increasingly focused on growth and the technologies necessary to power that growth.

It may be instructive to review how the largest companies in the marketplace are responding to such challenges. Nestle, for example, has opened an office in California’s Silicon Valley with the express intent to be closer to and capitalize on digital technologies and services as they are being developed. The company said the aim of its Silicon Valley effort is to enhance existing partnerships with the world’s largest technology companies while looking for pioneers among the thousands of small technology startups that Nestle may work with.

Few companies in the food and beverage space have the resources to match what Nestle may invest in a project. But the hallmark of the digital space is an effective vision has the potential to give even the smallest companies a larger, more robust presence. The key for such an endeavor is a sound strategy and the tools to execute.
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