Are Blue-chip FMCG Brands the WRONG Choice for Marketing Careers in 2020?
The big FMCG brands still have an inexplicable grip on marketing. But look at results, innovation, insight & diversity — they are no longer the choice for marketers.
Results. Innovation. Insight. Diversity.
Four of the biggest buzzwords in marketing today — for good reason.
But are these the words that you would associate with what are seen blue-chip brand businesses such as P&G, Unilever or Nestlé? You would think so. These companies have been long seen as the companies that nurtures great marketers and are seen as the best places to build a career. How true is this anymore? Where is the evidence for this?
Lets start with results.
Real dollars and sense such as revenues, market share and share price — what have been the results in the last few years for these blue-chip marketing darlings?
Not great, it turns out. Not great for years. Most FMCG big brands are losing market share and underperforming on organic sales growth. Although demand for consumer goods is increasing globally, sales at 34 of the world’s 50 biggest FMCG companies grew at an annual average of 7.7% between 2006 and 2011 but that fell to just 0.7% cent between 2012 and 2016 (you might remember what was happening in the world between 2008 and 2012 — a global recession). 5%-6% was Nestlé’s annual growth target. It recently abandoned this, and recorded sales growth of 2.4% in 2017. Mondelez: 0.9%. 3G Capital took over Kraft Heinz and could only focus on ruthless cost-cutting: the results have been ugly: ‘Kraft Heinz (KHC) stock suffered a complete and utter meltdown when it reported fourth quarter results last Thursday, and with good reason. In nearly all metrics, it delivered poor operating results that reaffirmed the quickly changing tastes of consumers around the world’.
And, the big daddy of the blue FMCG marketers — Procter & Gamble? Procter & Gamble has been in the news for the last few years, but not for its results. No, because of an activist investor Nelson Peltz and his hedge fund, Trian waging the largest and most expensive shareholder battle corporate America has ever seen. P&G are accused of a decade of under performance against peers — including selling brands instead of fixing them. Add in ‘eroding market shares, aging brands with a lack of breakthrough innovations and a suffocating bureaucracy’. Sounds really bluechip to me.
How are our FMCG favourites are doing on insight and innovation?
Five year old ice-cream brand, Halo-Top ice cream grew its sales 2500% in 2017 in the US, and became the best-selling pint of ice-cream in the US last summer, beating, you guessed it, Unilever’s Ben and Jerry’s and Nestle’s Haagen Daz. Halo Top have 17 core flavours and new introductions multiple times through the year.
What was the reaction from then Unilever’s CEO, Paul Polman: “the success of the low-calorie ice cream has surprised us in the US’. Indeed, it appears that Unilever have thrown in the towel on innovation internally, and, instead, focussed on acquisitions — buying 18 brands between 2015 and 2017.
The big daddy — P&G
What about Procter and Gamble? They are known for their ability to understand the needs, motivations and behaviours of the consumer and to use these findings to build brands. P&G claim to be the first company “to conduct deliberate, data-based market research with consumers” in 1924. Earlier this year, P&G’s CFO Jon Moeller was quoted in the Wall Street Journal as saying “we’ve been unable to put our finger on why this has been,” when asked why sales were down and why U.S. shoppers continue to reduce spending on consumer goods from paper towels to nappies. Perhaps Mr Moeller should try walking out the front door of his office.
Here is another innovation P&G missed: the direct to consumer razor market. Dollar Shave Club, Harry’s, and many other me-too brands grabbed 14% of the men’s razor market up from 0% five years ago in the US. Where did that share come from? Gillette — a P&G brand! Who decided that they could not beat them (and joined them)? Unilever bought Dollar Share Club.
And P&G’s innovation ‘machine’: they spend $1.9bn on R&D per year, more than the likes of other FMCG stalwarts, Henkel, Kimberly-Clark, Colgate-Palmolive, Beiersdorf, Reckitt Benckiser combined. Number of totally new brands developed in-house or new acquisitions mentioned in its annual report as a result of this expenditure: zero. Instead, P&G’s feature product extensions of current brands such as Tide PODS and Pampers Pants. No 2500% growth rates there.
How are the FMCG blue chips doing on diversity and choosing talent?
Rather rely on opinion or second-hand research, I asked a recruiter of FMCG marketers to tell me what they see and hear when they are dealing with these blue-chip brand. Here is what she said: ‘diversity? There is no diversity. When I found incredible people and pitched these to these brands, they said they were not going to look at any body unless they had worked in other ‘blue-chip’ FMCG brands. They say ‘we only want people from these brands’. They only wanted carbon copies of themselves, those who think the same and act the same. It’s a cookie cutter mentality’.
Back to P&G. Here is a quote from their CEO, David Taylor: “we cannot bring in outside people at too senior a level or they will fail’. P&G hired about 200 external people in 2016, up from just 50 in previous years — although the total workforce numbers 95,000. The aforementioned Peltz called the culture ‘insular ‒ rejecting outsiders and new ways of thinking’ and a ‘suffocating bureaucracy’, with few if any senior management having experience outside P&G.
Why are these brands still seen as ‘blue-chip’ for careers?
Rakesh Kapoor, CEO of Reckitt Benckiser calls it as it is: “large companies are finding it difficult to outperform the markets. And the reason is large companies are facing smaller, nimbler, niched competition … a ‘one size fits all’ approach is an outdated approach.” Big brands like P&G’s that sell at high prices face increased risk of commoditisation, Amazon is making an infinite number of products and brands available at the click of a button, no longer requiring expensive retail shelf space and the likes of Harry’s and Dollar Shave Club usage of “log-ins” mean they have better access to real time data about their customers.
Contrarian US tech entrepreneur, Dave Morgan, says that ‘these companies that have been perceived as great marketers aren’t actually B2C firms, they are really B2B firms. The Unilever’s and Procter & Gamble’s of the world have been operating in a single-channel, constrained distribution model which gave them tremendous power because of their size. Their programmes were designed to keep their customers-the channel partners-happy’.
Given the track record on revenues, innovation, insight and diversity, why do these purported blue-chip brands get all the kudos from marketers? Many of the arguments for the blue chip brands come from marketers come from who worked at a blue-chip companies. Given our personal biases, of course, we are all inclined to support and defend the path that they chose. We tend to prefer people with similar backgrounds, even board members prefer directors who are similar. I think there is a grain of truth in what entrepreneur, Dave Morgan says: ‘people don’t realise that they rose to the top because they had monopoly distribution and channel power’.
So, tell me one more time why these are the blue-chip great choices for marketing careers again?
How long can this dichotomy between reality and what is a semi-religious belief about ‘blue-chip marketers’ in marketing continue? These FMCG brands face stiff competition for the best talent as they increasingly compete with smaller, disruptive, founder-led start-ups or Amazon, Facebook or Google. Accenture’s John Zealley says: “The companies that were once the ‘go to’ destination for budding brand managers are struggling to exude the same ‘sparkle’ for the next generation of talent.” As Marketing Week has written extensively about in the last few months, marketing itself is not as attractive a career as it once was. When there is so much bias about the company you previously worked for in marketing recruitment, we are reducing the marketing ‘gene’ pool even more.
In reality, these large FMCG brands are skilled at executing known business models, and that’s great. But its not exactly future proof. Given the proliferation of new brands, fragmenting consumer tastes, and the radical changes in retail, how can executing known business models be a great preparation for the future?
If razors and ice-cream market share can quickly be eroded by a new brand, what do you think will happen to the big blue-chips over the next few years?
Originally published in my column in Marketing Week