Found this interesting read..
PARIS and NEW YORK--(BUSINESS WIRE)--Feb. 14, 2002--
Study From Cap Gemini Ernst & Young Finds Better Supply Chain Integration Can Save Manufacturers and Retailers $14 Billion
Food manufacturers and retailers face substantial consolidation and internationalization over the next five years as they innovate with brands and retail formats to satisfy changing consumer habits and demands, according to a report released today by Cap Gemini Ernst & Young titled "State of the Art in Food: The Changing Face of the Food Industry."
The 600-page report draws its conclusions from a survey of 220 leading food executives from 19 countries in Europe, North America and Asia Pacific, and detailed interviews with 65 senior-level executives.
The research shows that global brands will dominate -- 20 to 25 global brands will emerge in various categories of fast-moving consumer goods. These brands will occupy a leadership position in more than 100 countries and will be owned by approximately 10 global brand manufacturers. At the same time, manufacturers will "marry" global brands with "local jewels" to meet consumers' growing demands for local products. In addition, retailers increasingly will brand their stores and wrest more control of the supply chain as they attempt to build stronger relationships with consumers.
"For an industry where change is typically measured in decades, the pace and magnitude has really accelerated," said Fred Crawford, executive vice president of Cap Gemini Ernst & Young's Consumer Products, Retail and Distribution global practice. "The consumer is wielding unprecedented power and the need for establishing a powerful brand - whether retailer or manufacturer - grows as companies try to reach consumers in multiple regions. Understanding these trends and implementing strategies to deal with them effectively are shaping the future of the industry."
Trend-setting manufacturers are looking beyond retailers to market directly to consumers. According to the report, 75 percent of manufacturers surveyed fear the consequences of the retail channel's increasing strength.
"The lines between the food segments are increasingly blurred as both sides vie for the consumer's wallet," said Roberto Iorio, vice president of consumer businesses, Europe, for Cap Gemini Ernst & Young. "Improved customer relationship management and loyalty programs are key. Companies need to build and never deviate from their 'brand pact' with consumers."
Other findings of the study are:
Streamlined Supply Chains Can Realize Savings
The report shows that with better supply chain integration, Europe could realize cost savings of 8 billion euros by 2010, while savings in the United States could total as much as $7 billion if retailers and manufacturers worked together.
Both manufacturers and retailers agree that the industry needs a more reasoned approach to improving the supply chain through better cooperation with business partners, integrated technology that standardizes information, and greater focus on core business processes. But, according to the report, the absence of collaboration at the current time will make it difficult to realize significant cost savings. The study also finds that retailers could achieve greater efficiencies by partnering with other retailers on warehousing and distribution systems, something very few companies do right now.
Conventional Supermarkets Are Reaching the End of Their Lifecycle
Economic conditions and market efficiencies are leading to the end of the smaller conventional supermarket format, as factors such as high overhead, low volume and limited assortments take their toll, according to the report. At the same time, hypermarkets and larger supermarkets are expanding services and product mixes; discounters are moving in the direction of "quality discounting," offering higher-quality products at the lowest prices; and convenience stores are catering to "eating moments."
The report concludes that most food retailers have had little success utilizing the Internet as a viable option to reach the consumer. The research indicates that the e-commerce channel will remain a challenge and will represent no more than 5 percent of the global food business in 10 years.
The Buying Process Evolves to Meet Consumer Demands
As the balance of power continues to shift in favor of the retail segment, changes will occur in the buying process, primarily in the area of fresh and chilled products. Fully 83 percent of manufacturers and 96 percent of retailers expect the share of fresh products to increase, reaching as high as 60 percent of store sales.
Retailers will no longer buy individual products or assortments. Rather, they will buy - and control - the total process, from ingredients through production, ensuring that the finished product will meet the needs of consumers.
Strengths and Weaknesses Vary by Global Regions
While companies face the challenges that accompany global growth, each region has strengths and weaknesses that are endemic to its home marketplace, according to the report. Western Europe, for example, ranked high for efficiency, but low on service and hospitality. Southern Europe, in contrast, received high marks for quality, yet was criticized for its labor intensity. North America scored highest in service and marketing, but did not fare well on operational logistics. Asia-Pacific was recognized for its service orientation but lacked overall efficiency.
Jan-Willem Grievink, vice president, Cap Gemini Ernst & Young, who spearheaded the research project, points out that because each country struggles with its own set of weaknesses, it is important for global companies to look outside their home region to learn from the strengths of others. But the study revealed that very few enterprises know much about the strategies of foreign operators.
"State of the Art in Food: The Changing Face of the Food Industry," published jointly by Cap Gemini Ernst & Young and Dutch-based publisher Reed Elsevier. It covers seven areas in all: consumer markets, supply chain management/integration, buying markets, food safety and health, e-business, financial markets and human resource environments.
About Cap Gemini Ernst & Young
Cap Gemini Ernst & Young is one of the largest management and IT consulting firms in the world. The company offers management and IT consulting services, systems integration, and technology development, design and outsourcing capabilities on a global scale to help businesses continue to implement growth strategies and leverage technology in the new economy. The organization employs about 57,000 people worldwide and reports global revenues of about 8.5 billion euros (2000 pro forma).
--30--aw/ny*
CONTACT: Cap Gemini Ernst & Young, New York
Deborah Siegel, 212/944-6565
or
M Booth & Associates, New York
Seth Werlinsky, 212/481-7000 x126
KEYWORD: NEW YORK
INDUSTRY KEYWORD: CONSUMER/HOUSEHOLD FOODS/BEVERAGES RETAIL
SUPERMARKETS
SOURCE: Cap Gemini Ernst & Young |
