#FMCG companies facing economic downturns must focus on effective resource allocation and portfolio management to navigate challenging conditions
The past provides valuable insights into strategies that enabled companies to succeed, with Procter & Gamble transformation being a good case study going from 7 to 5 business units, from 16 to 10 categories, and from ~170 to ~65 brands while creating a dual operating model to enable growth in smaller markets
1) Organization and portfolio streamlining: By prioritizing its core brands/ categories (Household/ Personal Care: Tide, Crest, and Pampers) while divesting non-core (Coffee: Folgers, Snacks: Pringles, Batteries: Duracell, PetCare: Iams & Ekanuba, Beauty: e.g., Covergirl…) P&G was able to reduce complexity in its portfolio which in turn freed up resources and helped the company focus on its core
The sale of these non-core brands also generated significant amounts of cash for P&G, which the company could then use to invest in growth opportunities, especially in emerging markets
2) Dual operating model (Focus-centralized and Enterprise-decentralized markets) enabling a more empowered, agile, and accountable organization to accelerate growth and value creation, especially in developing markets
If investors are looking for growth, FMCG companies must be cautious not to over-diversify their portfolios and stretch their resources too thin. Effective portfolio management requires a balance between stability and growth, and companies should be strategic in their resource allocation decision
Companies need to re-learn to prioritize their source of future growth accordingly (c.f. Zero-Based-Growth in comments)
#cpg #strategy
Frederic Fernandez & Associates
Founder. Patent holder. Creative Director.
1moA good CEO makes the strategy, he doesn't implement one.