If you want to know what’s on the mind of major packaged goods company executives, there’s no better place to be than Boca Raton, Florida, in late February, where CEOs from some of the sector’s biggest ad spenders gather to update Wall Street analysts and investors with details of their annual agendas at the Consumer Analyst Group of New York (CAGNY) conference. This year’s event carried the usual boilerplate assertions—like “putting the consumer first”—but mixed among the typical slogans were key insights, like how leaders are viewing digital and e-commerce in 2020. Below, a summary:
Nearly every company voiced concern about the coronavirus. Executives from Unilever, Coca-Cola Co., Procter & Gamble Co. and L’Oreal all said they expect significant impact on their sales this quarter in China
and/or in travel retail, particularly in Asian airports. “Store traffic is down considerably, with many stores closed or operating with reduced hours,” said P&G Chief Financial Officer Jon Moeller. “Some of the demand has shifted online, but supply of delivery operators and labor is limited.” JP Morgan analyst Ken Goldman pointed out that General Mills has reason to worry, noting “nearly half of its Häagen-Dazs shops in China were closed and that hours were limited in the other stores.”
L’Oreal Chairman-CEO Jean-Paul Agon said the impact will be felt strongly in travel retail in Asia, where Chinese travelers make up more than half of airport passengers. But he also cited unconfirmed reports that e-commerce beauty sales in China are actually tracking ahead of growth rates a year ago, and since e-commerce makes up around half of the company’s China sales, that’s significant. “I think this crisis will even strengthen the position of e-commerce players in China,” Agon said. But he said the experience may be similar to that of the SARS outbreak 17 years ago, where sales were severely affected but bounced back strongly enough to still allow for full-year growth.
Zeroing in on digital
Using digital to reach more people, rather than to target heavy users or those who already buy a particular product or category, figured into many presentations among players competing in a largely growth-challenged business. Executives were singing from the hymnal of University of South Australia marketing professor Byron Sharp, whose arguments that marketers need to reach out to new buyers to foster growth rather than just targeting their current customer bases has won growing adherence in recent years.
Nowhere was that more clear than with Unilever, which after missing its sales growth targets slightly last year has adopted a five-point strategy heavy on increasing household penetration for its brands. “Increasing the mental as well as the physical availability of our products is absolutely key,” said Unilever Chief Financial Officer Graeme Pitkethly, echoing some Sharpisms. That means, essentially, it’s important to have products on shelves or anywhere people might want to buy them and reach people widely with marketing about them.
Yvonne Hsu, marketing director for Colgate-Palmolive Co.’s Hill’s Pet Nutrition, said her business has changed its mostly digital media planning to aim at reaching “every pet parent in America with our messaging” even if Hill’s plays at the high end of the market. Conagra, meanwhile, has flipped its digital spending to
81 percent of its media, compared with just 28 percent five years ago.
E-commerce still has a long way to grow
Online shopping remains a tiny percentage of overall U.S. consumer packaged goods sales, particularly in food. But it’s growing at a clip that’s unfathomable in the aisles of grocery stores, where many of these marketers do the bulk of their business.
Conagra’s e-commerce sales jumped 68 percent last year, yet are still less than 4 percent of overall sales. Overall, things aren’t looking strong for the maker of Healthy Choice and Slim Jim. Conagra warned investors the day before its presentation that it now expects so-called organic sales to be flat to up just 0.5 percent this fiscal year.
At Kellogg, e-commerce sales grew more than 30 percent, but they account for only about 3 percent of sales, said Chris Hood, president of Kellogg North America. Overall, Kellogg expects its organic sales to grow 1 percent to 2 percent this year.
Agon pointed to the huge impact e-commerce has had on L’Oreal’s sales growth—mostly outside the U.S., where overall growth has been slow despite best-of-the-decade organic sales growth of 8 percent companywide last year. E-commerce was a major driver, up 53 percent for the year for L’Oreal and now accounting for nearly 16 percent of sales.
L’Oreal is working to boost e-commerce growth everywhere, including the U.S., for example, by building its Amazon business in part by applying its Modiface virtual-reality makeup trial technology. P&G Chairman-CEO David Taylor pointed to growth and investments in a variety of startup brands, most of them sold entirely or mainly via e-commerce at this point, including Kindra products for women entering menopause and Bodewell skincare products to treat eczema and psoriasis.
Contributing: E.J. Schultz