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BW Businessworld

What’s Next for CPG: Embracing The Altered Realities

As the pandemic subsides, CPG companies are looking forward to making reasoned, data-driven decisions and applying their investments in the best possible way. Companies which were earlier dominated by traditional distributional networks have now leapfrogged to a channel-agnostic model.

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In the wake of the pandemic, the CPG industry has witnessed an unprecedented change. As the pandemic subsides, CPG companies are looking forward to making reasoned, data-driven decisions and applying their investments in the best possible way. Companies which were earlier dominated by traditional distributional networks have now leapfrogged to a channel-agnostic model.

In a recently concluded roundtable organised by BW Businessworld with some of India’s top finance leaders associated with the CPG industry, a wide range of topics were discussed, including the transformation of the CPG industry in recent years, predicting unpredictability, key learnings from the pandemic, and upcoming digital priorities.

Transforming to become more agile and nimble:

Ankush Jain, CFO at Dabur India Limited, highlighted that the past couple of years have been extremely challenging as uncertainty lingered on in every sector.

Jain said, “In the last couple of years we have been living in a VUCA world with volatility, uncertainty. This has led to uncertainty in demand and supply chain as well. As a result of the pandemic, there has been a contraction in demand, in particular, discretionary spending by consumers, and unprecedented inflation. However focused execution and value chain reengineering across the business has kept us resilient.”

These developments make it urgent for organisations across sectors to transform how they operate in order to make themselves more agile and nimble.

Jain highlighted that despite several hurdles, they were resilient enough to come up with double-digit strong growth in the last 2 years. He commented, "There were two broad aspects to our transformation – cultural and behaviour, and structural."

Jain mentioned that as an organisation they became extremely agile and nimble as the timeline for the new products that they launched was reduced by almost half.

He underlined, "The entire concept, design, approval, and the system of the workforce were developed to become extremely robust and fast. We also decided to have an hour-long leadership discussion daily instead of once a month to connect better, save time and take faster decisions in a collaborative approach."

Need to be comfortable with the idea of uncomfortable:

Sumedha Varma, Director, SAP Concur India, pointed out that historical successes do not guarantee future triumphs.

Sumedha said, "Increasing inflation, supply chain constraints, a tight labour market, ESG expectations, and regulatory uncertainty are continuously putting pressure on prices, and hence continuously altering the CPG industry. Also, consumer’s buying habits have been disrupted by digital technologies, which have changed the – what, where, how, and whom do they buy from?"

Sumedha underlined the fact that companies are under immense pressure to meet the rapidly developing needs of consumers, investors, employees, etc., and as a result, the CFOs must be comfortable with the idea of being uncomfortable.

Sumedha commented, "CFOs today need to work on incomplete data based on trends and exploratory studies, and also sense marketplace anomalies which may threaten the company’s business model itself. To acquire this much-needed insight into the future, CFOs are turning to scenario analysis. They are looking at a variety of situations, largely on the negative side, to prepare for the worst.

"Scenario planning is creating different plausible versions of the future, and CFOs are planning actions around those scenarios. As the future unfolds, organisations can act with greater confidence, or efficiently course correct when situations change," she added.

At the same time, CFOs need to nurture their capabilities to act promptly, build cognitively diverse teams, up-skill their teams, and also invest in digital technologies that can help them scan diverse sources of data using AI and offer insights using predictive and cognitive capabilities.

As Sumedha explained, "To sum it up, CFOs' willingness to learn and adapt is a key component in succeeding in an era of exponential change, and managing unpredictability predictably."

Alterations witnessed by the CPG industry:

Nidhi Batavia, CFO at Sanathan Textiles, shared that they have benefited a lot in terms of revenue and profit growth on account of several factors, including China plus One factor, and growing demand within India itself.

Batavia said, "The Indian population is becoming much more fashion-conscious. Also, with international brands coming into India, there is a demand for a different variety of products for athleisure, home textiles, fashion apparels, etc. which in turn increases the demand for different varieties of yarns.”

Batavia highlighted that the focus of the management is to ensure continuous innovation in the production space and at the same time emphasise measuring productivity at each level of production. She commented, "Though we took these measures earlier too, now it shall be more streamlined and automated.”

Batavia suggested that in today’s scenario, managing the supply chain and warehousing is of key importance. She said, "As customers want to track every milestone for deliveries, we also want to keep track of our raw material purchase."

Sumedha Varma emphasised that one of the biggest alterations that one has observed in the CPG industry is the shift in consumer behaviour, patterns, and personalization, along with seamless omni-channel experiences.

Sumedha mentioned, "These alterations are changing top management priorities and redefining the strategic direction of the finance function. As a result, what we have observed is that the companies are focussing on several different aspects."

"This includes improving operational performance for which real-time analysis of business performance is required- especially for supply chain management, as it accounts for more than 70 per cent of the cost in this industry. Using predictive analysis, CFOs should be able to identify, anticipate, and mitigate supply chain risks, and also identify opportunities at the same time," she added.

CFOs do recognise that data is the new currency in today’s world. As Sumedha pointed out, "CFOs see the value of managing data as a strategic asset rather than a transactional activity. As a result, they are championing technologies and analytics that deliver timely and accurate insights."

Besides this, CFOs are preparing holistically for the future workforce to shape a finance department that can support their forward-looking vision. As Sumedha mentioned, "This entails the use of automation and AI, determining skill gaps, and carrying out reskilling programmes such that digital finance can be supported."

Also, for reporting on ESG compliance, CFOs are designing and implementing sustainability dashboards for performance tracking and reporting. Sumedha added, "CFOs are integrating financial reporting with sustainability reporting, and also including ESG criteria as part of performance management to incentivise change across an organisation."

Technology has proven to be an invaluable asset:

Pawan Agrawal, Group CFO at Marico Ltd. highlighted that a lot of learning took place in the past couple of years, but the most critical aspects were agility and adaptability.

Agrawal said, "In the earlier years, when you made a strategic plan, it would run its course for 3-5 years. Now, if you make a plan for 3-5 years, it may become irrelevant in the next 4-5 months. For instance, when we were about to adopt an operating plan for FY 23 towards the end of February, the geopolitical tension came up, and the crude oil prices went up by 60-70 per cent. As a result, we moved to quarterly and monthly plans."

Technology has always been proven to be an invaluable asset in maintaining business continuity. As Agrawal pointed out, "If this pandemic had hit us two decades ago, we would have fared a lot worse. One would not even have thought of working virtually and achieving what we could achieve. Adoption of technology across verticals in an organisation is of prime importance."

Any adversity brings new opportunities too. Agrawal underlined, "One needs to have an opportunity-seeking mind-set while working in a business. For instance, in the last couple of years, we have seen that a lot of consumer behaviours have changed. You must adapt to changing consumer behaviours and make the necessary changes to your product portfolio. The same principle applies to emerging business models and supply chain models."

Challenges to approving technological spending:

Vidhya Srinivasan, CFO at Bata India, mentioned that the sheer pace of the number of initiatives taken in the technological sphere is unprecedented in the past 25 years of her career.

Srinivasan said, "Whether, from a CRM standpoint, e-commerce standpoint, in supply chain transformation, legacy modernisation, data warehousing, a lot of change is taking place,"

As a result, technological spending has indeed accelerated in the past couple of years, but the real challenge is prioritisation. She said, "There are 10 things you can do, and those 10 things have a certain amount of money in terms of investments. Also, manpower is required to implement it from both the technological as well as the business aspect. Attracting and retaining the right talent is a major problem.”

Srinivasan highlighted, "As far as prioritisation is concerned, we should ensure that we prioritise critical projects and ensure successful on-time implementation leading to business results.”

Biggest trends to impact:

Suriyanarayanan, CFO at Kaleesuwari Refinery, underlined that customers go inside a shop with a prepared mind. They know what to choose; they only focus on the price of the product alongside its shelf price.

He said, "For instance, if a product has a total shelf life of 6 months, people will not purchase the product if only 1-2 months are left before the product expires, but if 4-5 months are left, they will go ahead and buy it."

Suriyanarayanan underlined that the pandemic had a major impact on the way consumers shop. He commented, "No one wants to visit a supermarket frequently given the social distancing norms. Earlier, a person used to visit a supermarket and purchase one entity of 5-litre sunflower oil, but in today’s date, one can go and buy 4-5 entities of 5 litres each."

Every industry is trying to match the changing requirements of the customer, as the customer is the king. He mentioned, "Online reviews in today's date are very important, as customers do focus on the reviews before buying a product."

Suriyanarayanan highlighted that CFOs today are organising business strategies and outcomes. He pointed out, "Unlike earlier times, the CFO is not sitting in a room and watching actions unfold, but he is himself fully involved, especially with the digital developments including AI and RPA."

He said, "CFOs have complete and real-time data, and they use the data for informed decision-making. If one makes a wrong decision, you will never be in the market after a few years, because competition is increasingly rising."

The panellists concluded the discussion by agreeing upon the fact that business leaders need to increasingly adopt technology in order to explore more opportunities.

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cpg finance transformation