The Digital Future: A Game Plan for Consumer Packaged Goods

"The best way to predict the future is to create it,” Peter Drucker observed. The digital revolution puts the ability to do just that within the reach of almost any company.

Consumers are already there. Aided by digital innovators ranging from behemoth Amazon to start-ups such as Blue Apron and Dollar Shave Club, consumers are rapidly changing—and, in their eyes, improving—the way that they live. They are embracing technologies, devices, and services that make everyday tasks such as shopping, cooking, and even commuting quicker, easier, more fun, and more efficient. They order online, they get suggestions and reminders on their smartphones, and they marry disparate services such as menu planning, ordering, and delivery in ways that even the service providers had not anticipated.

Consumers relish digital innovation for the simple reason that it makes their lives better, which is why digital technologies have disrupted industry after industry—media, travel, and retail, to name a few. Digital technologies empower change driven by consumer demand. Consumer packaged goods (CPG) stand directly in their path.

Countless companies are rushing to meet these changing demands. Amazon is the biggest, and it continues to launch new services and models, such as Prime Pantry and Subscribe & Save. The online pioneer has also blazed a trail for hundreds, if not thousands, of other innovative models and services. Some traditional players, too, are heeding Drucker’s admonition. Walmart’s CEO says his company is focused on “winning at the intersection of digital and physical.”

Plenty of other incumbents, however, have yet to adapt—beyond setting up a simple website or commissioning a mobile app. In an industry that is fast reaching a digital tipping point, where much of the growth will come from digital channels while brick-and-mortar sales crawl along at the pace of the broader economy, these companies run the risk of being left behind to slug it out in a slow-growth offline world.

To help CPG companies determine where their best opportunities to “create the future” lie, the Grocery Manufacturers Association (GMA) asked a consortium of leaders in digital innovation—The Boston Consulting Group, Google, and Information Resources Inc. (IRI)—to pool their expertise and undertake an analysis, including an April 2014 survey of consumers’ purchasing-pathway behaviors for online and in-store purchases, of how e-commerce (including m-commerce), omnichannel retailing, digital marketing, and other technology trends are changing the future for its members. This report presents the results of this analysis. It has three parts:

1. Our assessment of how the principal global and industry trends will reshape the sector over the next five years, especially in the U.S., into a new game for all players.

2. The implications of these trends for CPG companies.

3. A game plan for how manufacturers individually, and the industry collectively, should respond, including low-risk moves for companies to position themselves to better address emerging threats, assess digital and e-commerce investments, and organize their operations for maximum digital-commerce effectiveness.

No company is immune to the changes under way. The experience of other sectors, from media to travel to retailing, repeatedly demonstrates that early movers often establish tough-to-trump positions and advantages. Experience also shows that many companies that are slow to adapt do not get a second chance.