In 2023, we believe a two tier economy will emerge with sectors such as retail and hospitality struggling as the UK enters recession. The more resilient industries such as pharmaceuticals and some FMCG goods such as alcohol and tobacco will continue to do well, writes Kirsty Braines, CEO of Oliver Wight.
For FMGC we see opportunity as people eat out less and enjoy home entertainment and living more. The challenge for FMCG this year will be deliver the desired customer service at the right cost.
Over the last year the FMCG supply chain has been severely disrupted with events such as the Ukraine war and oil prices driving up raw material cost and transport. The economic downturn will present an opportunity for the supply chain to once again balance demand and supply. The market facing most FMCG supply chains today is supply-constrained, where supply often cannot meet demand. A recession presents an opportunity for the supply chain to once again balance demand and supply.
The themes that businesses will need to continue to be on top of will be:
1) Digitisation including the increase of cloud services and the automation this will bring. For FMCG companies that are optimising new technology this will allow them to take data from customers and consumers and link this through to their planning and execution systems and processes. They will likely have multiple systems and cloud will be the way they can link the data to produce valuable information they can act on in an integrated way. In order to keep up with the competition businesses need to ensure the technology they are using is the right one and this will be something that becomes increasingly important when managing data.
2) Data – I am often surprised at how little emphasis on ‘the right’ data some companies have. The advent of big data has made millions more data points available, but the key question is if this is driving better decision making. Just because you can access so much data does not necessarily mean you should. Often it just creates more noise rather than bringing clarity. Organisations need to be really clear on the information they need to make good decisions in difficult trading conditions. Most important is getting to a shared view, debating what to do about what the information is telling us vs who has the correct data. Organisations often become stuck in ‘assemble’ i.e. gathering the data and never get beyond that into analysis and insight, which is where the organisations that are good at this spend their time.
3) Company responsibility and sustainability – 2023 will be a test for many companies who have made commitments to ESG principles. Are they really deeply ingrained values or in fact only hobbies to be enjoyed in economic fair weather? Management teams are having to navigate turbulent times and unfortunately CSR and ESG are typically first to have their budgets cut. This is despite strong evidence that ESG improves financial performance. We are strongly advising our clients to keep to their commitments as this will help businesses keep hold of and attract a good work force, who are increasingly making employment decisions based on corporate purpose actions. The same values are also important to customers and investors. Studies show that a company reputation’s is intrinsically linked to non-profit activities and maintaining ESG commitments, and we will be strongly advising our clients not to lose sight of this.
4) Management Styles – As we continue in a rapidly changing workplace we are seeing new approaches to leadership from the C-Suite to the front line. Workplace trends like the Great Resignation have brought attention to the need for stronger, more ethical leadership. We are advising management teams to really look at how they engage with their staff. Toxic work environments will not attract talent and instead there are more positive ways to create engagement, build teams and improve productivity. The right communication, emotional intelligence and time management skills, the latter particularly in a hybrid working environment will be important.
Finally, it is important to say that I have only touched on a few themes that I think will be important in 2023 and these are general. For each business there will be other relevant assumptions and predictions that should have already been thought through such as the impact of inflation, energy cost rises and what this means for the consumer. Questions companies should have been asking include those around consumer behaviour and what types of goods they will be buying (basic, luxury, brands etc). It will also be important to consider the effect on the supply chain if companies throughout the chain go out of business.
We believe that businesses should be making predictions and preparing for any eventuality at least two years ahead. Of course, events such as covid and what we have seen over the last two years are unpredictable. It is therefore important to have the processes and systems in place that allow a business to be agile and resilient in any situation.
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