Brands' C-Suite Exodus

An unprecedented number of consumer packaged goods CEO's are stepping down in the face of changing consumer attitudes towards brands and the rising preference for private label. David Merrefield names and analyzes the motivations behind these high-profile departures.
David Merrefield
September 2018
 

The CEO of any company that has experienced declining revenues for a while may be in jeopardy. When an entire business sector is in decline, many CEOs may be in jeopardy.

The latter is certainly the case when it comes to national-brand manufacturers of consumables.

In the past couple of years, no fewer than 16 CPG CEOs have vacated their corner offices. Conspicuous among them are Denise Morrison at Campbell Soup, Paul Grimwood at Nestle USA and Ken Powell at General Mills. And the list continues to grow. Indra Nooyi of PepsiCo recently announced she’s stepping down.

And it’s possible that we’ve seen only the beginning. Activist investors are now demanding major changes at 40 more CPG manufacturing companies worldwide, changes such as CEO replacement, asset sales or mergers.

Proximate reasons behind the recent CEO churn include pressure from activist investors, board unrest or ordinary retirements. But in all instances, the affected companies have been underperforming.

That’s the case across the sector. The top 25 food and beverage companies have been losing market share lately, chalking up annual sales growth averaging just 2 percent as compared to 6 percent for the balance of the industry.

In short: Branded goods are no longer as favored by consumers as they once were.

Younger consumers tend to see national brands as vestiges of times past. Conversely, they see private brands as conferring the status of possessing unique products secured at good prices. Retailers such as Kroger, Trader Joe’s, Whole Foods and Aldi cater to that. 

Research suggests that younger shoppers are setting a trend that’s likely to continue into the future. Younger shoppers now account for 31 percent of all private brand dollar sales, counting all outlets, while older Millennials and younger Boomers contribute just 19 percent of dollar sales.

Assuming that younger shoppers’ preferences remain with them as they mature, the future of brands is apparent.

Now, returning to the CPG manufacturers, what can we expect of the new executives faced with these challenges?

Most likely they will continue to seek better ways to offer customer-preferred product, such as natural and organics. They can do that by changing current product formulations, rolling out new ones or acquiring relevant companies. But the benefits of those changes are a difficult consumer sell.

So the road for CPG manufacturers is a long one. None of this is to suggest that national brands are going away, but the challenges CPG brand owners face are growing.

For PLMA Live, I’m David Merrefield.

-30-

 

PLMALive! Archives:
the Best of the Year Past
The Fourth Revolution

The latest developments in mankind’s industrial evolution combine digital, physical and biological technologies in a manner never seen before. Move over water, steam and electricity. Veronica Carvalho examines how new tech will influence consumer shopping habits ‑ and its impact on the retail environment. Click here for video.

Are Supermarkets Becoming Obsolete?

Supermarkets are facing plenty of threats these days—from online competitors, German discounters and casual restaurants. Tim Simmons spoke with Fred Morganthall, former President of Harris-Teeter and Executive Vice President of Kroger, who believes that supermarkets can meet all these challenges if they really pay attention to what shoppers are telling them.

China's O-2-O Could Change Retailing

If you haven't heard about O-2-O, you will. China's e-commerce giants — Alibaba, Tencent and JD — are creating a new form of retailing with smartphone ordering, ultra-modern stores and delivery to customers within five hours. Kroger may already be gearing up for O-2-O in the future. Retailers like Aldi could be perfect for the concept. Join news anchor Jodi Daley and PLMA president Brian Sharoff as they analyze O-2-O. Special reports from Roy White in New York and Emily Wu in Shanghai.

Summertime Is Relaxation Time

Yes, summertime is time for relaxation and catching up on some of the things that you missed during those hectic days at the office or traveling. PLMA Live understands and suggests two newsdesk reports that will help you catch up. First, there's PLMALive's report on Nielsen's study about future store brands growth. Second is Costco and their strategy to deal with e-commerce.

What Do Consumers Really Want?

Consumers are unpredictable, so it isn't easy to keep up with the latest product trends. Tim Simmons interviews Tom Vierhile, Innovation Insights Director at GlobalData. Vierhile says this year consumers are full of contradictions as they decide what new products they want to buy.

What's the Future of Online Shopping?

Take a look at Great Britain, where online grocery retailing has been growing for two decades. Justin King, former CEO at Sainsbury's, one of Britain's largest supermarket retailers, says that while most shoppers there use online to buy groceries, they aren't abandoning brick and mortar stores.

Top Retailers Bring Adventure to New Categories in Store Brands

The great outdoors is a land of store brands, led by chains like Cabela’s and Bass Pro Shops. After their $5 billion merger last year, Christopher Durham explores how these retailers use their own brands of gear, clothing, and even boats to make this segment a powerful contributor to the world of private label.

Science and Research: Real Ingredients Mean Real Sales

As more consumers adopt healthy lifestyles, ingredients like sodium benzoate are being replaced by natural additives like raisin juice and vinegar. Dr. Kantha Shelke explains that it’s not just food. Dietary supplements, pet food and even skincare products are all getting a natural ingredients makeover.

Fermentation Adds Fizz - and Buzz ‑ to Products

Kombucha, Korean-inspired kimchi and even beauty care products are rising to the top of the food industry headlines. It’s all about fermentation, which adds good gut bacteria inside and absorption efficacy outside. Dr. Kantha Shelke explains how fermentation appeals to health-minded consumers, and the way it can help store brands manufacturers.

A Toast to Private Label Wine
Increased wine sales are nothing to sniff at. Discounters like Lidl and Aldi are making store brand wines not only acceptable, but preferable for price and quality. Judith Kolenburg in Amsterdam previews PLMA’s 2018 Salute to Excellence Wine Awards where more than 30 retailers received recognition for private label achievements.