Type in your prompt above or try one of these suggestions
Why Partnerships Are Key for Consumer Goods Companies
A look at the pivot toward collaboration for FMCG and CPGs
The food company MARS has been active in the lucrative pet industry for decades. The company already owns approximately 2,000 veterinary practices and clinics in the U.S., known under the names Banfield Pet Hospitals, Bluepearl and Pet Partners. In Europe, MARS expanded its footprint by acquiring Scandinavian enterprise Anicura, a firm foothold in veterinary medicine and care. The Group has also set up a $100 million risk capital fund to invest in innovative pet-related products and services. What’s more, MARS conducted a three-year study to learn more about the behavior of more than 200,000 dogs—and is using those insights to become more proactive and preventative with animal care in the future.
Why the growing commitment to pet care?
First, the market potential within the pet industry is enormous—and growing at a healthy rate. Pets today are often regarded as family members; as such, their owners are more and more willing to invest in their health. In Germany alone, the pet market recorded total sales of over four billion euros in 2018—a forecast that is increasing.1 Second, the Group has understood that consumer goods manufacturers must transform in order to remain competitive. This transformation is primarily aimed at moving away from a product focus towards holistic consumer solutions.
By expanding its core business and entering new markets, MARS has found a way to evolve from a pet food manufacturer to an animal care expert—becoming one of the world's most important partners for pet owners. The company’s ability to find relevant partners, like animal hospitals and innovative start-ups that cater to the domestic animal, plays a substantial role in this transformation process.
What applies to pet food manufacturers, like MARS, is equally relevant to other product categories in the consumer goods industry. The market, formerly occupied by a small number of global companies, has become increasingly fragmented. With lower barriers to entry, agile start-ups and online retailers are entering the market—blurring the boundaries between retailers and suppliers and creating complex ecosystems with different players. This trend has far-reaching consequences, especially for traditional FMCG and CPG manufacturers. Increased competition is eroding market share and hindering growth. While current figures show a general increase in the growth rate of leading manufacturers, it is mainly due to expansion-driven mergers and acquisitions (M&A).2 In complex ecosystems, however, the main objective of an acquisition should be to optimize the customer experience, which will be the only way to create a real competitive advantage. To survive in this new reality, consumer goods manufacturers must consider the entire value chain and identify which points along the customer journey to optimize the brand experience.
Without their own sales channels, product-focused FMCG and CPG companies relied heavily on the retail trade because of its reach. Initially, this was a solid strategy. Today, however, consumer goods manufacturers are realizing they’ve lost the interface and connection to the consumer—which is essential in creating a cohesive and consistent brand experience.
To move away from a product focus, consumer goods manufacturers must identify strategically relevant partners along the entire value chain that will help them sell products while still retaining the ever-important customer connection. This change in strategy could result in competitors becoming partners and partners becoming competitors.
Consider MARS’s longtime partner Amazon, which has become one of its main competitors with its own pet food brands. MARS knew that to compete on a product level against Amazon’s convenience and price was pointless. Instead, the company set out to create its own competitive advantage and developed a new strategy that did not endanger its existing partnership with Amazon, but rather optimized it. A key element of the strategy was the acquisition of animal clinics, which created a direct interface to the consumer. Not only did this give MARS first-hand access to customer data, which can be used to develop insights for product development, but it also helped boost the company’s credibility and reputation as a total pet care partner. At the same time, the company strengthened its brand sovereignty on Amazon and other platforms through relevant content and placements.
Traditional consumer goods manufacturers will only be able to thrive in the future if they clearly define which customer needs they want to serve and transform their entire business model in line with this goal. Another key element will be to identify the right cooperation partners in order to offer a holistic brand experience across all channels. The solution is not "either or” but rather a comprehensive strategy that includes direct sales, partnerships with online and offline retailers and the development of completely new markets and marketplaces.
Related Articles
