1/ One of the interesting dynamics in CPG is the tension between extreme optimism and morbid fear that is present throughout the industry. Optimism b/c of incredible innovation and growth of challenger brands. Fear because many don’t know how to play it.
2/ I’m seeing more fear, throughout the industry, than I’ve ever seen in my career- in this or in any industry.
Fear is a pretty powerful motivator. Some would argue it is the most powerful motivator.
psychologytoday.com/us/blog/the-ma…
Fear is a pretty powerful motivator. Some would argue it is the most powerful motivator.
psychologytoday.com/us/blog/the-ma…
3/ In CPG fear is causing strategics to pay acquire companies for the sake of making a move, any move, to slow the onslaught.
Does Kraft in their heart of hearts believe that Campbell Soup will help them grow to meet the needs of tomorrow’s consumers?
Does Kraft in their heart of hearts believe that Campbell Soup will help them grow to meet the needs of tomorrow’s consumers?
4/ Fear is also causing paralysis for many. Here is a quote from the #2 at a $10b public company to me recently: “every day I wake up an our business is just a little less valuable than the day before. We don’t know what to do.”
5/ They are trying to steer a ship, while it is sinking because of holes that can’t be patched…. and the competitors are flying planes.
6/ I see that fear in almost every conversation I have with CPG incumbents. That might be public CPG brands that are terrified of getting eaten from below. Or it could be retailers that are struggling to know how to deliver innovation in limited shelf space w/o good data.
7/ The incumbent data providers are terrified that their data has been massively commoditized and that it is focused on the largest companies/retailers- but misses the long tail. Their customers care about the long-tail.
8/ Many of the incumbent PE firms have no idea how to put money to work. They keep firing whoever is running consumer with the hopes it is that person’s fault and not something more structural. They are wrong- it is structural. The interesting stuff is happening underneath them.
9/ Want evidence of that last one? How many CPG deals in North America would you guess KKR has done in the past let’s say 5 years.
kkr.com/businesses/kkr…
kkr.com/businesses/kkr…
10/ Trust me- having interviewed people working in consumer/retail for the PE firms over the past few years - they are terrified.
Do the same search here at Carlyle. If you don’t think those mid-year reviews are tough right now, you crazy.
carlyle.com/our-business/p…
Do the same search here at Carlyle. If you don’t think those mid-year reviews are tough right now, you crazy.
carlyle.com/our-business/p…
11/ Fear. Absolute, unmitigated terror.
Why? Well I think one reason the fear keeps building each month is related to #7 above. Opaqueness drives fear. A lack of data drives fear.
Why? Well I think one reason the fear keeps building each month is related to #7 above. Opaqueness drives fear. A lack of data drives fear.
12/ Said differently. Data provides clarity. The possibility for a roadmap to success, to create your own destiny. Data provides hope.
13/ So what data do incumbents (CPGs, retailers, asset managers/PE firms) all want?
First- They want far breadth. For example, @iriworldwide and Spins data cover roughly about 10k-20k co's (+/-)
First- They want far breadth. For example, @iriworldwide and Spins data cover roughly about 10k-20k co's (+/-)
14/ btw- they also only track the companies sold in the retailers they have taken the time to structure a formal partnership with. There are roughly 1.3 million consumer and retail companies in the US. Got it.....so they cover 2% of the market? Ok sweet.
15/ Second – incumbents want predictive analytics. In turns out that the data CPG data providers sell is very very VERY poor at predicting the future. So their data is marginally good at explaining the past for about 2% of the market………great. Helpful.
16/ The thirst from CPG incumbents for transparency, for a roadmap, for hope – is palpable. They need data solutions that will look very different than the current offerings.
Those solutions will come.
Those solutions will come.
17/ Beyond data solutions, incumbents must figure out how to invest/own brands that cap out at $500m in rev. That is reality. Consumer tastes are fragmenting- consumer products of tomorrow will be far more targeted than of the previous 20 yrs, and will tap out at lower rev ranges
18/ That makes for a fantastic opportunity – to own a collection of brands which together attack a market- rather than relying on one monolithic solution.
19/ So it isn’t Unilever losing market share to 1 competitor, it is losing it to the 200+ competitors that are each attacking different parts of Unilever. Imagine owning those 200? Now that feels pretty good.
19/ Dear KKR/Carlyle- the solution is to focus on investing $1b across 200 companies and riding their collective wave. Don’t wait another 5 years to find some mythical consumer company at the stage you’ve been used to since Nabisco- that time isn’t coming back.
20/ The opportunities are amazing – but it relies on thinking very differently about the world.
Something that fear often prevents.
Something that fear often prevents.
