Every industry has been affected by the COVID-19 pandemic in some way. Offices have rapidly had to enable remote working, businesses have been forced to close, and governments have had to launch radical new support packages to lessen some of the damage. Nevertheless, the economic harm caused by the crisis has been significant, with recessions being recorded in markets across the world. In the Netherlands, an economic decline of 8.5% measured in the second quarter of 2020 was the largest since records began.
While many businesses have struggled, the ones that have fared best have brought innovation to the fore. Digital tools and an openness to new business models have even seen some organizations flourish throughout the pandemic – particularly those that know their customers best. It may sound counterintuitive but disruption can allow firms to accelerate business growth – if they are willing to embrace change.
It is easy (and sobering) to list the impacts that the pandemic has already had on individuals, countries, businesses, and even entire industries. It is important to remember, however, that these impacts are unlikely to vanish completely – even if vaccination programs bring an end to the crisis. COVID-19 will continue to shape the future for many industries for years to come. Businesses must start preparing now if they want to ensure post-crisis growth.
In the FMCG space, some of these shifts are already being noted. As lockdowns have come into force, consumption has shifted from outside the home to inside – a trend that will prove difficult to shift while some form of social distancing remains in force. In light of this change, business model innovation has accelerated the growth of direct-to-consumer (DTC) channels, with companies looking for new ways of reaching their customers.
This has provided a lifeline for FMCG businesses that traditionally receive the majority of their revenue from the hospitality arena, with 80% of consumers reporting safe, easy, and convenient experiences from DTC offerings. Even so, more than 60% of consumers have highlighted costs and a lack of choice as major disadvantages of the DTC model. Clearly, there remains an untapped opportunity here for FMCG brands looking towards a post-pandemic future.
Consumer-packaged goods (CPG) brands are also likely to have noticed other trends, with customers trying new products on a greater scale than ever before (perhaps as a result of not being able to spend their disposable income on other experiences), a desire for more sustainable packaging, and shift towards convenient home-cooked meals. It’s true that some of these developments predated the pandemic but they have been given renewed impetus.
Turning crisis into opportunity
Identifying new trends is one thing, taking advantage of them is another. Across the retail sector, 71% of executives believe that the COVID-19 crisis represents one of the biggest opportunities for growth in their industry, with this figure rising to 79% in the CPG arena. But consumers will not flock to a brand if it continues to operate in the same way that it did before the novel coronavirus. Unsurprisingly, consumer confidence remains close to historically low levels – they will need convincing that an organization is worth supporting.
Innovation holds the key for brands wanting to make the most of the post-crisis growth opportunity. Companies should invest now in facilitating DTC business models, launching products, and identifying new consumer wants. In particular, larger brands can struggle to keep in touch with their customer base – something that they may need help with. At Innoleaps, we’ve noticed that larger organizations often fail to keep their customers front of mind, meaning they continue to rely on outdated marketing strategies and old-fashioned products long after consumers have moved on.
Businesses need to maintain a customer-centric viewpoint at all times to make sure they remain relevant and attractive to shoppers. But good ideas are not enough. Even among businesses that derive as much as 20% of their sales from products launched in the last three years, toplines are not growing quickly enough. Organizations clearly need support in using innovation to not only identify new customer demands but to satisfy them with high-potential ideas they can scale rapidly.
For a number of years, we have worked with FMCG and CPG brands that are struggling with business model innovation. We have supported countless large organizations in their efforts to unlock growth, using the innovation-first mindset that is more commonly seen with smaller, more agile start-ups. Working in partnership, we can help ensure that COVID-19 acts as a springboard for future success.
A look back at the global financial crisis of 2008 shows that innovation grew rapidly in the consumer goods sector in the years that followed the crash, with new product launches climbing consistently year-on-year. A similar approach is needed if businesses in the FMCG space are to thrive in a post-COVID world. Innovation is the key to unlocking post-crisis growth.
As organizations look ahead to the “new normal,” they must be open to adopting new business models and showing adaptability in the face of shifting consumer demands.