The COVID-19 pandemic has had a significant impact on the GCC consumer sector, with dramatic changes in consumer behavior and supply chain disruptions. The crisis comes after recent economic weakness in the GCC, marked by waning consumer confidence and the recent steep drop in the oil price. Although there is a surge in demand because of stockpiling for some product categories like packaged food, hygiene products, and other essentials, consumer packaged goods (CPG) manufacturers and retailers are dealing with unpredictability that is putting extreme pressure on their daily operations.
Most companies have reacted quickly by setting up crisis teams and devoting all their focus to keeping their people safe, securing business continuity, and managing day-to-day issues. Companies need to strike the right balance between solving short-term challenges and positioning themselves to rebound faster than their competition and generate future sustainable and profitable growth. Just as companies have appointed crisis teams to manage immediate priorities, they should establish a “recovery team” of senior people with strong strategic experience which can prepare the organization for the rebound and the longer-term by focusing on three areas.
- Stay close to consumers and customers
- Reassess their supply chain and build resilience
- Accept the shift toward e-commerce
Stay close to consumers and customers
First, companies must stay closer than ever to their consumers and customers. Behaviors are shifting so quickly that any traditional research will become outdated soon. Rather than relying on syndicated research and other established sources of information, companies should develop systematic approaches to analyze changing market dynamics and shifts in consumer preferences and behaviors on a continuous basis. To that end, companies can conduct regular open-ended surveys and enable their front-line sales representatives to collect key customer data and act on them swiftly. Going forward, they need to invest in robust data analytics and nurture a data-driven mindset to enable more objective and faster decision making.
Reassess their supply chain and build resilience
Second, companies must reassess their supply chain and build resilience and, in the case of CPG companies, ensure that their distributors’ networks are operationally and financially viable. Beyond that, they need to increase the visibility of their end-to-end supply chain. Equipping their organization with relevant and accurate data can help companies make the right decisions to mitigate risks and respond rapidly to any supply chain event that affects customer satisfaction, profitability, and working capital. This might be as well an opportune time to explore strategic partnerships through M&As to acquire complementary capabilities and build economies of scale.
Accept the shift toward e-commerce
Third, companies should accept the shift toward e-commerce and embark upon it. The largest long-term effect of the COVID-19 crisis will likely be an accelerated move to online ordering, which stood at a low base of less than 5% for most consumer goods in the region before the pandemic. As a result, companies must build or acquire the required capabilities to provide a frictionless online ordering and delivery experience. This is not straightforward and is costly; very few companies have managed to turn profits from their e-commerce business. Another possible approach could be to develop strategic partnerships with established e-commerce players. For example, Mondelēz International and Mars partnered with Alibaba Group in China in 2016 to launch their products on its online platform and take advantage of its marketing services, including big data analytics and consumer insights.
A common thread among all three of these measures is that they require speed, decisiveness, and resources. Accordingly, companies should get fit fast. They should set ambitious cost-savings targets for each function and business unit, along with a time frame to achieve those goals. Success requires quickly identifying which costs to cut and where to invest. As such, they should divest from non-strategic areas, and re-invest the savings in activities and capabilities that are critical and that make a difference to their consumers and customers. This should lead to a continuous cost improvement process that should be embedded in the way of doing business and in the organization’s mindset and culture.
By taking the right steps now and building for the future, companies can build the knowledge, processes, and capabilities to emerge fitter and stronger.
About the authors
Ramy Sfeir is a partner, Sami Darouni is a senior executive advisor, and Makram Debbas is a principal, with Strategy& Middle East, part of the PwC network.
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