Supply Chain Blog

FMCG Developing & Emerging Markets (D&E): Invest properly for growth

Posted by Dave Jordan on Tue, Oct 08, 2013

A number of years ago I was a science techie in a white laboratory coat trying to make detergent powder through non-standard methods - well somebody had to! After much trial and error an innovative solution was developed which resulted in significant savings and a pat on the back. The new process required the use of a specialist ingredient which was inevitably very expensive.

Crusty dinosaurs from HQ would bleat on about how you cannot use a specialist ingredient in a detergent powder as it was simply not cost effective. My standard retort was consistently “it is only a specialist ingredient because so few people buy it yet”. A little tongue in cheek perhaps but the principle was that the material would always be specialist if it continued to receive a low level of purchasing interest.

FMCG S&OP D&E markets resized 600This cunningly leads me on to profit and performance warnings by blue-chip FMCG companies. I have been working with a company that is struggling to maintain growth in Developing & Emerging (D&E) markets and has identifed S&OP as the prime source of failure. Coincidentally, Unilever recently announced that growth performance in D&E markets was below expectations, news which caused a sharp share price dip. With most companies seeing flat to negative growth in developed markets any glitch in D&E growth obviously sets the alarm bells ringing. But, are D&E markets really receiving the corporate attention they deserve?

The large (but not growing) countries in W Europe, USA etc have seemingly bottomless resources to throw at any market opportunity, cost saving or efficiency improvement project. At best, those huge financial and human resources are delivering market performance status quo. Furthermore, if negative growth is the order of the day then companies should consider whether these valuable resources could be utilised elsewhere for better return.

Some countries seem to have been on D&E lists forever - if they do mature does this automaticallly mean the end of growth? These countries receive the odd inconvenient tick-box visits from global teams but do they really receive sufficient attention? They should do if you are telling your investors that D&E markets house the few areas of growth in the current economic climate.

Perhaps D&E countries stay D&E countries simply because they never receive enough attention to develop their potential and approach mature market status. Are you investing heavily by propping up mature locations while ignoring the D&E potential? Following my detergent powder experience, if you do not develop D&E markets they will always be D&E………..

Of course, companies cannot overcome structural and political hurdles within a particular country but a realignment of resources could pay immediate dividends, literally! For example, why are D&E countries the last to receive professional coaching and guidance on global initiatives such as S&OP? If this is where you are pinning your growth hopes and pension pot aspirations then these are the places where expert resource should be allocated.

I wonder how much growth is being lost through failure to adhere to the simple, beneficial discipline of S&OP. The Unilever announcement does not specify the exact source of the performance dip but I would bet a little of my own pension pot that some element of the D&E deficit is directly related to poor S&OP deployment.

Image courtesy of Stuart Miles at freedigitalphotos.net

Tagss: FMCG, Dave Jordan, CEO, Performance Improvement, S&OP