Brochures

Investing into Slow Moving Consumer Goods

The rising wealth of the BRIC countries (approx. 1.4 bn people entering the middle class between 2000 and 2020), in particular China, is challenging the consumer goods value chain along two dimensions: (1) rising demand (for consumer goods) hits limited supply of raw materials and (2) formerly established value chain relationships are being redesigned without any rules

• Many raw materials have become strategic and a bottleneck. Rising prices and volatiles put pressure on (supplier) margins and question existing business models
• Consolidated supplier industries regain strategic negotiation power, driven by additional/new demand from formerly untapped BRIC countries without established (quality) supply chain
• Formerly export driven BRIC capacities are being redirected to satisfy domestic demand

To remain part of the global game, there are five different key strategies companies start to follow resp. need to implement

• Secure supply chain and win global fight for resources and technology through a strategic set of measures (e.g. backward integration,
  long-term supply contracts, partnering)
• Compensate for higher supply cost through forward integration (cash-in part of the retail margin of products with high customer price
  sensitivity) or fully outsource production (OEMs) and switch to pure "Design & Sales" business model (retail margins give plenty of room
  to compensate for higher supply costs)
• Switch business models to a "cost plus" logic (suppliers, products with limited customer price sensitivity)
• Drive R&D/innovation to reduce dependency from limited raw materials (increase efficiency, switch from natural to synthetic materials,
  recycling, end-of-life product management, autarchy)
• Develop and implement an international growth strategy to build a sustainable competitive position also in BRIC countries