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How Do Consumer Goods Companies Capture Growth?

04.05.17

McKinsey identifies four major drivers.

Every consumer packaged goods company executive knows that finding growth can be like searching for a polar bear in a snowstorm. After analyzing 53 CPGs, McKinsey says it has ID'd four key drivers that separate companies that are growing from those that have stalled:


• Don’t underestimate the power of emerging markets (revenue pools are concentrated in developed markets, more than 75% of growth comes from emerging markets);


• Minimize complexity when possible (top players derive 75% of revenue growth from only 13% of their business cells); 


• Dynamically reallocate resources (the highest growth companies reallocate their resources constantly rather than making a one-time decision or conducting cyclical reviews—agility wins);


• Mix up your M&A deal sizes. (In the McKinsey analysis, companies fell into three groups—they either refrained from deal making, conducted only small deals that accounted for less than 10% of sales in the year after closing, or took a balanced approach by pursuing a mix of large and small targets. Average annual revenue growth was 11.1% for the balanced group, compared with 6.4% for companies that concentrated on small targets. The balanced players also produced greater returns from portfolio momentum and execution, according to McKinsey).