Our Service Offerings & Thought Leadership team are working closely with the University Of Bath and the students of the MSc in Operations, Logistics and Supply Chain management to investigate the trends driving changes and the common ways organisations are tackling them. Next up, we looked at how Covid-19 has transformed the consumption structure in the Consumer Goods Industry.
COVID-19 is a worldwide threat that has fundamentally changed the way we live and work. Importantly for business, it has changed consumer behaviors which will permanently impact on how, and what, we buy.
Leaders in Consumer Goods companies and their procurement departments should now be thinking of what to do going forward to navigate the impact of COVID-19 and guarantee future business success.
Consumption Structure
Although the pandemic caused surging demand in some consumer products such as laptops and healthcare items, it also brought about three fundamental and permanent changes in terms of consumption structure. Firstly, consumers are reporting higher concern for healthy and sustainable products. Thus, the COVID-19 outbreak has raised both consumers’ personal health and environmental awareness, marking an increase in conscious consumption from consumers. Second, 32% of consumers in the UK report changing to cheaper essential products1. However, different segments are affected to different extents. Whilst segments such as the cosmetics industry are being hit hard2, foods and household goods are seeing demand increasing. Thirdly, eCommerce and buying locally have become more popular channels for consumers across all sectors which will be substantially accelerating the structural changes in the product portfolio in the long term. Therefore, procurement departments should pivot plans and operations to align with companies’ strategies in response to the new demand channels in this new normal.
Case Study: Coca-Cola’s Long-term Sustainability Solutions
As COVID-19 continues to impact customer behaviors, the demand for sustainable products is growing. Procurement departments are facing the challenge of finding the right measures to counter the changing consumption structure. Portfolio revaluation presented by the changing consumption structure forces the consumer goods industry to consider sustainability at the forefront of their procurement and supply chain strategies while the pandemic is still unfolding.
In response to unprecedented challenges, Coca-Cola company quickly adjusted its procurement plans to develop and implement innovative sustainability solutions by recovering, recycling and reusing its packaging. Coca-Cola’s chief sustainability officer, Bea Perez, emphasized the importance of their sustainability goals as the business emerges stronger from the global pandemic. Coca-Cola’s goal is to minimise its environmental impact and consider sustainability in its value chain by “extracting the maximum value from materials and products while in use, and then recovering and recycling them”.
To achieve this, the procurement department adjusted its sourcing plans to different types of raw materials to produce 100% recycled PET plastic packaging. Moreover, Coca-Cola pursued collaborative supply chain management principles to proactively support suppliers impacted by the global pandemic to secure supplies while maintaining the high quality of its products.
The global pandemic has had a significant impact on consumer behaviors and buying habits. Consumer Goods leaders should reconsider their product portfolios, adjust their procurement plans and build risk monitoring settings to secure supplies in order to navigate the impact of COVID-19.
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