‘Power partnerships’: Manufacturer–retailer collaborations that work

McKinsey research shows that when consumer-goods manufacturers collaborate more closely with retailers, they outperform their competitors. We identified four principles for fruitful partnerships.
Consumer-packaged-goods (CPG) manufacturers are feeling pressure from all sides. For one, consumers are becoming more value conscious and less brand loyal. They’re also steadily shifting spending away from traditional brick-and-mortar stores toward channels with higher costs to serve, such as e-commerce. And, in part enabled by these new consumer preferences and channel trends, small brands are elbowing out bigger, established brands on retailers’ physical and virtual shelves.1
It’s perhaps to be expected that in this challenging environment, large CPG players have fought to protect their market share and margins—in part by taking a harder stance in negotiations with their retail partners. Retailers, facing headwinds themselves, have also tended to pull back from collaborating too closely with large CPG manufacturers. But does less manufacturer–retailer collaboration truly yield better business results?
Our latest research suggests the opposite. The CPG manufacturers that are clearly winning relative to their category are those that have deepened and broadened their collaboration with retail partners, forming “power partnerships” that yield meaningful growth in both revenue and profit.
That’s one of the most intriguing findings from our latest Commercial Excellence Benchmarking (CEB) survey, developed in partnership with the Grocery Manufacturers Association and Nielsen (see sidebar, “About the Commercial Excellence Benchmarking survey”). To supplement the survey insights, we also interviewed a dozen US-based CPG and retail executives. Our research sheds light on the industry’s current challenges and, more importantly, brings into sharp focus four key principles of successful manufacturer–retailer collaboration that can help address those challenges. McKinsey – Read More…