The Consumer Packaged Goods (CPG) industry is a diverse industry going through immense change right now. Below is the first of two blog posts where we will examine how leading CPG companies are addressing this change and can use Quality Management Software to reduce risk, become more efficient and to help grow and protect billion dollar brands. At a high level, the CPG industry ranges from companies that produce food, to cosmetics, to diapers, to soap, to razors, to batteries; and everything in between. The CPG industry is also dominated by large global companies like Proctor and Gamble or Unilever and for these companies to compete effectively it is all about building scale and Billion Dollar Brands.
To successfully build and grow these brands, CPG companies typically take a portfolio approach to managing their brands and focus on strategies that enhance brand loyalty, spark innovation, or help open new global markets. Although once a company has effectively built a brand, and often even before, effort and resources should also be allocated to preserving brand equity and managing the risk of non-compliance, poor quality, or recall type events.
Managing Risk to the Brand
A quality issue, non-compliance event, product recall, or consumer safety issue can all critically impact a brand if not handled properly. The impact is almost always revenue first but if risk is not properly mitigated and quality is not managed well, the impact can quickly become a brand issue as well, which is much more damaging in the long run.
A great example of how having a good quality system in place can save a brand was the 1982 recall of Tylenol products from the shelves. This recall immediately hit the company for over $100 million dollars of products being pulled from the shelves but because J&J quickly and honestly communicated to the public that their quality systems were up to the task of remedying the situation the revenue hit was only short term and the brand survived.
A more recent example again comes from a related industry, automotive. In 2009 Toyota had to recall huge numbers of cars after multiple crashes and deaths because of unintended acceleration hit the mainstream media. In this case it probably can’t be argued that executives handled the situation in the best way possible but again it can be argued that because of the public’s belief in quality management at Toyota the recall was only a short term hit to revenue and not a long term hit to the brand.
But the question is if CPG companies have made the same investments that Life Sciences or Automotive companies have. Unfortunately, for many companies, the answer is “No” at CPG companies and it is time to start focusing on a lack of supporting quality systems as a major risk to the company. Luckily, as more and more CPG companies have become large conglomerates it is not uncommon for the same company to have a Life Sciences arm and a CPG arm. At these companies, we are starting to see a sharing of best practices across divisions and the roll out of Enterprise Quality Management Software (EQMS) at these companies.
Stay tuned for next week’s part II where we will explore the role Enterprise Quality Management Software (EQMS) can play in addressing the challenges above.