Paul Morrison
We will delve into the wonderful world of retail and consumer goods, and our mission is to spotlight the latest strategies, trends and innovations in this evolving sector. To help us do this, each episode will feature an industry expert or leader sharing their insights on what it really takes to succeed in this hypercompetitive marketplace.
My name is Paul Morrison.
I lead the WNS Retail and Consumer practice in Europe and for today's session, Plug-and-Play CPG.
I am delighted to be joined by my colleague Jason Evans, direct from Cincinnati, Ohio. And Jason, very briefly to introduce him, is a Senior Vice President at WNS. He's an expert in transformation and has spent decades helping some of the world's great consumer brands with strategy, operations and change.
So Jason, great to have you on the podcast and really appreciate your time. Perhaps you could say hi and then give our listeners a bit about your background and journey in the CPG space.
Jason Evans
Sure.
Thanks, Paul.
Happy to be here and welcome everyone.
It has been a 20-plus-year journey for me in the CPG space, in particular with large consumers. And certainly, the topic of the day is something that's kind of near and dear to me having gone through a number of transformations of larger organizations as they looked at both acquisitions of additional brands or business units as well as kind of the divestiture aspect of things as well, which many times people don't spend a lot of time focusing on.
Paul Morrison
Super.
So, you've been through the life cycle a few times, and I should just ask a question. Our listeners may be wondering if you live in the hometown of the world's largest CPG company. Is that a coincidence, or just very good long-term planning?
Jason Evans
No.
And certainly not a coincidence.
Have had a number of different occasions to support the big boys here in Cincinnati in both acquisitions as well as divestitures as well as just transformational programs and processes that have gone on through their organization over the years.
Paul Morrison
Yeah.
Jason Evans
Many, many and an ever-evolving organization, to say the least, in terms of how they look at things and how they continue to progress forward.
Paul Morrison
Absolutely.
Absolutely.
Well, Jason, let's dive into the main event you recently authored - a paper on the subject of Plug-and-Play for CPG that's available on the WNS website for our listeners.
Could you just set the scene on Plug-and-Play CPG?
What is it? And maybe give us some examples.
Jason Evans
Yes.
So, I mean, what really is Plug-and-Play?
I think it's really, it's kind of a framework that organizations are continually looking to improve upon and put in place, many of which have defined it already, many of which are in the process of trying to define it. In particular, due to where we kind of stand from an economic and conditions point of view right now, where you know inflation and cost of goods are really being impacted in large CPG organizations. The ability to continue to push that cost along to the consumers becomes harder and harder, and efficiency gains from within have become a much bigger part.
Of what these organizations are looking at and their ability to grow existing brands versus going out and acquiring fast-growing smaller brands that they can scale, this becomes a much bigger part of what they're looking to do and whether it's Mondelez, Unilever, Procter and Gamble, you can look kind of across the board and looking at what their CEOs are talking about right now and it's how quickly can they acquire and scale a brand or a new business unit or a new business sector.
Paul Morrison
Umm.
Jason Evans
And just as importantly, if they determine that something within their portfolio is no longer core, how can they carve that out quickly and efficiently and make that available either to spin off as a standalone, to sell off in a PE transaction or to potentially even sell it to a competitor that is, you know, more endearing ingrained into that particular space.
Paul Morrison
Umm.
Jason Evans
So, you know, I know Unilever is a big example right now with deciding, you know, strategically ice cream is no longer a business unit that they want to be in suspending off and making that an asset and putting it in play as quickly as possible.
Paul Morrison
Mm-hmm.
Jason Evans
So a lot of what Plug-and-Play is really about is the ability to have your organization set up so that you can, once those decisions are made, quickly unplug or plug something new into your business and then, you know, make it creative in a much faster way than what traditionally has happened in the past.
Paul Morrison
You know.
Okay, that's really interesting.
So we're talking here about the world of M&A in a consumer goods context, and it's all about speed.
It's about, do you as a company have the ability to merge or demerge a brand at speed so you can get to value quickly.
I think you know, listening to that and reading the paper in a sense, this sort of shuffling of the portfolio was being a feature of the landscape for decades.
And you know, the idea of a brand architecture under, you know, a big CPG name like Unilever or PNG, you know, that's integral.
But what you're saying is there's a way of thinking about this that organizations should embrace, which is, you know, get ready to enable your brands to be moved.
And make that integration quick and seamless.
Jason Evans
What we see in a couple of different areas right now, certainly in the M&A space, but we're also seeing it in some of the traditional, what I would call longer, older organizations that are in this space that have acquired over time and let those business units kind of run autonomously. And now with cost pressures coming on to those organizations, they're starting to realize that they, even if they're not in acquisition mode, have to be much more innovative and aligned in terms of how they run the company, going forward.
So when you're looking at organizations that you know might have, you know, they could be in the Consumer Foods area but run four or five different types from frozen foods to canned products, all with different processes, typically all through acquired through acquisitions.
Paul Morrison
Umm.
Jason Evans
In the past, those business units have many times been left autonomously to kind of run as is. And in today's world, and with the margin pressures that everyone is facing, you're seeing a significant amount of requests and ask for automation and transformational activities to bring those organizations up to speed so that they can become a Plug-and-Play-ready organization now going forward because what they're really quickly figuring out is their next acquisition can't be done the way it was done in the past either.
Paul Morrison
Umm.
Hmm.
Jason Evans
So you've got those that are leaders that are already out there and kind of the ability to unplug and plug in a very quick and efficient manner and you have a number of organizations in the CPG space that are now starting to realize they need to get there very fast.
Paul Morrison
OK, interesting.
So there are lots of trends pushing in this direction.
Uh, you talked about tight margins.
We've been through a number of years of massive price changes and a lot of uncertainty.
I think it's fair to say that, you know, that pour a bit of cold water on transactions. Yeah, in recent years, but that's maybe unblocking slightly, and we see this appetite.
There was a survey a few months ago that said that about 90% of CPGs were looking to prioritize that acquisition strategy as part of their next year's activities.
So it's definitely something of a wave, and you point there as well.
There was a survey a few months ago that said that about 90% of CPG's we're looking to prioritize that acquisition strategy as part of their of their next year's activities.
So it's definitely something of a wave and you point there as well.
It's interesting in many ways.
Plug-and-Play is an efficiency strategy.
Uh.
Around synergies, around access to scale, we look at other transactions and it's, you know, complemented by the desire for accessing new products, new customers and innovation as well.
The difficulty for a major CPG to create new value, and one of the ways to do that is through new combinations in your brand portfolio.
So there's there is lots pushing in this direction, so that leads to our next question, which is really around.
Or rather, isn't it, isn't it easy to do this or is this actually, you know, a complicated piece, and that's probably a bit of a rhetorical question.
It would appear to be very difficult for many organizations to do Plug-and-Play to move quickly.
What?
What would you say jumps out?
Or what are your headlines in terms of why Plug-and-Play is not as easy as it sounds?
Jason Evans
That's why I think, you know, just legacy is the biggest detriment to moving and getting to a true Plug-and-Play process.
Many organizations have just over time, either built and/or acquired standalone systems that run specifically just for a particular platform.
And so the risk/reward of replacing or going to more of a modular approach of a platform or a technology that goes across multiple business units or across multiple brands.
Ohm is something that a bigger CPG has not always been willing to do.
Umm, big CPG, even internal and most of these organizations, there is also the just the competitive nature within the brands.
You will find many organizations in the CPG space will have a kind of a tier-one or a star brand and then have multiple additional brands in the same space.
Paul Morrison
Hmm.
Jason Evans
So sharing data across those brands is sometimes challenging due to just the internal competitive nature of both people and you know kind of that the thinking around how to build the business.
Paul Morrison
Hmm.
Jason Evans
So there's a lot of kind of ancillary things.
I don't believe that, you know, the Plug-and-Play kind of the readiness framework that we talk about in the whitepaper is a challenge for people to understand.
It's more of a challenge for those who are focused on ensuring that is available across the organization.
So, you know, many times, and I've had recent conversations with a large CPG. They are actually putting this framework in place right now through their GBS organization and making it a centralized organization, you know, a group within their GBS space to allow for that kind of central framework to be available for all of their brands and business units to then tap into.
Paul Morrison
Right, yeah.
Hmm.
Umm.
Jason Evans
So, I am seeing more and more movement towards that center of excellence.
How do we do this? Because reality is that most CPGs are finding it easier to go acquire a brand and use their distribution.
And you know, shelf space capability to scale that brand to get to that, you know, magical next billion-dollar brand approach, then it is to internally hone, build and create a new brand or a new subset of a brand that can get to that billion-dollar range.
Paul Morrison
Right.
So I guess that's part of the rationality.
You want to buy that scale.
You want to buy that presence.
You want to buy those customer relationships and ways of working and uh, you don't necessarily want to change it.
Uh, that could be, you know, a massive task. That makes sense.
So you do see some of the leaders in this space.
They are starting to change the shape of their business or some of the operating model around centers of excellence to enable more agility in this space, you're saying?
Jason Evans
Yeah.
Again, I think you have leaders in this space already that have kind of been in that acquisition mode for kind of the length and history of their organization.
You have others that are really starting to kind of put their toe in the water around acquisitions, so to say.
Paul Morrison
Mm-hmm.
Jason Evans
And then I think you have that third group, which is just more of the typically older 100-year-plus kind of organization that has just grown over time and been successful with kind of a number of different businesses within their CPG space and keep coming back to food because of the margin pressure that's in that space right now.
Paul Morrison
Umm.
Jason Evans
Umm, but those are also the organizations that are quickly starting to figure out that, you know, data is key to where they're going to go and they have to be able to see data.
Paul Morrison
Hmm.
Jason Evans
It is kind of a central point across the entire organization and there is color, you know there is the ability for one brand's data to be very effective in helping to sell more.
Paul Morrison
Hmm.
Jason Evans
And you're finding more and more where in the food space?
In particular, you're finding, you know, a soup manufacturer that is very big into owning and building upon their capability in the cracker business right now.
Well, obviously, there's a direct corollary of soup and crackers that goes on, and so they're using that opportunity to try and figure out how to influence consumers further with data.
Paul Morrison
Yeah.
Yeah. Yep.
Jason Evans
Umm, but to do that they have to have this kind of framework in place to be able to see and move at scale and at speed across all their different business units.
Paul Morrison
Yeah, absolutely.
Well, and that touches on a point you raised there: In the paper, we set out a framework of the six dimensions that really determine how easy or difficult the Plug-and-Play move would be.
And well, just step through them.
Now we can just touch on them.
The first one you raised is around data.
You know the top-level question is, do you have a clear and structured data infrastructure and approach to data management? And many of the organizations we've been talking about have been investing for decades in that infrastructure and data management capability.
Do you see that readiness to move or is it, I guess, more of a mixed bag along the lines of the different types of company you talked about?
Jason Evans
I think most in this space have invested very heavily in what I would call Big Data.
So whether that's creating that, you know, massive Data Lake where all things reside. I think most organizations have pretty clearly understood the need for that kind of centralization of data. Where I still see CPG struggling a bit is in using that data effectively or being able to read that data effectively to make decisions.
Paul Morrison
Hmm.
Umm.
Jason Evans
So it's kind of the next level down.
I think there are lots of great organizations with, you know, massive Data Lakes supported by, you know, the large-scale hyperscale cloud organizations.
Paul Morrison
Hmm, OK.
Jason Evans
But now that you have this massive amount of data, how do you actually effectively get information from it? That next level down is where I think there's still some work to be done, but it's certainly an area where I do see the CPG industry as a whole really spending money and focusing on trying to get that right.
Paul Morrison
Yeah.
Absolutely.
OK.
So that's the number 1 data, number 2 process.
And the question here is, do you as a CPG have documented, standardized and flexible processes that can be transferred and integrated. Now, process maturity is the work of many years, not necessarily easily done, but it strikes me that the investment in this space around the maturity of documentation, around using some of the next generation of tools to understand process fragmentation and to address it through process, mining, task mining for example, are the sorts of things that can move a company up that process curve and enable a Plug-and-Play approach.
Any views from your side, Jason?
Jason Evans
Oh, this would probably be the area of my experience where I've seen the most need for large-scale CPGs to spend some time.
Paul Morrison
Umm.
Jason Evans
I'm candidly somewhat amazed at the amount of M&A activity that happens in the large-scale CPG space.
Paul Morrison
Yes.
Jason Evans
But seemingly, every deal is done a little differently.
I think sometimes it has to do with again, a lot of organizations just assigning resources to work on an acquisition or divestiture and that kind of getting back to a framework through a central organization to lead that. More in a true kind of PE firm/M&A type of mentality that has not really worked its way into CPG at where you've got, you know, a known tried and true kind of process for how you're going to go about any kind of acquisition or divestiture. It seems in this space right now, still, the process gets, you know, defined by individuals versus defined at a corporate level and kind of a standardized approach to that.
Paul Morrison
Yeah. Absolutely.
You'd have thought that the life cycle, in a way, looks pretty similar each time you got your due diligence, regulatory approvals, integration planning and so on.
There is a finite set of things that needs to be done, so I definitely see that variety.
And then there's obviously variety and complexity in the actual business process as well.
So for our second category process, there's a lot to work on.
Let's talk about number 3, which is technology.
So does the entity have a modern modular IT architecture? A well-configured core set of systems and best-of-breed systems?
Does it have that up to date?
Technology is obviously a very big topic, and you know I guess in any Plug-and-Play environment, there's an immediate need to map and understand the complementarity of the systems, you know, to what extent is the RP easy to integrate.
Does it make sense to integrate?
Does it make sense to keep it separate and then a whole series of best-of-breed and legacy systems all the way to the tail of some bespoke and ancient system?
So this probably is at the heart of that, that legacy challenge that you were talking about earlier.
Jason Evans
Yeah.
And I think a lot of that legacy is specific to a brand.
I think in today's environment, you're seeing less and less bespoke, you know, build something specific kind of activity going on.
Paul Morrison
Yep.
Jason Evans
I think the biggest challenge for large-scale CPG today is the resistance to change or remove those remaining legacy systems that are there.
I think, in today's world, if you look across, you know, large-scale ERP platforms and obviously in the CPG space, you know SAP plays a pretty dominant role.
But between, you know the SAP platform, and the multiple SaaS solutions available today across pretty much all areas from a tech perspective, you typically can find something that will work across brands, across business units, that can then be scaled and more efficient.
Umm, but every organization I talked to seems to still have that, you know, a key strategic planning tool or production tool that came along with a particular brand from 40 years ago running on a mainframe and just pure scared of, you know, a brand manager, general manager or whatever. It might be just completely reluctant to change that out, even though new technology would actually make them more efficient, faster and more reliable.
Paul Morrison
Mm-hmm.
Yeah.
Yes.
Jason Evans
But it's just that feeling of it’s worked for 40 years, we can't get rid of it.
Paul Morrison
Yeah. Hey.
Jason Evans
Approach that still exists in the CPG world even today..
Paul Morrison
Exactly.
Exactly and beyond. I suppose that Plug-and-Play therefore provides, you know, an opportunity for change, you know, catalyst will be a tight window, but an opportunity nonetheless.
Let's move on.
Time is marching on against us, to number 4 people.
And the question here is around, do those who matter to the business feel motivated and on board with the move?
And I guess, in a sense, this is a question about employees.
This could also be a broader question about customers as well.
But you know is there going to be some sort of delay or complication in bringing these stakeholders with the Plug-and-Play?
Or is that something that you know doesn't generate a delay?
Any thoughts on this one, Jason?
Jason Evans
You can.
I think there is.
There's probably resistance to change for systems, in particular that work today. So there’s the obvious question that always gets asked is why would I change?
I think in terms of what large-scale CPG is moving towards and putting this kind of framework in place, that's having the resources specifically focused on this type of a framework environment, typically within an org's GBS or shared services type of group.
Paul Morrison
Umm.
Jason Evans
Umm.
We'll make these things much easier to obtain going forward because I do believe most brand general managers or most brand presidents do fully feel the need for speed, the need for efficiency, the need to just squeeze every penny that they can, in particular in today's economic environment.
Paul Morrison
Umm.
Umm.
Mm-hmm.
Jason Evans
So having that available to them as a framework for an efficiency perspective for, you know, ensuring all the Is are dotted and the Ts are crossed, it is something that most people I believe are behind.
Paul Morrison
Umm yeah.
Jason Evans
I'm just not sure that the CPG space has invested in the right level of people yet to come in and lead those areas for them.
Paul Morrison
Hmm. Interesting.
OK, that's a key question.
I'll move this on to number 5 of 6 – regulation and ESG (environmental, social and governance).
And the question here is around, have the regulatory, environmental, social and governance considerations of a transaction been understood and addressed.
And we have seen many transactions where let's say that the approval antitrust dimension, for example, gets in the way or complicates transactions in the space.
I think of Kraft and Cadbury in the UK a few years back where there were complications there. Where there was a longer process as a result of that consideration, ESG as well, weighing ever more importantly in an organization's strategy.
What's your perspective on this category, Jason?
Jason Evans
So it's interesting because I kind of use the analogy of the past.
You know, there was, there was a big thing in the financial crisis around, you know, government and regulation basically stating some banks were quote unquote too big to fail.
I think as you look at the CPG space in particular, the big organizations continue to just get bigger.
So they are getting to that point of when is too big, too much.
And I think what you're starting to see from just a regulatory perspective as you are starting to see a lot of questions in this space.
So, you know, Kroger and Albertsons and whether you call that the acquisition or a merger or whatever. It ultimately, you know, the individual view is it's getting a lot of regulatory oversight and requirements to come out of that before approval and you're starting to even see that in the CPG-specific space around, you know, household cleaning products, around various areas within, you know, the food space in particular as well.
Paul Morrison
Hmm hmm.
Umm.
Yeah.
Jason Evans
So regulation is becoming much more of a concern.
I think, you know, depending on the area, you know, you're really talking in certain sub-industries now you've got only two or three really defined players and very little competition beyond that.
So for the ability for those two or three players to gain scale or get bigger is really a challenge.
Paul Morrison
Hmm.
Jason Evans
So I look at, you know, something as simple as you know, everyday household batteries, whether those are small watch batteries all the way up to, you know, CD batteries that are less used today as we move into newer technology.
But that is a space where you've really got off brand and then you've that are in many cases being manufactured by one of the two big players in this space.
So what do you do if you own one of those brands or if that's one of your core brands that your organization is part of. You have to diversify.
Paul Morrison
Umm.
Jason Evans
You have to get more efficient day in, day out and you have to go through that whole process of where and how do you find more scale.
Uh
Even though it's a competitive product to your own core product. I mean there's a need to find new ways to work with and around the regulatory environment.
Paul Morrison
Yeah.
Absolutely.
Jason Evans
I think ESG is certainly a very big, hot-button buzzword. Within large CPG in particular, there were lots of initiatives and promises around 2040-2030 net neutral carbon factors.
And you know, those are now becoming real.
We're getting already, you know, to that time frame where we're seeing clients move from just making bold initiative claims and now really having to go execute against those.
Paul Morrison
Umm.
Jason Evans
So from an ESG perspective, it also comes back to how are you looking at your organization and where and how are you getting data across an entire organization. Whether it's Procter and Gamble, Mars, Unilever, you know, global organizations running in, you know, in many cases, hundreds of countries and trying to come back with – this is what we're doing as an organization from an ESG perspective to stop, you know, carbon emissions.
Paul Morrison
Yep.
Yeah.
Jason Evans
This is one simple example. It's a massive undertaking that, you know, they're having to go through and without kind of a central point or process to go through to get that.
Paul Morrison
Umm yeah.
Jason Evans
It's almost impossible for them to tackle.
Paul Morrison
And so when we think about the Plug-and-Play strategy and organization that's considering following it where, you know, needs to weigh heavily and assess in full detail the durability of the acquired or disposed ESG obligations in the transaction.
It's not a normal thing.
It's a real and deep requirement to be able to meet those requirements. So it weighs heavily.
I'll move this on to our 6th and final determinant of Plug-and-Play success, which is around change, and I think the theme has come across woven into those other factors.
The question being, do you have the management and transformation experience to drive through a rapid merge or demerge?
So this is all about speed to make it happen, as you said a while back there, Jason, it's not enough to have the right direction.
You have to have the right people and the right skills to push that change through, and there aren't many transactions that are as big and hairy as a rapid transaction of a business in a six or 12-month period.
So it's a really significant change spike.
What’s your headline in this space?
Jason Evans
The big headline, I would think in this space, in particular around change, is get help. This is not an area that I typically see large-scale CPGs spend a lot of time, effort or resources on. It's typically always underestimated, and I think just the fact that you're pushing through a big change internally in an organization if done with internal resources standing on their own, there is a just typical default back to this is how we do things here versus an outside perspective that might say this is how to put a framework in place as quickly, as efficiently and, you know, at the core, or the most, you know, business-prudent way possible.
So I have not seen big change organizations internally in most large CPGs and even where there are change orgs internally, they tend to not really have the scale or the kind of outside expertise to really drive it as efficiently as it could be.
Paul Morrison
Hmm.
Yeah.
Absolutely.
Yeah, this is an intense and specialist area.
So they should just give you a call, Jason. Then basically, I think, yeah, there's the answer.
Jason Evans
Sure.
Absolutely.
Paul Morrison
Brilliant.
Well, so that's the 6th of our determinants of Plug-and-Play success, and listeners can find more information on those in the Plug-and-Play paper on the WNS website.
Time is against us.
We have to have to close out, I'm afraid.
And Jason from your side and if any sort of closing thoughts from your side that we haven't touched on so far?
Jason Evans
And you know, I would just close with just I think that the biggest thing for me around Plug-and-Play and the whole framework process is coming to it with an open mind.
I think that's the biggest thing that I see organizations sometimes not willing to do, and you know, thinking through what this could do internally as a business within the business, so to say, when set up properly would certainly not only become a very valuable asset organizationally, but I think pays for itself 10 times over when up and running properly in any CPG that's in the process of either scaling themselves further or just looking to drive more efficiency and more results from within their existing portfolio today.
Paul Morrison
Umm.
Hmm.
Hmm.
You know.
Yeah.
No, that makes a lot of sense and I’ll add to that, the idea with when we think about Plug-and-Play, it is a mindset piece. It's a mindset strategy.
We may, and we've been talking here a lot about following this approach in the context of a specific merge or demerge in the short or medium term, but we see value in the mindset of being ready for change.
We see that where a brand, where a business has those disciplines that we walk through in place. That brand is more valuable because it's portable and it provides options to its owners for new combinations for sale or for consolidation or whatever it might be and where those disciplines aren't in place, there is a discount or a, you know, a barrier to work through where that brand is effectively locked in into the long term.
So you know, we see a lot of a lot of value in these disciplines in general.
So with that final comment there, Jason, I just would like to thank you.
Thank you.
Thanks for a great discussion.
Really, really useful.
I appreciate your time and I look forward to our next curry whenever that is.
But thanks for your time.
Jason Evans
Absolutely.
Thank you.
Very appreciate being able to join you today.
Paul Morrison
So.
Superb and thanks to our listeners for tuning into Retail and Consumer Pulse.
Stay tuned for our next episode and if you've enjoyed this discussion, please do subscribe and share with your network and a final request.
Do check out wns.com for events and other resources in retail, consumer and beyond.
So thank you very much and catch you next time.