Party’s Over: Re-gearing for New Demand
Patterns in the Consumer Sector
By Mark Sutcliffe
s the economic downturn continues, frugality has become Going back to basics. This is about being efficient and better
A a core consumer value. No one can predict how long this
sentiment will last, but one thing is clear: shoppers are
simply not going to leap back into premium product categories.
utilizing existing resources to produce the same volume with
fewer personnel, less material or in less time, all with the end goal
of increasing productivity per labor hour. This means viewing
For food and beverage producers, who have traditionally relied plant workers as the biggest variable cost in a food plant and
on margins from premium categories, the continued shift in increasing productivity by giving them the tools they need to
consumer behavior is rapidly changing the dynamics of the improve performance. Not only is this approach proven to be
demand-driven supply chain. These producers must come to highly effective, but changes in people and process are faster to
grips with the fact that much – if not most – of the demand implement and require limited capital expense – with results
they experienced over the past five years was “artificial,” based that can be measured almost immediately.
on unsustainable consumer spending patterns. With the artificial demand for premium products gone,
Similarly, companies that have traditionally depended on a manufacturers that take action now to re-gear for greater
broader product portfolio must face the fact that although volumes profitability at lower price points and with a smaller product
may be up overall due to more in-home dining, the margins across mix will emerge stronger and be in a much better position to
their whole mix of products may erode as more of their capacity is prosper in the economic recovery. ■
geared up for products with a lower operating margin.
With the artificial demand now gone, companies that react About the Author: Mark Sutcliffe is the president of CDC Software’s
quickly to become the lowest-cost producers in value categories CDC Factory, a manufacturing operations management solution.
will be in a strong position to redraw the market-share map once
the recession is over. They will take volume and customers from
those companies that fail to develop the level of agility needed
to pivot faster and maintain or even improve t