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Background of the Study
In the wake of COVID-19, the consumer goods industry has seen unprecedented shifts in consumer behavior and market dynamics. Thus, leaders in the global Consumer Packaged Goods (CPG) industry are reassessing strategies to adapt to the evolving trends. Both established brands and small-scale innovators are experiencing a need to navigate disruptions and align their priorities with growing markets and channels.
About the Client and its Requirement
Our client is a branded contract manufacturer of jams, jellies, spreads, and foods and beverages such as snacks, juices, cocktails, and mocktails for the US and Canadian markets. While jams and jellies remain popular in the US and Canada, the market has recently faced challenges due to consumer concerns about high sugar, artificial preservatives, and fat content. To succeed, the client needed to prioritize healthy products and sought reliable contract manufacturers that could align with this goal. This required access to insights related to current procurement market intelligence and industry best practices.
To fulfil its above-mentioned requirements and counter the intense competition in the market, the client turned to procurement experts at SpendEdge for assistance in addressing competition and improving sales and profit margins. Key strategies suggested by SpendEdge included migrating cost-intensive operations to low-cost destinations. The potential addressable market for the client is over US$930 million in the US and more than US$146 million in Canada.
The Business Challenge – Finding Partners Supporting Consumer-driven Demand
To stay agile in a rapidly evolving landscape, the leading US-based CPG company partnered with SpendEdge to identify the best-fit contract manufacturing firms. This strategic alliance was aimed at optimizing resources and capitalizing on emerging consumer-driven demands/preferences to ensure the company’s success amid industry growth and competition.
In the emerging scenario of mergers, acquisitions, and divestitures, the CPG company aimed to leverage its marketing expertise and digital capabilities to enhance consumer engagement across subcategories. The CPG company wanted to use consumer behavior data and market intelligence to partner with contract manufacturers aligned with its priorities and strategic vision.
Also, the CPG company sought to strengthen its market position by addressing evolving consumer needs and leveraging disruptive trends for growth and innovation.
Methodology Adopted by SpendEdge to Address the Challenge
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Extensive Supplier Identification:
Our procurement experts identified a comprehensive list of contract manufacturers for the client's ready-to-eat product line, including jams, jellies, and spreads.
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Supplier Evaluation Criteria:
We assessed key aspects such as plant locations, equipment/technology used, and quality certifications to evaluate each manufacturer’s operational and functional capabilities.
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Comprehensive Market Research:
Leveraging 18 years of market research expertise, we validated and scored each manufacturer’s capabilities based on predefined weightages, ensuring a thorough analysis of operational suitability.
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Capability Assessment:
Critical factors evaluated included secondary packaging capabilities, automation levels, robotics integration, and operational efficiency of integrated lines, ensuring alignment with client requirements.
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Data-Driven Decision-Making:
Using our data-driven approach, we tabulated the scores to narrow down the list to a shortlist of five manufacturers that best met the client’s needs.
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Timely Execution:
The entire process was expedited and completed within 4 weeks, adhering to the client’s strict timeline for decision-making.
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Collaborative Results:
The client has begun working with one of the shortlisted manufacturers, and the collaboration is already showing encouraging results, validating the efficacy of our methodology.
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Key Parameters Suggested for Evaluating CPG Contract Manufacturers
Key parameters
- Assess Quality and Dependability
- Evaluate Production Capacity and Expertise
- Prioritize Ability to Align with Consumer Behavior Trends
- Evaluate Balance between Cost and Value
Assess Quality and Dependability:
Reputation for quality and reliability should be prioritized when selecting a contract manufacturer. Also, it should be ensured that they align with the brand’s standards and have the ability to deliver on time. Factors such as adoption of robust quality control systems, possession of certifications such as ISO, and references should be focused upon.
Evaluate Production Capacity and Expertise:
Production capacity and expertise should be assessed. Possession of necessary resources and equipment, and capability to fulfil technology needs, production capacities, lead times, and scalability should be evaluated. Experience in similar products or industries should be prioritized to ensure efficient fulfilment.
Prioritize Ability to Align with Consumer Behavior Trends and Patterns
Prioritizing consumer behavior and trends is essential during the selection of contract manufacturers. For instance, the trend of consuming “clean label” products is growing in the US, driven by health concerns, as 34.2% of adults are overweight, 33.8% are obese, and 11.3% have diabetes should be considered by CPG manufacturing companies while determining product portfolios, and contract manufacturers should be selected based on their ability to align with the same. Also, ethical and green label products, like organic and non-GMO, are gaining popularity among consumers. Additionally, there is a rising demand for new flavors in products such as jams, jellies, and spreads made from non-traditional fruits such as avocado, chironja, and guanabana.
Evaluate Balance between Cost and Value:
Price is crucial in selecting a contract manufacturer, but the decision should not be based solely on cost. While competitive pricing is important, product quality, customer service, and partnership benefits should also be considered. A comprehensive assessment should be carried out to ensure alignment with your long-term goals and optimal returns on investment.
Faced with consumer concerns over high sugar and artificial ingredients, the client aimed to prioritize healthy product offerings. SpendEdge’s procurement experts assisted by identifying and evaluating potential manufacturers based on quality, production capacity, and ability to align with consumer trends. This strategic partnership enabled the CPG company to optimize resources, leverage digital capabilities, and strengthen its market position, addressing evolving consumer needs and fostering growth and innovation in a competitive landscape.
