Analyzing Commercial Excellence in Latin American CPG Companies

Following a decade of turbulent macroeconomic conditions in which top-line growth has faded away and global consumer packaged goods (CPG) companies’ shareholder returns have plunged from the top to the bottom quartile, the CPG industry has entered a period of reckoning.

As inflation slows, the industry must take up an ambitious dual agenda to reimagine portfolios for growth and reinvigorate performance to enhance operational efficiency. As McKinsey has written previously in reference to CPGs in Europe and other regions, advancing commercial excellence depends increasingly on digital tools and analytics, including AI, to unlock deeper and more-focused channel and consumer insights. In Latin America, as channels and media strategies shift and evolve in response to industry changes, demographics, and consumer trends (such as value-driven purchasing decisions), CPG companies are forced to operate differently and implement practices that set them apart from their peers.

Consumer Excellence Benchmarking Survey Overview

The 2023–24 Consumer Excellence Benchmarking (CEB) Survey of Latin American CPG companies reflects these new realities. Informed by our latest survey data, this article explores how leading CPG companies in Latin America are outperforming their regional peers in net sales growth, commercial spend efficiency, and marketing performance. They are achieving this by using five key commercial excellence best practices:

1. Articulating clear product portfolio roles with distinct approaches for renovation versus innovation
2. Strategically collaborating with retailers and distributors, leveraging data to manage sales force and third-party performance
3. Implementing in-house marketing that relies on testing and measuring return on ad spend (ROAS)
4. Empowering revenue-growth management with analytics to support price, promotion, and innovation decisions
5. Embedding e-commerce efforts in the annual strategy and emphasizing e-merchandising

How Commercial Excellence has Evolved in Latin America

Consumer goods companies in Latin America have made significant progress in commercial excellence in recent years. This progress is driven by changing channel dynamics and modernization in the region. For example, fragmented trade in Latin America is defying global trends by demonstrating remarkable resilience and modernizing to incorporate omnichannel opportunities.

According to the CEB Survey, leading CPG companies in Latin America are deploying best practices for commercial excellence in important capability areas:

• More than 95 percent of companies consider category price evolution and competitive positioning in defining their revenue growth management strategies.
• More than 70 percent of companies have internal design capabilities that support new-product development.
• More than 95 percent of companies include customer-specific goals in their e-commerce strategies.

Articulating Clear Product Portfolio Roles

Leading companies know that renovation and innovation require different approaches, and they know which path each part of their portfolio should follow. For renovations—small tweaks to products—a structured and clear stage-gate approach is ideal. Innovations, on the other hand, need to be supported with a robust, agile process informed by consumer testing—an iterative process, rather than the linear approach suited to renovations.

Leading CPG companies in Latin America are constantly evaluating portfolio roles, articulating each brand’s role in terms of segments, categories, and occasions. This clarity allows for consistency and flexibility in brand management, setting them apart from their peers.

Strategically Collaborating with Retailers and Distributors

Leading CPG companies in Latin America prioritize collaborations with strategic retailers and distributors. They engage in multiyear planning horizons, joint KPI scorecards, and collaborations centered on expanded assortment, new merchandising strategies, trade spend, and pricing.

Additionally, these companies use data to manage sales force and distributor performance and leverage a wide array of data sources to influence their channel and customer strategies.

Implementing In-House Marketing

Data-driven marketing sets leading companies apart in Latin America. They measure digital content engagement through ROAS, prioritize in-house capabilities for digital content, and engage in marketing-optimization testing to enhance their marketing strategies.

Empowering Revenue-Growth Management with Analytics

Leading CPG companies equip their revenue-growth-management teams with the tools, analytics, and granular data they need to influence pricing, promotion, and innovation decisions. These teams work closely with sales and marketing to drive portfolio, pricing, and promotional changes.

In a high-inflation environment, sustaining net-price increases is critical, and leading companies achieve this by developing deep fact bases for pricing strategies, creating granular promotional guidelines, and expanding the scope of revenue growth management.

Embedding E-Commerce Efforts

Leading CPG companies in Latin America have evolved their e-commerce capabilities and include their e-commerce strategy as a core component of their annual plan. They focus on e-merchandising capabilities, content development for e-commerce, and best practices for online merchandising and content placement.

Conclusion

Even in a challenging, ever-changing environment, winning CPG companies in Latin America have been able to outperform peers and reduce expenses. To continue thriving, they must clearly define brand roles, evaluate marketing investments, and collaborate with strategic retailers. These practices can guide companies to enhanced performance.

FAQ

Q: What are the key factors driving commercial excellence in Latin American CPG companies?

A: Key factors include articulating clear product portfolio roles, strategic collaborations with retailers and distributors, data-driven marketing, analytics-driven revenue-growth management, and embedding e-commerce efforts.

Q: How are leading CPG companies in Latin America differentiating themselves from their peers?

A: Leading companies are leveraging digital tools and analytics, collaborating strategically with retailers, implementing in-house marketing, empowering revenue-growth management with analytics, and embedding e-commerce efforts in their annual strategies.

Q: What are the main challenges faced by CPG companies in Latin America?

A: Challenges include navigating changing channel dynamics, adapting to modernization in the region, sustaining net-price increases in high-inflation environments, and optimizing marketing investments.