Food and Consumer Goods Industry Sees Web Potential but Doubts Preparedness; CEOs and Manufacturers Most Optimistic
64% of food industry executives question existence of their firm’s clear-cut eCommerce strategies, recent study from Accenture and CIES reveals
New York, October 16, 2000 – Despite broad acceptance that eCommerce will dramatically impact the food and consumer packaged goods industry, research reveals that companies in the sector appear ill-prepared to embrace the opportunity. Results of the survey by Accenture and CIES – The Food Business Forum, indicate that while the industry clearly recognizes the opportunities offered by Web technologies, there is unease among employees that senior management are not preparing their company to realize opportunities.
According to the study, CEOs are far more optimistic than their employees about their firms’ readiness for eCommerce across a range of measures such as competitive position, senior management commitment, and the number of employees staffed on eCommerce initiatives.
In one of the survey’s most significant findings, 64%of respondents said their company does not have a clear-cut eCommerce strategy in place. Only half the CEOs, identified as the most optimistic about a company’s eCommerce potential, said there is a shared eCommerce strategy within their company, versus only 30% of IT directors and professionals participating in the CIES Management Development Programme (MDP – for the future leaders of the food and consumer packaged goods businesses).
"The industry will have to address this eReadiness gap in order to realize the full benefits of the new economy," said Jeff Smith, partner, Accenture . "It is important that companies have a shared sense of direction, starting at the top and clearly articulated throughout the organization. Everyone needs to understand where the company is going with eCommerce and how it is going to get there, particularly given that it will touch almost all employees’ jobs, and will require their commitment to make it happen."
The survey also revealed clear distinctions in the way manufacturers and retailers view eCommerce. It showed concern among retailers that eCommerce will severely challenge their current business models. Manufacturers, on the other hand, believe their businesses will be less dramatically affected.
The survey sampled the views of professionals representing more than 100 of the world’s leading food retail and manufacturing companies. Those surveyed include CEOs, information and technology directors, and people taking part in the CIES MDP, generally people under the age of 36 who represent the future leadership of the food and consumer packaged goods industry. The study was developed by CIES’ MDP and Accenture .
A more detailed breakdown of the survey’s findings follows.
CEOs vs. Other Employees
61% of CEOs rate their companies’ eCommerce opportunities as very strong, compared to only 55% of MDP members and 42% of IT directors. 74% of CEOs believe they are driving eCommerce within their organizations, compared to only 53% of MDP members and 55% of IT directors. 38% of CEOs think more than 30 of their staff are involved in eCommerce development, while close to half of the other respondents believe the number lies between one and ten. CEOs believe the entire value chain would be impacted significantly, with the main opportunities coming from B2B, whereas IT Directors and MDP focused more on B2C opportunities.
American and Asian companies are most optimistic (over 75% rate the opportunity very strong) compared to 45% of Europeans. Only 33% of European CEOs are viewed as highly involved in eCommerce strategy, compared with 52% of their U.S. counterparts. 70% of American respondents consider senior management as extremely or very committed to eCommerce, whereas only 48% of European respondents share this view.
- European respondents were most pessimistic with regard to their companies having a shared eCommerce strategy; 65% see no explicit or shared strategy (vs. 41% in Asia).
- Asian companies claim the broadest employee involvement in eCommerce (41% having over 30 people involved) with Americans not far behind (vs. 24% for Europe and Africa).
"We believe that U.S. and Asian leadership in eCommerce accounts for this increased optimism. However as European companies become more familiar with eCommerce and what it can mean, their optimism about its opportunities is likely to grow. We see it happening already amongst our member companies," said Richard Fedigan, chief executive offices, CIES.
Retailers vs. Manufacturers
Manufacturers are generally more confident than retailers concerning the impact of eCommerce on margins, with 57% believing that they will increase (versus only 33% of retailers). 27% of manufacturers say senior management is not at all committed to eCommerce, versus only 5% of retailers. Retailers are devoting more resources to the issue of eCommerce than manufacturers.
Both retailers and manufacturers expect eCommerce to have a positive impact on customer loyalty, with 76% of respondents saying loyalty will increase. Many believe that eCommerce will give retailers and manufacturers greater access to their customers and will result in increased consumer choices, price and information transparency. However, it is also generally understood that competition will increase and hence loyalty will be increasingly difficult to earn.
Significant Barriers to Success
The survey cited several significant obstacles to the development of eCommerce in the food and consumer packaged goods industry, most relating to human elements. They include:
Unprepared corporate culture (particularly strong in Europe) Individuals feeling ill-prepared in terms of skills and knowledge to operate in the eEconomy Perceived lack of senior management commitment to eCommerce
"In order to be successful in the new economy, companies will need to overcome the real and perceived obstacles that are preventing them from creating and implementing eCommerce initiatives," said Smith. "Companies should transfer the efficiency of existing processes into the eCommerce arena, extend the life and value of current eCommerce initiatives, build competence and skills in the new economy, and finally create new value and assets which give them a sustainable competitive position in the future."
About CIES – The Food Business Forum
CIES – The Food Business Forum is a unique, truly international food business network, strategically placed at the interface between retailers and suppliers. The CIES mission is to anticipate change for the food business, and to identify future trends and advance best practices and techniques. It aims to improve company performance and professional standards of food retailers and their suppliers in the service of consumers worldwide. CIES also provides an international business forum for member company chief executives and their senior management. Membership is made up of 250 major food retailing companies drawn from some 48 countries and an equal number of their suppliers worldwide. The combined sales of CIES retailer and supplier member companies are over $2,800 billion. The CIES website can be consulted at www.ciesnet.com.