Industry Overview: Consumer Products

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Posted by The Editors on December 3, 2012
Overview
Consumer products is one of those elastic phrases that can include any of the jars, boxes, cans, or tubes on your kitchen and bathroom shelves-or it can expand to include pretty much everything you charged on your Visa card last year. This industry manufactures and, perhaps more importantly, markets everything from food and beverages to toiletries and small appliances. (We do not include industries sometimes put in this category but covered in other profiles: autos, apparel, entertainment products, and consumer durables, which are large appliances and other products expected to last more than three years).

The consumer products industry can be divided into four groups: beverages, food, toiletries and cosmetics, and small appliances. Most firms offer products that fit primarily into only one of these groups, although a firm may have a smattering of brands that cross the lines. Virtually all companies are similar in organizational structure, emphasis on brand management, and approach to business.

Consumer products are the foundation of the modern, consumer economy. The industry itself not only generates an enormous portion of the gross domestic product, it also pumps huge amounts of money into other industries, notably advertising and retail. Individual consumers make up the majority of this industry's customers; sales are concentrated in the United States, Japan, and Western Europe, though other parts of the world are working hard for the privileges of wearing clothing emblazoned with company logos, eating processed food, and chopping vegetables with an electric motor instead of a traditional utensil. Success in consumer products is all about marketing an individual product, often by promoting a brand name. The competition is ferocious for shelf space, so package design, marketing, and customer satisfaction are key elements.

The majority of companies that sell consumer packaged goods are conglomerates consisting of many diverse subsidiaries selling brands that consumers recognize. Sara Lee Corporation produces products from Ball Park franks to Hanes underwear and Endust furniture polish. Unilever, an industry giant based in England, sells teas and soups, pasta and pizza sauces, ice cream, bath soaps, shampoo, salad dressing, margarine, laundry detergent, toothpaste, cosmetics, frozen foods, and perfumes. Other big players in the industry include Nestle, Clorox, Kraft, Procter & Gamble, S.C. Johnson, and ConAgra.

Alliances
Many of the more forward-thinking consumer packaged goods (CPG) companies are trying to enhance growth via alliances with other companies. One CPG brand management insider says of her company's partnership on a product line with a big industry competitor, "It seems amazing that we're partnering with 'the enemy,' but it's true." CPG companies are doing this for a number of reasons. Some are doing it to create and bring to market new products with less risk than they'd have if they were going it alone; for instance, PepsiCo and Starbucks teamed up to create a line of bottled coffee drinks. Some are doing it to reach new demographics; for example, Coca-Cola teamed with Danone to distribute bottled-water products to new customer segments. Others are doing it to expand geographically into new markets; General Mills, for instance, has joined forces with Nestlé to market breakfast cereals outside North America. And some do it for other reasons, such as to increase operating efficiencies, cut costs, or reduce capital outlays.

RFID
In recent times, Wal-Mart, Albertson's, other retailers of CPGs, and other organizations like the U.S. Department of Defense have given their CPG suppliers mandates to begin tagging their product shipments using RFID, or radio-frequency identification, technology so that those retailers can improve their supply chain efficiencies. This means that at most of the big CPG companies, there's a major focus currently on getting up to speed with RFID technology-which in many cases means good news, in terms of job opportunities, for engineers and other tech types.

Other Technologies
As in most industries these days, technology is becoming an ever more significant factor in doing business in the CPG industry. One of the biggest technology trends is the rise in importance of customer relationship management (CRM) applications. CRM software collects information about customers, their behavior, and all aspects of their relationship with a company, allowing the company to better understand the marketplace for its products and how to increase sales and market presence. If you go into brand management in a CPG company, expect to use data collected by CRM applications to tailor your efforts to sell into the marketplace.

The Internet is another area of technology that's had a big impact on CPG marketing. In the Internet arena, the most successful companies are using the interactivity of the Web to strengthen the relationship between consumers and their brands. Campbell Soup, Coca-Cola, and Hershey's all offer online gift shops where Internet surfers can buy branded collectibles such as decorative tins, T-shirts, and plush toys.

Following are the product categories found in the CPG industry. Many companies operate in only one category-especially smaller companies. Others, including many of the big dogs of the industry, are diversified CPG companies: They make and sell products in multiple categories. Nestlé's brands, for instance, include products in the food (e.g., Toll House cookies), beverage (Nestea), and pet care (Alpo) categories. In many cases, diversified CPG companies started out by making products in just one category, but diversified over time via mergers and acquisitions.

Beverages
Intensely competitive and hugely reliant on advertising, this is a mature industry. Different segments of the beverage world include beer (Adolph Coors, Anheuser-Busch, Miller, Stroh's), soft drinks (Coca-Cola, PepsiCo), and juices (Tropicana is owned by PepsiCo, Minute Maid by Coca-Cola).

Foods
There may be a little less consolidation in the food industry than in beverages, but this is also a mature and competitive industry with single-digit growth. Most of the packaged goods that fill our pantries, cupboards, and refrigerators come from a handful of big-league corporate players. Some are household names; Campbell Soup, General Mills, H.J. Heinz, and Kellogg have spent enormous sums of money to tattoo their names onto your brain. Other big players, such as ConAgra (Hunt's, Healthy Choice, and Wesson) are better known for brands they own.

Toiletries, Cosmetics, and Cleaning Products
Baby Boomers aren't getting any younger, and vanity will outlast us all. So will household dirt. So this is a solid category for the foreseeable future. At three-and-one-half times the size of its nearest competitor, Procter & Gamble is the Godzilla of this group-and indeed the consumer products world in general. Other players include Clorox, Colgate-Palmolive, Revlon, Gillette, Kimberly-Clark (Huggies, Kotex, and Kleenex), Unilever, and S.C. Johnson (Pledge, Glade, and Windex).

Small Appliances
This is an amalgam of companies in various industries. More people are building and buying homes, and forecasters don't expect the trend to slow. So tools, kitchen gadgets, air-conditioners, chain saws, and anything else Saturday shoppers enjoy pausing over in the hardware store are selling well, and the future looks rosy for this segment of the industry. Nevertheless, this is also a relatively mature industry, and the brand system is not as strong as it is in the other categories mentioned above. Players here include Black & Decker, Sears, and Snap-On.

The big consumer products companies employ people in a range of fairly standard corporate functions-everything from accounting and finance, human resources, and IT to research and development, operations, and sales. You can find yourself a good career in these and other functional areas in the industry. However, none of these will ever get the focus that one functional area gets in CPG companies: marketing and brand management.

According to the Bureau of Labor Statistics (BLS) 2004 Occupational Outlook Handbook, employment in the field of marketing overall is expected to increase faster than average-at a 21 to 35 percent clip-through 2012. The BLS says that this sustained job growth will be supported by increasingly intense domestic and global competition in consumer products and services but cautions that budding marketers should expect increased competition for full-time corporate marketing positions as marketing projects (including brand management) are increasingly outsourced to ad agencies and contract specialists.

The hiring outlook at CPG companies, whether in brand management or in other departments and functions, depends primarily on the financial performance of those companies. If a company is growing, it will be hiring. These days, after a few years in the doldrums due to the recession in the early 2000s, CPG companies are starting to enjoy growth again. As a result, some companies are hiring. But by most accounts, in late 2004, the economy is not out of the woods yet. Because of this, even companies that are hiring are doing so cautiously.

Still, these are big companies, and as people leave jobs at CPG companies, they must be replaced. And, while there are never many brand management positions available, each year many CPG companies bring at least a few brand management trainees on board. At the biggest companies, these are typically MBAs from top schools.

Training Opportunities
Most consumer products companies offer their employees top-flight training opportunities. In most of the big players, college and MBA recruits go through intensive management training programs. And some companies offer management trainees rotations through various functional areas, so trainees can get a thorough understanding of how the business works.

See the Results
Several insiders tell us that while many of their friends spend their days giving advice (as is true of consultants) or buying and selling securities (brokers, traders), one of the things they really like about working in CPG is that you work with tangible products. Says one, "We actually make a product, a real, physical thing, and I like that."

Contributing to the Culture
Sometimes, you'll even be able to get the jolt of satisfaction that comes from working on a product that becomes somehow iconic, part of the popular culture. For instance, imagine if you'd worked on bringing Reece's Pieces to market before they were featured in Spielberg's E.T.-that would've felt pretty cool, huh?

Bureaucracy
These are big companies we're talking about. Which can mean having to deal with layers and layers of bureaucracy. Many insiders say they spend too much time selling ideas to various levels of management, and not enough time implementing new ideas that will help their companies compete in the CPG marketplace. One brand management insider says, "It can take a while for a great idea to get to the shelf." Another insider says, "As our consumer base changes, we obviously need to change, but change can come slowly in CPG."

The Old School Still Rules
Similar to the effects of big bureaucracy, many CPG companies contain lots of long-time employees, which can mean resistance to new ways of doing things at all levels. As one insider puts it, "There can sometimes be an old-school mentality."

Follow the Leader
Some of the consumer products companies and divisions within the companies are known as "fast followers"-companies that imitate rather than innovate. These companies grow by acquisition rather than by invention. Other than a few line extensions here and there, they rarely introduce revolutionary new products. This isn't an industry-wide phenomenon, of course, but again, it is true that the CPG industry as a whole is slow moving and risk-averse.

Most of the jobs described below require an undergraduate degree or an MBA. Senior management positions in marketing, operations, R&D, and other departments tend to be filled from within the company (or at least, from within the industry). This is a hierarchical business and though merit and hard work count for a lot, even the wunderkinds have to do time before they're promoted.

Customer Service
This is as entry level as you can get at any major consumer products company; customer service representatives are on the front lines with the consumer all day, everyday. Tasks can include everything from registering complaints to hearing praise, entering orders to solving a crisis with a distributor or shipping company. Many CS folks use this position as a launch pad for a career in marketing-arguably, there are few better ways to really get to know the product and the customer. To thrive in this job, you have to be a people person with a lot of energy. Salary range: $20,000 to $40,000.

Marketing Assistant or Analyst
If you've just graduated from college, these are the trenches that prepare you for product management and brand management. Some of the work here is administrative, but your ideas are welcome and the brand management team will depend on your organizational ability as much as your knowledge of the target customer. An MBA will typically start as an assistant brand manager for a few years before taking charge of shepherding all the product pieces to market. In either case, you can expect a lot of poring over sales and merchandising figures, Nielsen ratings, and premiums. Compensation varies widely depending on the company and its location, as well as where you went to school and your relevant experience. Salary range: $25,000 to $70,000.

Product or Brand Manager
Conjure up your gloomiest images of what shopping was like in the Soviet Union. This is the fate product managers work to save us from. They create the catchy new names and novel packaging. They ask prospective customers how to make products even more irresistible. Then they scramble like mad for prominent display space, ad dollars, and their marketing director's active support. You either work your way up the ladder to these jobs or start at this rung with an MBA. Very important factoid: Headhunters really love successful product managers. Salary range: $70,000 to $120,000.

Market Researcher
To do this job, you don't really have to wear glasses and ask silly questions-you do have to have a strong interest in the psychology of customer behavior and an ability to coax this information out of prospective purchasers. Tools of the trade include focus groups, one-on-one interviews, Nielsen data, and quantitative surveys. People can enter these positions from undergraduate, MBA, or industry backgrounds. Salary range: $30,000 to $100,000.

Research Scientist
Academic appointments for chemists and biologists are hard to come by these days and often don't pay enough to support a family. Formulating and developing new products-whether shampoo or frozen dinners-is a compromise many scientists find less difficult and more interesting than they had imagined. You don't need a head for numbers, but you do need a better sense of consumers and markets than most lab technicians have. "Just because you think purple cereal with pink speckles would be really fun to develop doesn't mean people will buy it," says one scientist. Salary range: $45,000 to $100,000.

Sales
You still see them from time to time, personable young people trundling from small retailer to small retailer promoting their wares. Sales is generally the easiest place to enter a company without experience. Those who become successful at this work are usually stronger on personality and gumption than on higher education. Generally, the bigger the accounts you work on, the more money you can make. At the senior level, the earning potential far surpasses that of a brand manager-and you won't have the MBA debt to worry about either. Salary range: $25,000 to $100,000.

Logistics or Manufacturing Engineer
And now for something completely different. Logistics engineers are the folks who figure out the popular but complex just-in-time manufacturing-the approach to scheduling which allows retailers to receive factory orders when they need them, not weeks or months in advance. If you have strong organizational and computer skills-plus patience and diplomacy-you'd be good at this work. But no matter how carefully you think you've calibrated just-in-time, every now and again human fallibility will intrude, and according to one insider, "just-in-time becomes just-in-time-to-catch-hell-and-worse." Salary range: $60,000 to $100,000.

Finance Manager
CPG companies need MBAs with creative financing skills to help solve problems, assess profitability, and acquire new businesses. In some companies, these finance analysts and managers actually have equal and occasionally even greater authority than marketers. They aren't responsible for developing marketing plans or working with the advertising agency, but they make many of the important recommendations and decisions that direct the course of business strategy and new product development. Salary range: $60,000 to $120,000.

The recruiting process in consumer products varies by company, job function, and career stage. Smaller CPG companies-for example, the mom-and-pop pickle company whose products are only available regionally-don't really do much in terms of recruiting, other than placing help-wanted ads when they need new bodies, or maybe employing an executive search firm if they need high-level help. It's the bigger consumer products companies that employ the bulk of the people in this industry.

Most big consumer products companies recruit on campus for new hires. Almost invariably, they're looking for marketing/brand management candidates. In many cases, they're also looking for candidates to fill other corporate functions such as finance, sales, research & development, IT, or operations. This means that big companies can have a presence on a variety of campuses, and an interest in a variety of students. For instance, CPG companies often turn to campus recruiting to fill out their corps of sales people. Companies looking for operations folks may recruit at business schools or engineering schools. And companies that want to make R&D hires may recruit students from PhD programs in science fields like chemistry or biology. The way to know for sure how the companies you're interested in do their student recruiting is to check out their websites and contact their recruiters, and check with your campus career center.

Almost all big consumer products companies offer internships for MBA students looking to get into brand management careers, and often they have internships for other MBA types. Many companies also offer internships for undergrads. These are a fantastic way to learn more about the career you're interested in, to learn more about what it's like to work at a specific company you're targeting, and to give yourself a major advantage over the competition when it comes time to interview for a full-time position at the company where you interned.

The competition to land a spot at a top company is intense. The biggest players are well known, they offer great training programs, and they hire a relatively small number of talented candidates. If you're set on landing a job at a consumer products company, keep these things in mind:

  • Because turnover in the industry is low, growth is stable, and most firms hire a relatively small number of candidates each year, the competition for positions is very strong. To get a job, you'll need to have a solid educational background, good people skills, and evidence of your leadership capabilities.
  • No one in consumer products is interested in hearing why you might deign to work for them for a brief period while en route to something far more glamorous and well paid. Many of the top people in the industry have been with the same company since graduating.
  • Be prepared to demonstrate your interest in the consumer products world. For marketing positions, you'll likely be asked to explain a favorite product promotion strategy; even for other positions, you'll probably be expected to know what products the company produces, who the competition is, and why it's not as good.