Consumer Products Overview Iowa

Consumer Products

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.

Trends

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.

How It Breaks Down

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.

Love-Hate

What's Great

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?

What's To Hate

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.

Job descriptions and tips

Key Jobs

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

Customer Service

This is as entry level as you can get at any major consumer productscompany; customer service representatives are on the front lines with theconsumer all day, everyday. Tasks can include everything from registeringcomplaints to hearing praise, entering orders to solving a crisis with adistributor or shipping company. Many CS folks use this position as a launchpad for a career in marketing—arguably, there are few better ways to reallyget to know the product and the customer. To thrive in this job, you have tobe 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 thatprepare you for product management and brand management. Some of the workhere is administrative, but your ideas are welcome and the brand managementteam will depend on your organizational ability as much as your knowledge ofthe target customer. An MBA will typically start as an assistant brandmanager for a few years before taking charge of shepherding all the productpieces to market. In either case, you can expect a lot of poring over salesand merchandising figures, Nielsen ratings, and premiums. Compensation varieswidely depending on the company and its location, as well as where you wentto 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 SovietUnion. This is the fate product managers work to save us from. They createthe catchy new names and novel packaging. They ask prospective customers howto make products even more irresistible. Then they scramble like mad forprominent display space, ad dollars, and their marketing director'sactive support. You either work your way up the ladder to these jobs or startat this rung with an MBA. Very important factoid: Headhunters really lovesuccessful 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 sillyquestions—you do have to have a strong interest in the psychology of customerbehavior and an ability to coax this information out of prospectivepurchasers. Tools of the trade include focus groups, one-on-one interviews,Nielsen data, and quantitative surveys. People can enter these positions fromundergraduate, MBA, or industry backgrounds. Salary range: $30,000 to$100,000.

Research Scientist

Academic appointments for chemists and biologists are hard to come by thesedays and often don't pay enough to support a family. Formulating anddeveloping new products—whether shampoo or frozen dinners—is a compromisemany scientists find less difficult and more interesting than they hadimagined. You don't need a head for numbers, but you do need a bettersense of consumers and markets than most lab technicians have. "Justbecause you think purple cereal with pink speckles would be really fun todevelop doesn't mean people will buy it," says one scientist. Salaryrange: $45,000 to $100,000.

Sales

You still see them from time to time, personable young people trundling fromsmall retailer to small retailer promoting their wares. Sales is generallythe easiest place to enter a company without experience. Those who becomesuccessful at this work are usually stronger on personality and gumption thanon higher education. Generally, the bigger the accounts you work on, the moremoney you can make. At the senior level, the earning potential far surpassesthat of a brand manager—and you won't have the MBA debt to worry abouteither. Salary range: $25,000 to $100,000.

Logistics or Manufacturing Engineer

And now for something completely different. Logistics engineers are thefolks who figure out the popular but complex just-in-time manufacturing—theapproach to scheduling which allows retailers to receive factory orders whenthey need them, not weeks or months in advance. If you have strongorganizational and computer skills—plus patience and diplomacy—you'd begood at this work. But no matter how carefully you think you'vecalibrated just-in-time, every now and again human fallibility will intrude,and according to one insider, "just-in-time becomesjust-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 solveproblems, assess profitability, and acquire new businesses. In somecompanies, these finance analysts and managers actually have equal andoccasionally even greater authority than marketers. They aren'tresponsible for developing marketing plans or working with the advertisingagency, but they make many of the important recommendations and decisionsthat direct the course of business strategy and new product development.Salary range: $60,000 to $120,000.

Getting Hired

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

Most big consumer products companies recruit on campus for new hires. Almostinvariably, they’re looking for marketing/brand management candidates. Inmany cases, they’re also looking for candidates to fill other corporatefunctions such as finance, sales, research & development, IT, oroperations. This means that big companies can have a presence on a variety ofcampuses, and an interest in a variety of students. For instance, CPGcompanies often turn to campus recruiting to fill out their corps of salespeople. Companies looking for operations folks may recruit at businessschools or engineering schools. And companies that want to make R&D hiresmay recruit students from PhD programs in science fields like chemistry orbiology. The way to know for sure how the companies you’re interested in dotheir student recruiting is to check out their websites and contact theirrecruiters, and check with your campus career center.

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

The competition to land a spot at a top company is intense. The biggestplayers are well known, they offer great training programs, and they hire arelatively small number of talented candidates. If you're set on landinga 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.

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