What It Takes to Be a Leader in Consumer Packaged Goods
Recurrent themes among experts in the Consumer Packaged Goods (CPG) industry point to a discipline that would benefit from a boost in innovation, disruption, and digital transformation. “Consumer Packaged Goods (CPG) companies are classic examples of organizations that have to move from a static-control to a dynamic-innovative focus,” write Penn State’s Samuel Hunter and his co-authors in “Shifting to a Strategy of Innovation: The Key Role of Leadership in Consumer Packaged Goods.” “Innovation is critical to the success of CPGs,” he notes.
Despite lagging in these areas, the industry has more than held its own during the COVID-19 pandemic, thanks to consumers stocking up on essentials and more, though not without significant supply-chain woes. Writing about how the early months of the pandemic changed the mindset of CPG CEOs, Geoff Freeman, president and CEO of the Consumer Brands Association, characterizes the CPG response as “companies ensuring the delivery of products needed to help fight COVID-19 and doing the right things for essential employees.”
Whether building on COVID-driven momentum or tackling the mandates of innovation, disruption, and digitization, CPG companies need strong leadership. A 2020 study from TCS Business 4.0 Institute, “Opportunities for Leadership and Disruption in Consumer Packaged Goods,” distinguishes digital-leader companies – those with strong leaders promoting digital initiatives that contribute to increased revenue – from digital-follower firms that have little digitization going on and minimal success in increasing revenue. The study found that CPG companies tend to be followers. The risk of the follower position is falling behind in the world of online sales. In a brief account of the recent history of the industry, Richard Stark and co-authors note that between 2013 and 2020, “more than $17 billion in sales shifted from CPG giants to startups and 90 percent of all CPG e-commerce growth came from new, smaller companies.”
Consumer Packaged Goods executive teams, reports a 2019 study by consulting firm Spencer Stuart, have an average of 12.8 members. Four-fifths of CPG company leaders have devoted their whole careers to consumer packaged goods. Of the 50 leaderships teams Spencer Stuart researched, 17.5 percent of studied executive-team members were women;16 percent included no women, and 36 percent boasted three or more women. Among CPG industry CEOs, only 5-6 percent are women.
Like many leaders in CPG, CEOs also tend to have long tenures at their companies – an average of 22.6 years – and have been CEO for an average of 5.3 years, reports Spencer Stuart. Very few are hired from outside their companies. Laura Gurski, senior managing director and global industry lead for consumer goods and services at Accenture, paints a picture of a typical CPG CEO: “male … aged in his mid-fifties, and overwhelmingly from an industry background in management, sales or marketing.”
In addition to the most common functional backgrounds, CPG leaders come from finance operations/supply chain sales/commercial consulting, strategy, technology, quality, R&D, and innovation. Common industry backgrounds, Spencer Stuart’s CPG Leadership Index reports, include beverages, food, household products, tobacco, personal products, healthcare, and private equity. Frank Birkel and his co-authors of a 2019 Spencer-Stuart report on the “CPG CEO of the future” observe that experience in regional general management and global category management is advantageous.
An array of hard skills, soft skills, and personal traits are keys to success in CPG leadership. “Changes sweeping through the CPG sector require new capabilities within the top team,” proclaims a 2018 McKinsey report. Pointing to the need to level-up in digital, big data, and analytics skills, Patrick Guggenburger, writing for McKinsey, warns, “for the consumer-packaged-goods, the skill crunch is just around the corner, driven in part by the shift toward digital channels.” The Spencer-Stuart CPG CEO of the future report notes that “the next generation of CPG leadership must anticipate how to better connect with consumers, invest in the right technologies and business models, and use culture to spark innovation and growth.”
Additional desirable leadership characteristics include the following:
Leadership Styles in the CPG Field
Research on leadership styles in the CPG industry tends to focus on effects of various leadership styles rather than predominance of any one style in the field. A study by Anthonia Adeniji and co-authors found that transformational and transactional styles had a positive effect on employee engagement and performance. Similar results were reported from a South African study in which Solomon Omonona and co-authors found the transactional leadership style to have a greater influence on employee performance than other styles of leadership.
These resources offer additional insight on leadership in Consumer Packaged Goods: