Synectics Group Response: The incredible shrinking CPG manufacturer universe driven by acquisitions and mergers and the continued exponential growth of Wal-Mart, does not bode well for the health and well being of the CPG industry. Ten years ago when the consolidation began on the retailer side, the somewhat tongue-in-cheek comment was that the CPG landscape in ten years would be comprised of 5 large retailers and 5 large manufacturers. That painted a picture that was extremely ominous to the mid tier and smaller manufacturer, but at least presented a playing field that was somewhat level between the retailer and manufacturer.
Today simply combining the likes of Gillette and P&G will fall far short if we do not focus upon strengthening the competing retailers in the Wal-Mart world. The individual resources available to any one component of this universe does not come close to matching Wal-Mart’s resources, but the collective resources of the manufacturers and competing retailers does.

Wal-Mart has developed an incredibly efficient distribution/analytical infrastructure over the past 15-year period. The bi-product of this relentless focus on excellence has resulted in exponential growth. A focused collaborative effort by manufacturers and retailers with the existing technology of today could significantly level the playing field in as short a time as 15-18 months. This collaborative effort must revolve around a significant paradigm shift regarding the execution of the $125 billion trade promotion investment.
Today conservative estimates state that less then 50% of the $125 billion trade spend ever reaches the consumer. The tactic of attempting to match Wal-Mart’s everyday low price is futile and in essence an advertisement for Wal-Mart. A collaborative effort by the manufacturer and competing retailer to Wal-Mart should be accessing and jointly analyzing real time data to develop a unique promotional plan by category that differentiates that retailer from Wal-Mart’s low price strategy. Off the shelf applications are in production today that could electronically manage the total trade promotion process and provide real-time reports regarding category/brand profitability. This data managed in a collaborative environment would provide the catalyst for the paradigm shift and the eventual accomplishment of a more level playing field.

If the current cold war between manufacturer and retailer continues regarding the use of trade promotion dollars, Wal-Mart will continue to grow and with that growth more competing retailers will go away. If Wal-Mart becomes the last retailer standing the simplistic strategy of large CPG manufacturers of acquiring to gain leverage will be a failed one. The CPG industry needs diversity of competition from both the retailer and manufacturer perspective. Collaboration of all resources and intellectual property between the retailer and the manufacturer can level the playing field between Wal-Mart and the rest of the world. An isolated individualistic approach will far dismally short of the goal line.