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How global brands can stay relevant in choppy waters

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Global brands need to reinvent themselves to address declining revenues and profits

Following decades of solid and dependable growth, the future for many global brands started getting hazy in 2012.

Despite steadily rising global demand, a series of events began taking a toll on large consumer products companies' revenues and profits. Growth slowed in developing markets.

When we analysed the 2012 to 2016 performance of 34 of the world's top 50 consumer goods companies, we made the unsettling discovery that 85 per cent of them had seen a decline in either revenues, profits or both.

Given these trends and tensions, many companies are now dealing with nothing short of an existential crisis.

Recent valuations reflect an expectation that consumer goods companies will return to 4 per cent to 5 per cent organic growth. However, for some, the reality will probably be much harsher unless they do something truly different.

As retailing morphs with the growth of digital, convenience and value channels, brands will need to consolidate, simplify and cut costs to survive; they also will need to make way for harder retailer negotiations and invest in a digital future with new rules for selling and marketing to consumers.

Brands must prepare for the coming rebound in emerging markets while acknowledging that the next set - which includes Pakistan, Nigeria, Myanmar and others - will be more challenging to pursue.

And they will need to invest to address rapidly shifting consumer preferences by creating new niche and indulgence categories that battle retailers' private labels and competitors' insurgent brands.

Large consumer goods companies have faced dark clouds and uncertainty before, but the playbooks that they have used to weather previous storms will not help much this time around.

The very advantages they had as big companies have turned into disadvantages.

For example, until now, large companies could install the lowest-cost capacity, afford top research and development (R&D) capabilities, spread advertising broadly and efficiently, deploy large sales forces into a single channel, or access the cheapest capital.

Today, evolving technology, an expanding network of specialised third-party solutions and other market conditions appear to favour asset-light companies that rely on third-party infrastructure or external R&D networks.

Additionally, companies must contend with geopolitical shifts, sustained market pressure on short-term productivity improvements and an intensifying battle for talent.

We suggest attacking the mounting challenges from two angles simultaneously - "today forward" and "future back".

Taking a "today forward" approach means focusing on the challenges that you are facing to reignite profitable top-line growth over the next three to five years.

"Future back" means redefining the vision for your industry and your company, often inspired by a fundamentally under-served consumer need or breakthrough technological solution.

Done right, it will guide innovation and sustainability strategies, and genuinely inspire the front line. In addition, winning companies will revive their sense of entrepreneurism.

Matthew Meacham is a partner based in London, and Mike Booker and Paolo Misurale are partners based in Singapore, and all are leading members of Bain's Consumer Products practice. This article appeared in The Business Times on Tuesday.

BUSINESS & FINANCE