Transcript:
Peter Crosby:
Welcome to Unpacking the Digital Shelf where we explore brand manufacturing in the digital age.
Hey everyone, Peter Crosby here from the Digital Shelf Institute. The annual CAGNY event, or the Consumer Analyst Group of New York, is a rich opportunity to get the pulse of CPG CEOs and CFOs and identify business trends in areas of focus that will impact the industry up until the next CAGNY. There is no one better than Russ Dieringer, Founder and CEO of Stratably to come on the podcast to summarize the shifts we can expect from some of the largest companies on earth and the takeaways for you.
So Russ Dieringer, welcome back to the podcast. We're so excited to have you back today.
Russ Dieringer:
Oh, thanks so much for having me, excited to be here.
Peter Crosby:
So you took a deep dive into the reporting on CAGNY, or the Consumer Analyst Group of New York. It's one of the biggest CEO conferences for CPG leaders in the space and really talks a lot and puts front and center the strategies and visions of some of the top companies in the world. And you translate CEOs speak better into action items better than anyone I know. And there's a lot of shifts going on in the industry. So what sort of tablets of business commandments have come down from the Mount of CAGNY that you should share with our audience?
Russ Dieringer:
Yeah, so the CAGNY Conference, for those that are a little bit less familiar, really the largest consumer package goods brands go, and it's sort of a, I don't know, somewhere in between a quarterly earnings call and an investor day for these companies. The audience tends to be investment analysts, and so the CPG companies get to talk about what they're seeing near term and then also what they're focused on in order to drive growth and profitability over the medium to long term. I think this year's conference was sort of refreshing, I would describe it as, because there was much more of a discussion around what I'll describe as return to normal type theme.
So if you go back a year, 2022, this conference, the conversation was really monopolized by a focus on inflation and supply chain issues. And you would've seen the supply chain issues lapping COVID in the 2021 meeting. But 2023 was very much a feeling that cut across essentially all of the presenting companies that we were moving past this period of extreme volatility. Colgate-Palmolive had a great chart that illustrated the last three years that we all lived through COVID, then lapping COVID and supply chain, and then unprecedented inflation. But as they look to the future in really all of the presenting companies, they started to say it's uncommon to be a consumer staples company growing eight, nine, 10%, we think we're going to return to more of that low single digit type growth, we think we're going to have a lot less volatility around supply chain, et cetera.
And so there was much more of a focus on common value driving initiatives, whether that's companies talking about product innovation, it could be companies talking about reshaping their portfolio, either divesting certain brands that we're not strategic to them, or acquiring certain brands, or integrating brands that they had recently acquired. But just very sort of common core CPG value driving initiatives were front and center this year, which again, was a welcome relief from everyone just talking about inflation and getting price increases through, which was the case in 2022.
Peter Crosby:
Well, it's funny because every company out there has lived through periods of recession. So while no one's welcoming it or anything like that, we understand what happens in that. But you're absolutely right, that sort of lineup of three real epic upheavals, I'm knocking wood literally, you can hear me.
Russ Dieringer:
Please do.
Peter Crosby:
Just to make sure, but at least there's some semblance of a normal that can be based on prior experience and figured out. Is that kind of what you're saying?
Russ Dieringer:
Yeah. I think that was a common theme that emerged, and I think it stood out a little bit too, because I would say the CPG brands presenting at this conference, they had, I mean, this is subjective, but the tone I think, from them was a little bit more positive than what if you follow the retailers like Amazon, Walmart, Target, et cetera. I think their tone in the first quarter of this year was a little bit more conservative, a little bit more cautious than what the CPG brands were talking about.
Now, part of this is a lot of these CPG brands, there are food and beverage, so some of it's kind of categorical differences, but nonetheless, I did feel like these CPG brands were a little bit more optimistic about '23 and moving forward than some of their big retail customers based on what the retailers have guided in some of the forecasts on that part of the value chain of retail.
Lauren:
And Russ, I'm curious where digital fell in all these conversations, because I'm sure it was a critical topic in the past couple of years, but where is it standing with most of the companies these days, and was it a big theme as well?
Russ Dieringer:
Yeah, so this conference is not a digital oriented conference, but digital themes, and I wrote about this, were really front and center at this conference. And although you might have thought that that was the case in prior years, it really wasn't, because again, so much of the conversation was focused on critical near term things like supply chain and inflation. So this year, as more companies started to look further out into the future, they did start to talk about digital much more prevalently than they have in the past.
And I think that that manifested itself in a few ways from an e-commerce perspective, like a sales perspective, as an example, very common for these CPG organizations to be talking about a growing percentage of their business shifting online. Surprisingly, there were three organizations that indicated their online share is greater than their in-store share. So I think it was Colgate-Palmolive, General Mills, and Kellogg's, all three of them, they didn't have to say this, but they did. They came out and said, our online share is greater than in-store, which I felt to be quite shocking ...
Peter Crosby:
That's a huge shift.
Russ Dieringer:
... in sort of non-consensus, because you think about online, sort of this "infinite shelf", there's just more competition online. Plus you think about these big CPG organizations. I've worked with them for a decade and they're always been criticized, they're moving too slow, they don't get digital, et cetera. Well, they've put a lot of effort in over that last decade, and depending on the accuracy of these numbers in these estimates, I think it's showing that wow, they've really come a long way. They've taken digital serious, they've added really smart people, they've put a lot of resources behind it, and it's starting to show up in the overall market number. So I thought that was a really interesting disclosure from not just one, but several companies at this conference.
Peter Crosby:
Russ, do you think that part of it is that now that money's not free, a lot of the way in which the upstarts were able to take market share was through organic, very effective organic, and kind of slicing away at the legacy company's market share. But now, the way you win has to do with spend, particularly on a few of the major retailer channels. Do you feel like in some ways legacy roaring back is just that they have some deep pockets that they can afford to, they're also did, I mean, God knows we know, they've done incredible foundational work on the digital shelf, the way they show up on digital shelf and product pages and things like that. I'm not discounting that, but I'm wondering if that's part of it, is just that the game has changed really and advantages them more.
Russ Dieringer:
Yeah, I think that's a big part of it. I mean, they're not reliant on raising the next round of capital in order to be able to stay in business. So I think that financial wherewithal is a component of it. I also just think that over time, largely because of the pandemic, as the percentage of sales coming from online has grown into meaningful dollars before them, that's sort of in parallel driven more focus inside their organizations and they've put a lot more resources even beyond paid search spend and things of that nature, but just more people, more technology investment, et cetera behind it.
So I think the fact that some of their, let's call them digital native, smaller ankle biter startups, are in a different financial environment today. I think that's part of it, but I also think in parallel, these organizations have gotten smarter and they're just putting more muscle behind it, and it helps that they don't have to be raising these financing rounds in order to stay in business. They're self-funding just because of how big these organizations are, right?
Peter Crosby:
Yeah. Let's do a little bit of a deep dive on retail media. One, I'd like to start with what you heard around media ROI, and how are people spending on digital and how are they feeling about the continued upside there, and where does it tap out, things like that. And then just how it sounds like organizations are responding to making retail media such a focus.
Russ Dieringer:
So media efficiency was a common theme throughout the various company presentations, and improving media, ROI media efficiency was very much tied to increasing the amount of spend going into digital channels broadly. On average, I would say, company are not uncommon for these CPG organizations to be spending 50, 60% of their budgets on digital. It can vary by organization, but all have been increasing the percentage of their media spend going to digital over the last several years.
Peter Crosby:
That's pretty substantial.
Russ Dieringer:
And interestingly, we really haven't hit the point of diminishing returns. They keep increasing it year after year after year, and their commentary at this conference, as an example, suggested they're going to continue to push that figure higher because they're just seeing such a positive outcome as a result.
Now, one of the companies presenting there was Hostess, and they indicated, I was somewhat surprised at this, that 100% of their spend is digital. So they were an outlier at the conference, and you can't go more than a hundred, so they're sort of paving the way, and maybe will eventually, possibly get their [inaudible 00:12:14].
Peter Crosby:
Twinkies ain't on TV anymore, is that why you're talking?
Russ Dieringer:
I don't know, I guess not. I haven't seen a Twinkies commercial in a while.
Peter Crosby:
In a long time, yeah.
Russ Dieringer:
Yeah, it's been a little while.
So that was one theme of just more marketing budget towards digital. Now, within digital, several of the CPG organizations talked about the importance of retail media within that helping drive that media efficiency. So retail media, I would consider it to be quite a standout at this year's conference, and much more so than previous years' presentations. So organizations on the brand side certainly see an opportunity with retail media being a key part of the future of driving efficiency further. Part of that, obviously, is because of what's happened from a privacy perspective. In some of their social channels it's become, as we all know, more difficult to measure, et cetera, and so some of that money is shifting over to retail media. But retail media, I would say, again, subjectively for the first time, it was really a core part of how these organizations are talking about their plans to activate going forward.
Lauren:
And Russ, did they talk at all about how they're integrating it into their organization or how they're thinking about it more holistically across all of their planning? I'm just curious, because I know with the increased spend, it means potentially increased team, and support, and integrating more into sales and marketing and shoppers.
Russ Dieringer:
Yeah, to a degree. So they didn't specifically call out real changes to their organizational structure. Now we're working on a study to try to understand what is leading edge in that regard in terms of how brands do "retail media". But where I think you saw it sort of get fleshed out a little bit in these presentations is that retail media was mentioned in the same breath as what they're doing on social media, or what they're doing on connected TV. There was no separation, at least in their presentations around the role for retail media. This is media, this is part of how we're spending our marketing budgets, and it's a core part of it.
I think that, and the three of us know this because we're doing research on it, we're in the early innings of organizations figuring out, how do we exactly integrate retail media because it's part retail and it's part media, and it's kind of something different but the same, and so how do we make that work in the organization? We're still trying to figure that out collectively as an industry. But I think most consumer brands, especially these real sophisticated ones that we're talking about, they recognize like, we've got to figure out how to integrate this, and so I think you started to see that with some of these presentations where again, it's just mentioned in the same breath as other activations that they're doing and thinking about.
Peter Crosby:
So Russ, Rob Gonzalez and I were talking to a CPG marketing, e-commerce executive the other day who really, his organization has transitioned to be Omnichannel in nature, in that he now owns retailer media, shopper marketing media and content center of excellence in one organization. It's headlined Omnichannel, and that's at a major CPG organization. So you're I think you're seeing the efficiencies and the alignment that people want to get across the value chain of how they're spending to draw consumers, and then how it converts when they reach the moment of decision in store and online. And I love that thing, because as we're thinking about making this all profitable, getting the most growth at the least cost, it needs executives that are able to cut across all that stuff. Does that resonate for you?
Russ Dieringer:
Yeah, an analogy I think about is a toolbox. And I feel like if you, a typical structure today is you have a brand team, kind of national media team has one set of goals and they're looking at every possible tool available to them, with the exception of retail media. And then you got salespeople that are trying to have sales and they're responsible for these sales accounts. And it just so happens that retail media is through these retailers that they sell to. So they're trying to meet their goals, but they're just looking at retail media. So a lot of organizations have artificially constrained themselves and divided up this toolbox.
But if we take a step back and say, what are we trying to do as a company, what are our objectives, what are our goals? Once you start to understand that, you recognize why would we artificially constrain ourselves? And a great example is you think about doing a advertisement for an NFL game, you think about Thursday night football, Amazon today owns the Thursday night football rights. And so if you were to do a commercial with them, it looks like a TV commercial, and if you had gone back a couple years when Fox or CBS, or whoever, ESPN had the rights and you did a TV commercial, that would've come from a different team. Those are just TV commercials.
And so we know when you look at that example that we should not be splitting this up in this weird artificial way, we need to give the organization the benefit of looking at the whole toolbox, and so that whatever is the right tool, they can use. So that's the analogy that I think about, and I think that senior leadership teams really need to understand this dynamic, that these different groups inside the organization, marketing and sales, they have typically different incentives. So one's trying to drive reach and awareness and one's trying to drive sales. And was it Charlie Munger? I'm going to really mischaracterize the quote probably, or who even said it, but I think he said, "Show me the incentives and I'll show you the outcome." And so it's not surprising that the sales team doesn't want to do a bunch of upper funnel reach stuff when they're trying to meet a number for the year. And it's not surprising that the marketing team who's not incentive on sales is not real interested in doing paid search.
None of that's surprising, and so the organization, in my opinion, has to find a way to referee that. And so whether, Peter, to your point, to your example, that's sort of restructuring the organization. I mean, I think that's one approach, we've seen companies do that. I think a step in that direction is not necessarily restructuring, but recognizing those incentives differ, and then having a process in place to referee those differences of opinion, just recognizing that different parts of the organization are going to want to do things differently, so how do we referee that? I think that's another sort of approach.
So maybe at CAGNY 2024, we'll start to hear more substantial commentary about how they've changed their organizational structure around media to take a Omni perspective.
Peter Crosby:
And Russ, I think, and Lauren, just before I forget this thought, this is a career making opportunity for our audience, as I think about it. One of the things that has struck me, ever since I came into this business and now eight years later, is just how amazingly thoughtful, passionate, how forceful our audience needs to be to get the changes done that they need to get at their organization. And I think that puts, I hope audiences true, you feel is true, it puts you in the position of being able to bring all of that agility and capability and knowledge into the Omnichannel environment, into really having the biggest impact because of what you know from digital, both organizationally and in terms of how to execute to a broader set of impact for the company. And seeing that at some pockets of places, I believe that's the next five-year arc of career growth for a lot of our people. Lauren, I'll pass that to you just to see if that makes sense, and then you can say your thing,
Lauren:
Oh, I 1,000% agree. I think the digital leaders in the organizations who understand this, who are making those changes, who are creating what I like to call shared goals across each function, it is career changing. Because you're bringing an organization together and you're bringing an organization into the next phase, to your point, Peter, if you don't have shared goals, to Russ's point, you are siloed and you're creating your own silos. So shared goals is something I've seen a lot of organizations really double down on where the sales team, the marketing team, the R&D team, supply chain, in all of their goals and objectives or whatever process they have, everybody has this shared e-commerce goal, or the shared sales goal. And so if everybody doesn't meet that goal, then compensation is correlated with that.
And I say this a lot, but what gets measured gets managed. And if you want to break down those silos, then you really do need to incentivize people to be Omnichannel, because that's naturally human nature, how they're going to react to those types of goals. So I totally agree.
Peter Crosby:
And being the tail wagging the dog can be exhausting. Being the one that's trying to push other people's incentives from your seat is dangerous and scary. But come on, you all have been doing that for years. So we hope to see people stepping it up and being able to drive those across Omnichannel too.
Lauren:
And come talk to other people doing it. That's what the DSI is for, that's what Russ and T are for. Come talk to us, we can sympathize with you.
Peter Crosby:
Please do.
Russ Dieringer:
And that's part of the job description, I think, is for e-commerce leaders, it's always been sort of group inside the organization that has, I don't know, do a lot of convincing, connecting, convincing and bridge building. But Peter, I mean, one of my reactions, I think I'm recalling back, it may have been like 2016, 2017, I was speaking at one of SALSA vice conference, you had this setup, it was like a divided room, and I was speaking, and one of my last slides was an audience filled with e-commerce professionals. But I was trying to make the point like, hey, this is the future, you all are going to be the future CEOs, the future [inaudible 00:23:50]. And at the time, going back then, it wasn't that long ago, but in the world of e-commerce it kind of was, at the time that was sort of a revolutionary statement, but I very much still believe that and in very much agreeing with you that this is a career defining moment. And I think it was on Amazon than it was on retail media, it's just getting more and more sort of complex.
And so I like how you brought up agility and flexibility, and I think that really speaks to a big challenge inside of these large organizations of how do you go from formulating plans that take 18 months to ultimately get to market, or set a budget once a year. How do you get the organization to move as fast as the feedback loops are moving? It's not like planning an end cap and then putting it out there and then seeing how it does, that takes months. When you go to activate on a digital platform or retail meter or whatever, you start to get performance right away, and all these retailers are coming out with new innovations all the time. And so do you have flexibility in your budget to experiment and test and shift money where it's performing the best? I think a lot of the organizations at this conference that we're talking about today, that's what they're trying to do.
It's very difficult, and I have such an appreciation for the e-commerce teams inside these giant organizations in being able to influence that change. It's hard, it takes a while. I would maybe characterize it as frustrating at times, I'm sure for some of these teams. But when you can do it, you start to see the output, which is, hey, we've got greater share online than in store, to bring it back to that data point. But the skillset that the e-commerce teams and digital teams are developing, this is only going in one direction, more digital.
Peter Crosby:
We're hearing a lot that for retailers that have marketplaces, they are making listing new products on the marketplace the price of entry to even be considered for in-store. And so that also puts our folks, because I'm biased, in the position of being the way for new products to come to market, which is an amazing opportunity, I think.
Russ Dieringer:
Yeah, and the ability to rapidly commercialize products for online and be able to really lean in to that capability, particularly on a marketplace like Amazon or increasingly Walmart, be able to get products out there, see what the consumer reaction is, very tough, again, for organizations to do that for a variety of reasons, margin goals, certain volume limitations, they need enough volume in order to make it economical, et cetera, et cetera. Bunch of challenges to it, that's why not everyone can accomplish that, but a real competitive edge if you can. And I don't know why a merchant wouldn't want that test to happen online first before they make a big commitment. Well, I don't think we're there yet, but I think we are going to get there in the not too distant future. And I think that also poses a threat to incumbent brands inside of stores, because if there are a lot of digital native brands that do make a lot of traction online, why wouldn't a Walmart merchant want that product inside of a store?
Peter Crosby:
On their shelves, yeah.
Lauren:
Russ, I know we could talk about this for ages, but last but not least, we want to get to one of the last themes that you talked about was data. So first party data, I know it was a big topic that came up at CAGNY, what were brands saying about it, how are they kind of using it and leveraging it?
Russ Dieringer:
So this was an area, so I expect these organizations to be able to talk a little bit more about first party data in 2024 and beyond. I think in 2023, this year's conference, there was a lot of discussion about collecting first party data. I think where the gap in the conversation in the presentations was, is what is the business value of that first party data?
So all of these organizations, they know and they feel like they should be collecting it, and that's what they're working on, they're building up these data repositories, but how are they deploying it? How are they using it to drive media efficiency? That was a little bit of a gap from my perspective. So we'll see if that conversation changes over the next year. I think innovative tools like Amazon Marketing Cloud, as an example, is going to help in some ways unlock some of that value as will clean rooms more generally speaking. But that was kind of the state, or my conclusion around first party data. A lot of innovative and interesting ways of collecting it, but now how do we use it? And I think that'll be something that these organizations challenge themselves to be able to articulate to the investment community in next year's conference, hopefully.
Lauren:
And Russ, I don't know if you agree, but I feel like the brands who are doing it are getting so far ahead of the ones that are not, because there's so much data that both the brands have and the retailers have. So one, if you're partnering with your retailer, there's an opportunity there. But two, if you're the brand and you're understanding what your consumers are purchasing and trying to predict what they might purchase next or personalizing that experience, there's so much opportunity to do something like that. We talked about it on another podcast around if you're buying cookies, try and sell milk, if that is part of your portfolio, how can you make those experiences using data that you already have?
Russ Dieringer:
Yeah. And if you haven't started, no better time to start than today, kind of thing. I mean, there's a lot of urgency to all of this stuff, there's a lot going on. But how would I characterize it? I think consensus thinking is kind of centered around the importance of first party data. And even if organizations aren't quite articulating the value of it today necessarily, there's expectation that they're going to be able to really leverage this information in the future, again, to keep driving media efficiency, and then everything that cascades them off of that as a result. And there's big efforts. There's big efforts underway to try to collect this type of information from consumers. It's not easy to do, and so the companies that are able to do that are going to have an advantage over the long term.
Peter Crosby:
Well, Russ, we have you back at least once a quarter I think now, which is amazing. And so we'll re-CAGNY in 2024 for sure. We'll make sure that that's on the calendar. I'm going to break my own rule here to close out. I actually want you to actively plug your business on this podcast. Lauren, Rob and I are all subscribers, and I was saying to this to you before we recorded, that every single email I get from you, I learn something, it's actionable. So I just want you to take a few moments before we go and please plug yourself and what your organization does.
Russ Dieringer:
I appreciate. I appreciate the opportunity to do that. So Stratably, very simply, closes the e-commerce knowledge gap inside of consumer brands, retailers, agencies, and the ecosystem around it. And we do that in two ways. One, is we help the e-commerce team stay on top of the market. So we all know this space is incredibly dynamic and these individuals on these teams, they're busy, they're running the business. They cannot on their own keep up with all the changes in the market, so we help them do that. We're that outsourced analyst team that is helping them do that.
In addition, a big part of that team's role is to educate their colleagues and up skill their colleagues on digital commerce, and we help them do that through our weekly written research, through our weekly live events, and then we also make all of that come to life by doing one-on-one presentations and workshops, and things of that nature, with our enterprise clients. So the combination of weekly written insights, weekly live events, doing these one-on-one sessions with us over the course of a year, that's how you keep your team up to date on the market. That's how you up skill your colleagues, and that's our focus, and that's our business model. We're not driven by sponsorships, we are 100% aligned with our subscribers, and that's what we come to market with, and we try to help our clients each and every week with that type of research and that type of content.
Lauren:
And you do a fantastic job. Peter wanted to also jump in and just say it.
Peter Crosby:
Yeah.
Lauren:
The content that Russ puts together is, from someone who was in the seat, is incredibly relevant and it is accurate, and I really encourage you to follow and subscribe
Peter Crosby:
When this airs, this will be our 220th podcast. I have never done that with a guest, ever.
Russ Dieringer:
Oh, wow.
Peter Crosby:
So anyway, that's enough said about that. I'm going to embarrass Russ, he'll probably be blushing. So anyway, thank you, Russ, as always for coming on and sharing your perspective. As you know, I think you're awesome.
Russ Dieringer:
Well, thank you very much. Pleasure to talk about this, love talking about these topics as you can tell. And thanks for having me on again, and thanks for all you do for the community as well.
Peter Crosby:
Thanks.
Lauren:
Thanks Russ.
Peter Crosby:
Thanks again to Russ for his brain and everything. Swing on over to digitalshelfinstitute.org and become a member to keep this kind of knowledge coming your way. Thanks for being part of our community.
