The Phoenixes and Bastions of the consumer sector - MBS Intelligence
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MBS Intelligence The Phoenixes and Bastions of the consumer sector How companies have responded to Covid-19
Contents Introduction
Over the past few years, the world has seen some extraordinary
developments that few could have predicted. 2020 has proven to
be the pinnacle so far, with Covid-19 generating permanent change
Introduction 3
in the corporate, political and societal spheres. In the consumer-
facing industries specifically, the pandemic has overhauled entire
Digital acceleration 5 sectors, forcing business leaders to re-think their operations and
accelerating existing trends at a phenomenal speed.
Investments, mergers and acquisitions 9
Corporate social responsibility 13
People strategies 17 As we approach the autumn and enter the next It is, and will continue to be, an incredibly
phases of Covid-19, this report looks back at turbulent time for the consumer sectors.
the last few months, exploring the ten areas Sadly, businesses will fail, and well-known
Partnerships 21
where Covid-19 has had the greatest impact. brands will disappear. Some will last, and
Based on conversations with our sector’s most some will be reborn. This has always been
The supply chain 25 influential leaders, this report is a collection the case, of course, but the pandemic will act
of insights and analyses which reflect the view as a major catalyst for business success and
Corporate collaboration 29 of businesses globally, covering FMCG, retail, failure. Which organisations will be the bastions
travel, leisure and hospitality, fashion and luxury of the consumer world, and which will be the
Changing consumer behaviour 33 and digital. phoenixes we welcome back from the ashes?
Some of the changes brought about by Talent will be key. Human capital has been at
Agility 37 Covid-19 are immediate and obvious, while the heart of the pandemic from the beginning
others are subtle and slow-burning. By tabling and we have seen some extraordinary
Deprioritised areas 41 the ten themes now, we hope to revisit them developments in mass furloughing, key worker
towards the end of 2020 and assess which recognition and boards which are now primed
About us 44 predictions have come to pass, and which for disruption. In this report, we consider what
were never fully realised. impact Covid-19 has had upon the talent
landscape, and what the disruption might mean
for companies seeking survival, or opportunistic
prosperity, through their hiring plans.
3
Digital acceleration
How Covid-19 has accelerated digital
adoption and transformation
Across the consumer-facing sector and beyond, Digital businesses
Covid-19 has fast-tracked digital transformation
at an extraordinary pace. Speaking on the
coming out on top
matter recently, CEO and CTO of Accenture The landscape of the consumer-facing sector
Paul Daugherty posited that the world has seen has shifted in the last few months – resulting
three years’ worth of digital transformation in in the accelerated success of digital-first
just three months. The crisis has revealed that businesses.
digital credentials are no longer simply a ‘nice For professional organisations, Slack, Zoom
to have’: they are crucial for survival and will be a and Microsoft Teams have allowed businesses
vital part of emerging stronger from this period. to communicate and continue operating
Nowhere is this more clear than in retail, where remotely. We can expect to see much more
ecommerce has burgeoned. According to growth in this area, as businesses fight for
the Office for National Statistics, online sales market share. Indeed, Slack’s user base grew
reached a record high in May, accounting for more in February and March than it had in the
33.3% of total retail sales. While this figure six months prior and has recently pooled its
dipped slightly in June to 31.8%, Covid-19 is still communication capabilities with Amazon in an
expected to add a significant £5.3bn to the UK’s effort to take on Teams. Cybersecurity is set to
ecommerce sector by the end of the year. be a key competitive differentiator in this space,
with widely-aired concerns over Zoom’s security
The same is true in international markets. Even credentials sending shares down 18% in April.
in China, which already accounts for 45% of
global ecommerce transactions, businesses are Competition has also driven further innovation.
scaling their online propositions at a rapid rate. With Zoom, Houseparty and the Nextdoor
Moreover, a recent survey from McKinsey found app winning market share from Facebook, the
that 55% of Chinese consumers are likely to established big tech responded with the launch
continue to buy groceries online after the crisis of Facebook Messenger Rooms.
has died down. We have also seen plenty of activity in the
Covid-19 has propelled businesses with strong entertainment and gaming space: ByteDance
online propositions to the forefront of the hired 10,000 new employees to cope with the
sector, forced traditional businesses to rethink TikTok boom, the newly-launched Disney+
their digital capabilities and increased the garnered more than 50 million subscribers
long‑term need for organisations to make in its first month and Netflix raised $1bn of
digital hires. fresh capital.
5
“Businesses
Covid-19 has also exposed the strength of The online grocery boom must ensure Impact on talent even in traditional, offline roles. In fashion, for
online retail over bricks-and-mortar. In fashion, example, analysts may prove as valuable as
One of the most significant developments they have the The agility, innovation
the luxury ecommerce business Farfetch traditional creatives as the entire industry shifts
in the consumer sector has been the race and resourcefulness
reported a 90% uptick in revenue, while the
by grocers to roll out, or expand, their online right skills demonstrated by IT leaders
online. Indeed, the existence of initiatives such
European online retailer Zalando expanded as Microsoft and London College of Fashion’s
its customer base by more than 20% during
delivery propositions – and a quick look at the to consolidate at the start of the crisis will incubator means that the next generations of
major players proves that a digital foundation short-term need to become the norm –
the first half of 2020. talent are going to be fully tech-literate.
is a critical requirement for adaptability and businesses must ensure
Moreover, businesses which previously invested and crisis management. progress into teams have the right skills Certain positions will change considerably:
in their digital proposition have reaped rewards
Case studies can be found in Morrisons, which lock term to consolidate short-term the decline in out of home (OOH), trade
during Covid-19. L’Oréal – widely regarded as progress into long-term activation and event marketing versus digital,
teamed up with Deliveroo to roll out home success”
a digital leader in the beauty space – enjoyed success. Indeed, a recent Bain for example, looks set to make a permanent
delivery; Aldi, which fast-tracked its ecommerce
a 53% spike in online sales during lockdown, report posited that less than 50% of businesses impact on marketing. The jury is out on whether
offering to provide pre-packed food boxes; and
thanks to its strong ecommerce framework. In are likely to achieve their automation transformations such as wholesalers going
Tesco, which added 120,000 extra delivery slots
workforce management, Amazon was able to performance goals, despite 80% of companies direct to consumer are permanent or whether
and hired 20,000 new staff to meet demand.
leverage its automation technology to screen having accelerated automation initiatives since interim support is required.
more than one million job applicants when There have certainly been bumps in the road. Covid-19 – thereby highlighting the need to A warning for digital-first businesses is that
needing to fill 100,000 warehouse roles. At the start of lockdown, for example, many hire the right talent to guarantee sustained their talent pool has just become even more
grocers struggled to meet unprecedented digital development.
Overall, in the digital arena, Covid-19 has in demand, and will face an intense talent
levels of demand and received backlash
worked to speed up existing consumer Even more so than before, there will be a retention challenge going forward. We can also
from customers who were unable to secure
trends and increased the gap between scramble for digital talent in the months and expect wider implications on salary inflation
a delivery slot. But despite the initial
digital laggards and leaders. years ahead. In every sector, we can expect and overly accelerated career trajectories.
issues, grocers have expanded their online
to see an increased need for data-literacy;
proposition at a never-before-seen pace and
scale, and welcomed entirely new customer
The number of hires
demographics who are now shopping online
for the first time. Research in 2019 by IGD
Proportion of UK retail sales made online (%)
20,000 made by Tesco to help
meet online demand
predicted online could be worth as much as
14% of the total grocery market by 2024. In light 33.3
35 30.8
31.8
of Covid-19, a long-term consumer tendency
towards staying at home and the delivery 30
transformation we are seeing in the grocers,
The proportion of total it will be interesting to see if online does not 25 22.5
20.0
31.8% UK retail sales made amount to well beyond 14%. 19.3
online in June Indeed, Ocado has made a bet on the
20
continued growth of grocery delivery, in 17.9 17.5 18.0 18.1
15 17.0 17.3
June committing to raise £1bn to build
to new infrastructure. Speaking on the 10
The number of matter, Tim Steiner, Ocado’s founder and
chief executive said that online grocery is 5
50m the new Disney+
subscribers in its experiencing an ‘inflection point’, with Covid-19
first month proving a catalyst for permanent channel shift. 0
JAN FEB MAR APR MAY JUN
Source: Office for National Statistics 2018 2019
6 7
Investments, mergers
and acquisitions
The impact of Covid-19 on mergers and acquisitions,
private equity and venture capital
This is a unique time for the consumer- example, Blackstone agreed a £120m deal
facing sector, with widespread disruption to buy a portfolio of logistics sites, rightly
simultaneously leading to the collapse of predicting a boom in ecommerce in response
businesses and the emergence of new trends to Covid-19. At the beginning of April, EQT
and technologies. Amidst the uncertainty, acquired the French industrials group Air
there are opportunities for private equity firms Liquide, which produce a range of hygiene
and investment funds to capitalise, as well as products including hand sanitisers, and in
for businesses to develop their portfolio with May, KKR acquired a majority stake in the US
mergers and acquisitions. multinational beauty company Coty for $3bn
– a figure well below what Coty was valued
Private equity at pre‑crisis.
This is a unique time for private equity funds. Despite evidence of funds taking advantage
Over the course of Covid-19, we have seen of lower prices, research from The MBS Group
funds increase levels of engagement with their found that funds are not interested in distressed
portfolio businesses, while simultaneously investments. Private equity funds are looking
watching the market for investment to help repair the balance sheet of businesses
opportunities. Indeed, recent research from that had a strong EBITDA before the crisis,
The MBS Group found that 69% of funds that rather than snapping up distressed businesses
operate in the consumer-facing sector are and overseeing a whole company turnaround.
either ‘very likely’ or ‘likely’ to invest in our Funds told us that they felt that companies
industries in the next twelve months – with which were distressed pre-Covid-19 are unlikely
funds highlighting the digital, food and drink to survive in the ‘new normal’, unless they can
and beauty spheres as key areas of interest. access packages of state support. For funds
looking to invest in the consumer-facing sector,
We have already seen this play out, witnessing
a strong digital proposition, a healthy pre-crisis
funds making bets on certain sectors, or
EBITDA and a clear purpose are all necessities.
else capitalising on the economic fallout
of Covid-19. At the outset of the crisis, for
9
“Private
equity Moreover, our research found Supporting struggling businesses Impact on talent Even more than usual, there will be a need to
appetite
that there is a particular
with funding and M&A Going forward, businesses will need to hire
distinguish between the short- and long-term,
appetite for asset-backed with a question mark over who is well-placed
In sectors that are disproportionately impacted, the right M&A talent to delineate between
is geared companies. Companies
in particular travel, leisure and hospitality, we short and long-term opportunities. We are
to make the right judgment calls. Private equity
are less frequently being portfolio companies, indeed anyone operating
towards assessed on a balance sheet can expect to see a flurry of M&A activity in the in a position where previously unthinkable
in the M&A space, will need to hire talent
digital future, as access to cash becomes key. M&A/PE activity is plausible, and companies
and cashflow basis, but more with exceptional judgement – as, very often,
will need the right talent to make shrewd
businesses” often on the value of their For example, as racing and sports were cancelled, acquisitions and conduct appropriate due
they will be looking to acquire brands and
assets, like infrastructure, the bookmaker Flutter Entertainment (parent companies whose value has become clear only
diligence in an environment where a different
inventory and freehold property. As a result, company of Paddy Power and Betfair) secured a in the context of the pandemic and which may
set of considerations have come to the fore.
we can expect to see pubs and hotels being £10bn merger with The Stars Group to help them be different from those previously acquired.
On the other hand, target businesses must
bought by private equity funds and their weather the crisis. Interestingly, Flutter was the think strategically about hiring talent to lead With M&A likely to be a very prominent
property assets repurposed. biggest gainer (up 36%) on FTSE 100 in April. ‘defence’ and ensure they are not the subject feature of the consumer-facing sector in the
Similarly, we have already seen plenty of of opportunistic takeovers. next few years, hiring decisions will have
Digital investment businesses raise funds to bolster their balance to be made around whether to cultivate
Key-person security, geographic mix,
It will come as no surprise that there has been sheets during this time. With nobody travelling, M&A leaders with industry experience,
robustness of the supply chain and the
plenty of activity in the digital sphere in the last Expedia raised £3.2bn to ride out the pandemic, hire seasoned dealers (such as those
seasonality of businesses, for example, will have
few months. while Airbnb raised $1bn from private equity from investment banking), or bring in
to be considered post-Covid-19 when making
firms Silver Lake and Sixth Street Partners. commercial strategy consultants.
In line with the shift in consumer behaviour an investment.
towards online, the recipe box business In fashion, struggling heritage businesses have
Gousto raised £33m in a round led by Perwyn, been bought by larger players, such as the
BGF, MMC Ventures to fund its growth. acquisition by Boohoo of Oasis Warehouse
Netflix also raised $1bn to double down on Group’s online operations after the brand fell
original content. into administration. How likely are you to invest in the consumer-facing
Private equity appetite is also geared towards
sector in the next 12 months?
digital businesses. Research from The MBS Businesses adapting their portfolio
Group found strong digital credentials to be with mergers and acquisitions
the number one priority for funds looking Very likely
As businesses across the sector think holistically
to buy assets. Indeed, we have already seen about where their organisation will fit in the ‘new
this play out, with private equity firm Novator normal’, we can expect to see businesses making Likely
leading a Series D funding round into the luxury strategic acquisitions in order to trade more
consignment marketplace Rebag, for example. effectively and cater to new consumer demands. Don’t know
There is an expectation of more M&A in tech, This will be particularly true in the digital arena,
as founders seek to bolster their balance sheets as businesses acquire new technologies to Unlikely
and the balance of power shifts to investors. further their online offering.
Very unlikely
Moreover, the demand for local products will
benefit local FMCG companies and may mean
global brands have to adjust their portfolio
accordingly.
Source: The MBS Group research
10 11
Corporate social
responsibility
How Covid-19 has shone a light on ‘doing the right thing’
“A company’s
Corporate social responsibility – as part of a stance on key offering a percentage
wider understanding of environmental, social social issues of their profits to
and governance considerations – has been organisations tackling
rising up the agenda for some time. Covid-19 is becoming the crisis.
has fast-tracked this, shining a light on the an important Five months on from
corporate responses to the pandemic and differentiator” the beginning of the
setting in motion a flurry of CSR activity that
UK’s lockdown, CSR is
looks set to wave in a new era of corporate
still high on the agenda. With companies like
governance and customer relations.
IKEA repaying its furlough payments back to
the government, and Kurt Geiger pledging to
Covid-19 fast-tracking donate to the NHS until Christmas, it seems as
the CSR agenda though an awareness of the importance of CSR
In the last few years, there has been increased isn’t going away.
visibility around how businesses drive positive Moreover, as evidenced by the Black Lives
change and support social and environmental Matter movement in recent weeks, a company’s
causes in their communities. Indeed, in stance on key social issues is becoming an
some cases, doing the right thing by one’s important differentiator for consumers – and
colleagues, customers and communities organisations that fail to take a stand and do
has become just has important as delivering the right thing will fall out of favour.
shareholder value or achieving profitability.
Covid-19 has accelerated this trend. At the
outset of the crisis, for example, donating
funds or products to the NHS or vulnerable
communities became the norm for businesses
in our sector. Across the industry, we saw
companies – even those for which CSR and
charity is not usually a priority – donating care
packages, offering discounts for NHS staff and
13
“The world’s
Focus on fashion Brand-building in grocery biggest tech CSR for reputational expelled 4,000 third party sellers from its site
In fashion, Covid-19 is set to have a long-term Covid-19 has increased the visibility of many
firms have recovery for profiteering from the pandemic; and Twitter
expanded its safety rules in a bid to curb the
impact on the industry’s conversation around businesses in our sector – and none more so For some businesses,
CSR. For bricks-and-mortar retailers, pureplays than supermarkets. With a key role to play shouldered Covid-19 has presented
spread of misinformation.
and luxury fashion houses alike, sustainability in keeping the nation fed, the last few months CSR well an opportunity to win back There have also been examples of purpose-
has been a key item on the agenda for quite have served to propel the grocery sector driven leadership in technology companies.
during public trust and build a more
some time, and Covid-19 has directly affected further into the national consciousness than positive reputation. Netflix, Amazon, Apple, Facebook, Disney and
two key issues: seasonality and excess travel. it ever has been before. the crisis” YouTube each downgraded their video quality
As businesses face billions of pounds worth For example, in response in Europe after the EU expressed fears about
Against this backdrop, the many positive to criticism that the gambling industry was
of excess stock, we can expect to see the the load on internet infrastructure caused
measures, schemes and initiatives rolled out exploiting people stuck at home, the Betting
seasonality and mass-produced nature of the by the combination of mass home-working
by supermarkets over the period have acted and Gaming Council announced that firms
industry change; many will be looking into and home-entertainment. Led by Netflix, this
as phenomenal brand builders. had voluntarily agreed to stop advertising
sustainable resale and upcycling opportunities. development begs the question whether CSR
When panic-buying struck the UK, for example, during the lockdown. In a more significant could be the key to ingraining a ‘first-mover’
Similarly, with global travel restrictions shift, brewers and distillers – long accused of
the major players in grocery swiftly announced mindset in tech.
disrupting fashion weeks around the world, undermining public health – became lifesavers
measures to protect customers and staff and
luxury fashion businesses found digital by pivoting to manufacture hand sanitiser. In general, the world’s big tech firms have
safeguard supplies for those who needed
solutions to continue with shows and shoots. Big pharma, and even tobacco, both similarly shouldered CSR well during the crisis, with
them. Trading hours were adjusted to give
Looking ahead, Covid-19 may well be a demonised, found themselves in the vanguard almost all using their platforms to feature stay
priority to pensioners and health workers, and
watershed moment for CSR in the fashion of work to develop vaccines. at home messages during the lockdown. Most
purchases of essentials were limited. Some
industry, as well as mark a new way of thinking prominently, Twitter CEO Jack Dorsey pledged
announced plans to pay their smaller suppliers
about both luxury and fast fashion. more than a quarter of his wealth to tackling
with immediate effect (see Partners) while CSR at technology companies the pandemic.
others established hardship funds for struggling Tech companies, meanwhile, have found
staff. M&S, for example, gave store and supply themselves simultaneously playing a critical
chain staff a 15% pay increase. role in national infrastructure while also being
Impact on talent
The pay increase Looking ahead, it will be interesting to see
15% M&S gave its store
Perhaps more notable than the individual
initiatives themselves was the level of
at the heart of some of the emergency’s most
heated debates. whether those responsible for CSR take a more
and supply chain staff central role in business strategy. As the topic
collaboration that emerged amongst grocers. On the one hand, tech businesses have
When the leading supermarkets jointly penned becomes more visible to consumers, we may
stepped up to the plate to deploy their see board level roles dedicated to CSR and
a letter to consumers at the beginning of the capabilities in supporting the fight against
outbreak, urging against stockpiling, it served a higher number of strategic partnerships
The proportion of the virus. Google and Apple took the lead between CSR and marketing functions. Other
as a symbol of unity and set the tone for the in developing a tracking app; the World
25% his wealth that Jack
Dorsey pledged to
months to come. Health Organisation launched health alerts
roles relating to CSR – such as the chief
sustainability officer – may also be propelled
tackling the pandemic Taken together, the CSR activities of our on WhatsApp; and Facebook Messenger is forward post-Covid-19.
grocers have not only increased the visibility partnering with governments and the United
of their individual brands, but also highlighted Nations on health messaging texts. From our conversations with Chairs and Non-
the vital role that the UK grocery sector plays Executive Directors, it became clear that this
The number of Similarly, the crisis has driven a change towards community feel that it is their role to ensure
in our wider society. Looking ahead, it will be regulation which is supported by the sector’s
third‑party sellers that CSR remains firmly on the agenda in
4,000 Amazon expelled
interesting to witness the impact this crisis
has on the grocery sector, and, from a talent
behemoths. With sanitisers and protective these times of crisis.
from its platform clothing in high demand, eBay introduced
perspective, whether the sector has become measures to tackle price gougers; Amazon
for price gouging
more attractive to ambitious individuals
looking to drive societal change.
14 15People strategies
How Covid-19 has impacted workforces
across the consumer sector
Covid-19 is set to have a lasting impact Workforce visibility
on workforce management in the consumer-
The discussions surrounding key workers and
facing sector. After all, the labour market
feeding the nation have increased the visibility
has been significantly disrupted: while mass
of the UK’s wider workforce like never before.
redundancies took place across the sector,
At the outset of the crisis, retail employees,
Tesco alone hired 45,000 new employees.
delivery drivers, farmers, and other essential
The crisis has also fast-tracked conversations
workers were thrust into the spotlight and
around key workers, and increased the visibility
received wide recognition for their contribution
of employees in our industries.
to keeping the nation moving. Indicative
As a result, the human resources function of the national mood, Vogue’s July edition
has become more visible than ever before. featured essential workers on its cover.
Especially at the outset of the crisis, Human
Moreover, in line with CSR and ESG agendas,
Resources Directors (sometimes called Chief
businesses are paying more attention to
People Officers) were tasked with balancing
their people internally during this stressful
long-term priorities such as employee
time. Companies such as Tesco and Aldi
wellbeing with the immediate - and highly
have expanded their health and wellness
complex - matters of furloughing, redundancies
propositions during the crisis, and Heineken
and pay cuts. Looking ahead, Covid-19 looks
has made a ‘no lay-offs’ guarantee to its
set to permanently change how companies
employees until the end of 2020. Those
think about their people, and the human
businesses which look after their employees’
resources function is sitting at the centre
physical and mental wellbeing – and continue
of this development.
to do so beyond the crisis – will benefit from
increased loyalty among both colleagues
and customers.
Looking ahead, when it comes to hiring and
securing the best talent, employers should
expect to be asked by potential hires how they
treated their employees during Covid-19.
17“Never
Focus on the gig economy Internal upskilling before have Impact on talent
Many of those still working throughout As businesses adapt to the changing consumer companies Never before have companies
lockdown were part of the ‘gig economy’, landscape, but work to avoid the costs of needed the very best HR
occupying short-term, sometimes multiple making new hires, we can expect to see a needed the Director as much as they 9.6m The number of people
roles. This structure of employment has been renewed focus on upskilling current employees. very best HR do now. on furlough in the UK
widely criticised in the past for its reliance on This is particularly true in areas such as digital Director as The crisis has required
zero-hour contracts and lack of sick pay and marketing, ecommerce and data analytics.
other employee benefits. Looking ahead, The multinational beauty and personal care much as they capable and resilient people
leaders to keep colleagues
we may see businesses change their attitude company Natura, for example, made a do now” healthy and mentally well,
towards gig workers, and employ more statement committing to increase its internal The proportion of the
empathy and understanding when drawing digital training capacities, to support a 250%
oversee vast remote working
networks and handle the complexities of
10.2% US population that
up policies. Uber, for example, which has spike in ecommerce sales since Covid-19. is unemployed
retrenching, furloughing and deciding
previously been accused of being exploitative,
whether to cut jobs, salaries or working hours.
committed $50m during the crisis to provide its Flexible working CEOs have been telling us over the last few
drivers with safety equipment, and set up a ‘gig
How organisations operate has been of months that their HR leader has become
hub’ for drivers to find other short-term jobs The number of Chinese
transformed in the last five months. With their most trusted advisor and, in some cases,
during Covid-19.
the boom of Teams, Zoom and other virtual their de facto number two. 5m citizens who lost their
job in the first two
A renewed understanding of the importance of project management programmes, businesses Looking ahead, we can expect this crisis to months of 2020
the so-called ‘unskilled’ workers in the domestic world-over have maintained productivity while raise visibility of the human resources function
labour market could also influence the debate working remotely, and this experience looks further, which will lead to more HRDs sitting
around post-Brexit immigration policy - though set to wave in a new era of flexible working around the main board table.
there is little sign of this yet. patterns. Twitter CEO Jack Dorsey, for example,
announced in May that the company would Much has been written about how to elevate
Restructuring allow colleagues to work from home as long the HR position, and why ‘people people’
as they see fit, and in July, Google followed are so consistently under-represented in the
Covid-19 has also led to mass restructurings boardroom - indeed, of the 723 non-executive
suit, making a statement to say employees
across the consumer sector, and plenty of directors who sit on FTSE 100 boards, just 3%
would be working remotely until at least
cross-sector collaboration as employees have any prior HR experience in their executive
summer 2021.
from hospitality and travel businesses were career. This comes despite the fact that HR
redeployed to work in the food industry. The fallout from this structural change will be Directors have a well-balanced and thorough
Looking ahead, we may well see this sort of broad-reaching and long-lasting, impacting understanding of how businesses work.
movement of people happening more often everything from where cafes, restaurants and Considering the ‘our people are our biggest
between sectors. bars choose to open to businesses’ policies asset’ rhetoric adopted by so many senior
around childcare. Indeed, historically, the leaders, and the prevalence of the HR function
lack of meaningful opportunities for flexible during the crisis, we can expect to see more
working has been a barrier to achieving diverse former and current HR directors around the
leadership. The last few months have shown board table in the months and years ahead.
us all that remote and flexible working is
effective – possibly even more effective than
we originally thought – and should no longer
be a barrier to progression.
18Partnerships
How Covid-19 has strengthened strategic
partnerships across the sector
Covid-19 has highlighted the need for Suppliers
collaboration and strategic partnerships.
Covid-19 has brought supplier relations to the
By forming partnerships with one another,
fore, especially in retail. Since the beginning
businesses from across the consumer-facing
of the pandemic, we have seen grocers roll
sector have been able to continue serving
out support for their suppliers. Such examples
customers effectively.
can be found in Sainsbury’s and Morrisons,
Moreover, the intense disruption caused by both of which revisited their supplier payment
Covid-19 has fast-tracked conversations about terms to speed up payment and help save
transparency in the supply chain. Now more small businesses on the risk of collapse.
than ever, businesses must know – and engage Supporting homegrown producers rose up the
with – their supply partners. agenda, too, with Aldi promising to stock more
British beef and M&S launching a campaign
to support and champion British farmers. In
FMCG, Unilever pledged €500m to support its
supply chain through such moves as extending
credit to select small-scale retailers that rely on
the company.
This issue is closely aligned to corporate
social responsibility, and comes with major PR
implications. Primark, for example, pledged to
create a fund to pay garment workers’ wages
after facing severe criticism from the likes of
the Bangladesh Garment Manufacturers and
Exporters Association when billions of pounds
of clothing orders were cancelled across
Asia, leaving millions without work. Brands
including H&M, M&S, PVH Corp and Adidas
also committed to paying suppliers despite
deadstock.
21“Covid-19 has
Cross-sector partnerships revealed the continue trading Impact on talent
to customers in
Covid-19 has served to reveal the interconnectedness The increase in cross-sector collaboration
their homes. In
interconnectedness between consumer sectors: could see the rise of the partnership director
alcohol manufacturers are dependent on pubs; between consumer March alone,
to handle strategic relations. In retail, new
sectors” Deliveroo said
food producers are reliant on restaurants and partnerships could affect the commercial
that it registered
much of the beauty industry is dependent on and buying functions.
more than
salons operating as usual.
3,000 new UK restaurants to its platform. More generally, as businesses from different
As a result, Covid-19 has encouraged many Going forward, it will be interesting to see sectors team up – such as healthcare and tech
displays of cross-sector support. In a show of which businesses commit to long-term – it may be necessary to address how best to
support for on-trade, Diageo pledged £1m digital partnerships and which withdraw from execute partnerships between companies with
to support bartenders who had lost their jobs, collaborations in order to focus on traditional very different corporate cultures. Indeed, one
and Campari UK gave £100,000 to launch routes to market. medium-sized business CEO told us that the
the Shaken Not Broken fund supporting most notable impact in her organisation during
hospitality workers. Such moves were not
Keeping customers safe Covid-19 was the ability to negotiate. For all of
purely charitable, but recognised mutual her leaders, regardless of function, negotiations
dependencies. Whether this will prove the Throughout Covid-19, we have also seen have become part of their job description.
start of a transition to a new normal of more countless partnerships designed to reassure These have ranged from asking for delayed
collaborative supplier relationships remains customers as health, safety and cleanliness payment terms, to increased delivery speed
to be seen. becomes a key competitive differentiator. to lower rent rates.
At the outset of the crisis, for example, Hilton
Group announced a partnership with Reckitt
Digital partnerships Benckiser, the maker of Lysol and Dettol,
Perhaps most predominantly, we have aiming to develop a ‘new standard’ of hotel
seen dozens of new digital partnerships cleanliness. In this case, collaborating with
during Covid-19. In the early stages of the a well-known name such as Reckitt Benckiser
pandemic, retailers and restaurants forged new raised Hilton’s profile, and acted as a marketing
collaborations in order to keep trading and strategy to encourage customers back to
reach customers during lockdown. Case studies its hotels. We have also seen businesses
can be found in Morrisons, which teamed up partnering with technology companies to trial
with Deliveroo to roll out home delivery; in Pret, new ways to keep their customers safe. In late
which partnered with Amazon to sell coffee July, for example, Asda teamed up with the
products; and in the countless restaurants technology company WasteCare Group to trial
which worked alongside food delivery giants to a new trolley cleaning machine that kills 99.9%
of bacteria in just fifteen seconds.
22The supply chain
The long-term impact of Covid-19 on the
consumer-facing sector’s supply networks
During Covid-19, the strength of the UK’s Leaders and laggards in retail
supply chain networks has not only meant that
In the early stages of the pandemic, the sudden
vulnerable communities have been able to
surge in ‘panic buying’ put immense pressure
access the vital food they need, but that most
on retail supply chains – and highlighted that
UK households have been able to maintain
agility should always be a priority.
their normal lives from indoors, accessing the
same food, goods and DTC services. Faced with unprecedented demand for online
grocery deliveries, for example, supermarkets
At the same time, the crisis has shed light on
such as Sainsbury’s and Tesco proved flexible
the shortfalls of the many fragile and complex
enough to step up to the challenge. Ocado
supply chain networks that exist in our sector.
also provides an interesting case study. The
The last few years have seen companies use all
company’s robot-powered operations, set to
the tools at their disposal to drive efficiencies
operate at specific capacity, could not simply
and reduce costs; optimising every step in the
bring more people in to help fulfil orders.
chain and creating supply lines that are averse
Despite these initial challenges, however, the
to sudden change. Covid-19 has proved the
online retailer has since claimed share of wallet,
need for simple, agile and flexible supply
achieving its best-ever market share at the end
networks that can pivot with ease.
of June. Looking ahead, it will be interesting
Looking ahead, winning businesses will be the to see whether Ocado’s digitised operations
ones that prioritise investment in their supply will be re-evaluated and risk assessed in order
chain, and implement the right technology and to ensure long-term commercial success and
hire the best people to lead transformation. maintain productivity through a potential
Doing so will pay dividends: a recent study from second wave of the crisis.
Bain found that investments in supply chain
resilience can deliver a 25% improvement in
output and a 30% rise in customer satisfaction.
25“Companies
Understanding your supply line: are now Swapping global Impact on talent We are also seeing an increase in consumer
transparency and analytics taking steps for local A complete re-evaluation of supply networks
scrutiny around supply lines and ingredients.
It remains to be seen whether this will drive
Effective supply lines also require transparency The Covid-19 crisis has will require new talent, especially in developing
at every level – and achieving this requires
to construct undoubtedly exposed digital solutions to improve transparency and
a ‘local for local’ approach – as many leaders
attest – or whether it will result in greater
rapid digitalisation. flexible the weaknesses of agility long term. Indeed, a report from Bain
sophistication around technology that provides
demonstrates this, finding that while 80% of
During the Covid-19 crisis, many manufacturers networks globalised supply consumers with instant insight into the make-
chains. At the very companies were accelerating automation
demanded greater visibility into their supplier’s of suppliers” height of the crisis, for initiatives, less than 50% were on track to
up of a product and its journey.
own supply chains – and this practice is achieve their automation development targets. Supply chain leaders need to maintain an
example, the FMCG
certainly worth continuing. Integrating data It is therefore imperative that businesses outward-facing view, and partner with their
business PZ Cussons reported difficulties
across the supply chain, and utilising 5G and introduce the right people who can oversee marketing teams to ensure they are up to
sourcing the raw materials for soap from
blockchain technology will allow leadership supply chain transformation and consolidate speed with the latest technologies.
its overseas suppliers – arguably its most
teams to gain real-time visibility and calibrate short-term progress into long-term success.
important product at that time. Blockchain has long been an area of focus,
supply and demand during normal times,
as well as react to supply and demand shocks. Kevin Moore, chief commercial officer and as such, tech-educated supply-chain
The ability to compare production capacity of Greencore, predicts the development leaders will be increasingly in demand.
with real-time demand will be a critical of local and regional supply chain networks
to achieving agility and flexibility. in the consumer-facing sector as a result
of businesses re-evaluating their operations.
Investing in digital analytics tools will surely pay
dividends in the years to come. A recent report
Indeed, companies are now taking steps to Resilient supply chains build competitive advantage
construct flexible networks of suppliers and
from Bain showed that advanced analytics can
manufacturing partners. That means setting
improve supply forecast accuracy by up to 60%.
up alternative suppliers, manufacturing sites
and assembly locations and developing
Focus on fashion digital analytics tools to measure progress.
When the Italian government put the country’s
We may see businesses move their offshore
northern region under quarantine, the fashion
manufacturing onshore, or at least closer to key
industry’s long-standing dependence on
markets to improve response time and be more
Italy was brought to the forefront of the Accelerate revenue Improve customer Increase savings Mimimize risk and
receptive to local demand. Toyota, for example,
conversation. The issue was exacerbated growth satisfaction and cash flow increase resilience
reduces risk by having one supplier produce
by Asia, where stores were reopening
and luxury retailers were placing orders.
60% of the needed parts, while two additional 40%-60% 20%-40% 1%-2% Buffers reduce
suppliers each produces 20%. decrease in prodcut increase in perfect order lower operating disruptions to
Fast forward to today, and the impact of the development cycle rate expenses the network
From a consumer standpoint, we may see
crisis on fashion supply lines may well be a
demand increasing for local products as fears 20%-60%
catalyst for lasting change. We can expect to 15%-25% 20%-30% 10%-20%
around health and safety and sustainability improvement
see a return to far less seasonal industry, and increase in improvement in customer lower transporatation in forecasting accuracy
concerns continue to mushroom. plant output satisfaction costs
for luxury fashion houses and brands to turn to with advanced analytics
local suppliers, designers and manufacturers. As a counter point, however, global supply lines
will always be needed so long as a consumer 10%-40%
Faced with billions of pounds worth of excess increase in inventory
appetite remains for region-specific products, turnover
stock, high street and luxury brands alike will
such as French champagne or Scottish whisky.
have to find creative, sustainable and cost-
Source: Bain & Company analysis
efficient ways of shifting unwanted products.
In May, for example, Primark reported that it
was sitting on £1.5bn worth of excess stock.
26 27Corporate
collaboration
How bodies, businesses and organisations
worked together to tackle the pandemic
In April, the Consumer Goods Forum launched Some of the biggest challenges in the
the New Coalition on Collaboration for consumer-facing sector, from sustainability
Healthier Lives, aiming to help its members to diversity to food poverty, will require
“drive more impactful collaborations that connectedness and collaboration between
benefit both people and planet and seize businesses in the sector. If companies continue
the opportunities offered by purpose-driven to cooperate to the same extent as during
business models”. While this initiative had Covid-19, we can expect our sector to grow,
been planned well before Covid-19, its timely develop, innovate and become an incredibly
launch was indicative of the overall mood of exciting place.
the consumer-facing sector during the crisis.
After all, in the last few months we have
Swapping competition
seen an unprecedented level of corporate for collaboration
collaboration and knowledge sharing taking In March, the UK government relaxed
place between businesses. At the height of the competition laws to allow retail businesses
crisis, for example, leaders from each of the to work together to meet the unprecedented
sector’s biggest food businesses were meeting demand brought on by stockpiling. This
virtually on a weekly basis to share insights and development came to define the early stages
discuss how to help each other in keeping the of the crisis. The spirit of collaboration could
nation fed. In an industry usually fraught with also be seen in tech, with rivals Apple and
competition and fierce rivalries, Covid-19 has Google teaming up to develop Covid-19
served to prove what can be achieved when tracing apps.
businesses work together.
It will be interesting to see whether this period
will foster a new normal of cooperation and
a potential wave of collaboration on other
industry challenges, from privacy to diversity.
29“Trade
bodies have Redeploying staff Neighbourly is another example of corporate industry and government together to ensure Again, government has stepped forward
collaboration driving positive change. Danone food and other essentials keep flowing through with helpful flexibilities. To cope with demand
played a As some sectors experienced
UK & Ireland, Coca-Cola European Partners, the supply chain, while the Food and Drink from shoppers and ensure adequate supplies,
unprecedented demand
vital role in and others ground to a halt,
M&S, Lidl and Aldi joined forced to create Federation has been sharing supply chain jobs. competition laws were relaxed to encourage
Neighbourly, a fund to support organisations collaboration and data-sharing between the
the battle the consumer-factor proved
helping those most at risk during the crisis.
Much of this work has been supported by
grocers in a move that raises questions about
against its interconnectedness, and the action of government, both national and
what the relationship between supermarkets
leveraged its workforces to Similarly, the anti-food waste charity FareShare devolved, with the furloughing programme,
Covid-19” redeploy staff where needed. has gained significant mainstream momentum liquidity support and targeted initiatives
- and some of their new partners - will be like
in the longer term. Some collaborations, such
during Covid-19. In June, the organisation such as the Holyrood administration’s £10m
In many cases powered by industry bodies such as Deliveroo’s partnerships with Morrisons and
joined forces with the Premier League Scottish Seafood Business Resilience Fund.
as The FDF or WiHTL, thousands of people Marks & Spencer, make sense in lockdown,
footballer Marcus Rashford, committing to Images of empty supermarket shelves were
moved between sectors at the beginning yet the economics of these arrangements will
providing more that 3.7 million meals per week a salutary reminder of the fundamental
of March. One of the most prominent be scrutinised with different eyes in recovery.
to vulnerable people. importance of retail/FMCG to the functioning
developments was food businesses bringing
of the country, yet it remains to be seen
on employees from the then-closed hospitality
Trade bodies and UK government whether the government becomes more Impact on talent
sector. Other examples include easyJet and
attentive to the sector as a result. Ministers The collaboration between businesses and
Virgin, where staff went to work at the NHS Industry bodies have played a vital role
have other challenges to resolve first, not sectors has exposed the number of transferable
Nightingale hospitals. in the battle against Covid-19, providing
least in addressing the dilemma of which skills that exist in our industry. Looking ahead,
These sorts of developments may well a forum for business leaders to connect
businesses the government should prioritise we may well see an increase in hires being
encourage innovation in employee-matching and mobilising critical action.
for post‑lockdown recovery. made from adjacent sectors, and more senior
technology, especially as more businesses The British Retail Consortium, Food and Drink movement between industries as businesses
Challenges in the coming months include
streamline their number of sites or close their Federation, IGD, Walpole, UKHospitality, grow increasingly interconnected.
the need for the hospitality sector to work
doors completely. Finding redeployment The British Fashion Council and the CBI have
with local authorities to adapt their businesses
solutions within the sector could be a key area underpinned many of the sector’s activities,
to social distancing requirements, and for
of interest going forward. often liaising with the UK government or
travel – especially airlines – to work with
providing connections between adjacent
governments. Return to work planning has
Joining forces for positive businesses.
seen Hilton announce it will collaborate with
initiatives Among such initiatives has been the work RB and consult with the Mayo Clinic to deliver
There is a plethora of examples of businesses of IGD working with the Department for an industry-defining standard of cleanliness
coming together to launch charitable schemes Environment, Food and Rural Affairs (Defra) and and disinfection in their properties.
and fundraisers. Indeed, Covid-19 has exposed foodservice companies to manage the sourcing
Moreover, public-private partnerships between
the mutual reliance that exists between and delivery of food parcels to those normally
healthcare and private tech look set to be
industries – especially between food and drinks reliant on foodbanks.
accelerated as a result of Covid-19, with Apple
manufacturers and the hospitality industry, During this time, former FDF president and and Google working on a tracing app and the
for example. Campari UK’s Shaken Not Broken Premier Foods CEO, Gavin Darby, has become NHS using Microsoft Teams for virtual visits.
initiative is indicative of this. In partnership chairman of The Felix Project, the London food Government’s role as a partner and funder
with TiPJAR and The Drinks Trust, the drinks distribution charity which has stepped up from for innovation can be seen with the launch
giant created a relief fund for the hospitality delivering 10 to 40 tonnes a day to feed the of a £1.25bn Future Fund to help UK start-ups,
industry’s front-line workers, and itself capital’s hungry. The crisis has exposed the with similar ventures worth €4bn in France
committed £100,000. value of good leadership in such organisations and €2bn in Germany.
and the need to hire the right talent. IGD, the
research and training charity, has been bringing
30 31Changing consumer
behaviour
The seismic shift in consumer behaviour
and what it means for the sector
That consumer behaviour has shifted Accelerating trends
dramatically during Covid-19 is indisputable.
Covid-19 has fast-tracked a number of existing
In the short-term, consumers world-over have
trends, forcing businesses world-over to
moved online, and in the UK alone, more than
re‑think their long-term strategies.
half the population has used a new cashless
form of payment since Covid-19 began. The most notable development has of course
been the move towards digital adoption.
Longer-term, businesses face the challenge
When asked about the pace of change, the
of identifying which parts of the economy will
CEO and CTO of Accenture Paul Daugherty
spring back to where they were pre-Covid,
suggested that the world had seen three
and which shifts are likely to prove permanent.
years’ worth of digital transformation in just
Due to the unavailability of past data and few three months. Specifically, Covid-19 has
existing case studies to help drive decision- encouraged an entirely new demographic to
making, it is difficult to envision how exactly turn online. The notion of the ‘silver surfer’ has
the crisis will impact society. However, history always been well-established, but it will be
tells us that crises cause fundamental shifts interesting to see what investments businesses
in both social attitudes and the way in which make to encourage their older customer base
businesses operate: WWII brought women into to stay online.
the workforce, 9/11 redefined security policy,
Covid-19 has also fast-tracked the trend
and the SARS outbreak sparked an increase
towards homeware and interiors, triggered by
in ecommerce, for example. Businesses need
consumers re-evaluating their surroundings
to think holistically, strategically and steadily
when spending more time indoors during
about their future, and determine where they
lockdown. In the middle of the crisis, for
fit within the ‘new normal’ for consumers –
example, sales of candles at Diptique grew
whatever that may look like.
by 536%. Moreover, the fast fashion platform
PrettyLittleThing recently announced its move
into the homeware category.
33“The entire “Effective
Other trends are forming new hybrids. In
consumer on the growing trend Coping with recession chief strategy Impact on talent
consumer goods, digital combined with a for home cooking that
The economic fallout from Covid-19 will be The need for innovative
resurgence of home cooking has accelerated sector will has emerged from officers
felt for years to come, and businesses must and entrepreneurial
the rise of meal-kit recipes. The model was not have to adjust lockdown. Nando’s, for
adapt their propositions with this in mind. As will make responses to a new
new, but it has found its moment in the crisis, example, has teamed
as was confirmed when Gousto raised £33m
to social up with the recipe box
consumers find themselves with less disposable insights-driven commercial reality
income, buying habits and purchasing will put a premium
mid-way through lockdown. In a similar way, distancing business Mindful Chef to predictions
decisions will be disrupted – a McKinsey survey on chief strategy
Peloton – already a burgeoning brand – hit and fears allow customers to cook
of consumers in China, for example, found that about or transformation
one million subscribers through lockdown and its recipes at home.
is predicting its total revenue for the year will
around health 42% of young consumers intend to save more consumer officers. Effective chief
There are businesses as a result of the virus.
increase by 89%. and safety” buying habits” strategy officers will
which have proved their make insights-driven
In some businesses, we will see a move towards
agility and have adapted their proposition predictions about consumer buying habits,
The ‘new normal’ or developed their offering to cater to new
lower-cost products. The surge in upmarket
as well as support CEOs who are likely to
nail polish purchases during lockdown is
The entire consumer sector will have to adjust consumer needs. Personal shopping, for be focusing on ensuring the survival of their
indicative of the ‘lipstick effect’ – the theory
to a world of social distancing and fears around example, has resurged with Harrods offering business.
that consumers will always buy luxury goods,
health and safety. Some businesses, such as the comfort and security of personal shopping
but opt for less expensive items. Indeed, A focus on thinking around the customer may
cafes and retailers, have been quick to adjust – to its most valued customers as the first phase
the market research group NPD reported also see the rise of the chief customer officer.
but such agility is more difficult for others, such of its return to opening. Farfetch, NAP, and
a double‑digit increase in sales of nail polish
as airlines, hotels and cruise businesses. Moda Operandi also identified the need for We have already seen some roles, such as the
during Covid-19.
private client divisions early on. personal shopper, given a new lease of life
Organisations will have to show that they are Looking ahead, brands will have to will have during Covid-19; highlighting the need to hire
taking health concerns seriously, which may Leaders can take lessons from their peers in
to think carefully about product development the best talent to optimise spending. The move
shift the balance of power in the market. Will other regions. In China, for example, the luxury
to ensure commercial success. Indeed, this to ecommerce in developing markets such
a certified hotel environment prove more department store Lane Crawford introduced
could mark an exciting period for the sector, as Russia raises questions as to whether local
appealing than a semi-unregulated Airbnb? a ‘trunk service’, whereby entire new wardrobes
as a more difficult economic environment knowledge or digital expertise is of more value.
Federico J. González, President and CEO of were picked out by personal stylists and sent
sparks innovation, and established businesses
the Radisson Hotel Group, thinks the new directly to customers. In FMCG, we are likely to see an evolution
must prepare for increased competition from
competitive differentiator will be not just price of functions in insights, consumer market
Barclays’ Global Consumer Staples report start‑ups in every field.
but safety protocols, trust and experience. Will knowledge and route-to-market planning as
shows that washing hands more regularly
European holidays via Eurotunnel Le Shuttle major corporations try to stay one step ahead
is the biggest behavioural change in the
or a ferry crossing in the safety of one’s own of the consumer behavioural changes.
UK in response to the spread of the virus,
car feel a safer option than a flight, or will predicting that this practice will remain in Overall, businesses must ensure that their
there be a reluctance to travel far at all? place for many months and will be a major senior teams are agile, and comfortable with
Bars, restaurants and entertainment venues social norm even after the pandemic passes. a fast-moving, often ambiguous consumer
will have to decide how best to encourage With this in mind, it will be interesting to see landscape. The ability to think on one’s feet
and accommodate customers who may be which FMCG businesses diversify into hand and make critical decisions at pace has been
reluctant to venture out and whether changes washing products. Also in FMCG, channel mix proved a requirement for crisis management,
- to premises and even business models will become an increasingly crucial feature in a and should be carried through to the next
themselves - should be permanent or interim. business model. Nestlé, predicting a decrease phase of Covid-19.
Many restaurants have already developed in footfall to convenience stores, has taken
ways to reach consumers at home, capitalising the proactive measure of partnering with
Deliveroo’s Essentials platform.
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