December 2023Consumer Packaged Goods PracticeWhere to play in CPG: A multi-lens approach to beat the market Machine learning can help Latin American consumer packaged goods players better understand consumers, categories, competitors, and capabilities—and increase the odds of outperformance year after year. by Anne Grimmelt, Diego Martin del Campo, Ricardo Sanroman, and Carlos ZuzunagaGiven today’s challenging economic environment in Latin America—including inflation, shrinking margins, low economic growth forecasts, and a reduced willingness to spend—many companies are tempted to deprioritize growth. However, a recent McKinsey article showed that growth is even more important in times of economic uncertainty, and the companies that grow during downturns often outperform their peers when the economy recovers.1 Of course, growth is never guaranteed. So the question remains: how can companies increase their odds of outperforming in today’s market? McKinsey research shows that consumer goods companies that use a combination of four lenses—consumer understanding, category and channel value pools, competitive understanding, and capabilities to win—are 1.2 times more likely to mine valuable insights on where to play than those that use only a single perspective.2 These insights can be further explored using AI tools and techniques—many of which are powered by machine learning (ML)3—at a more granular level to generate forward-looking, actionable next steps. This article shows how predictive tools can be used to develop a “growth road map” that includes estimates of the financial upside and the capabilities needed. It also provides examples of use cases in Latin America, many of which significantly increased TSR.Growth matters—both during and after a downturn In Latin America, companies that grow their market share while expanding profit margins often reap substantial rewards compared with the market. From 2019 to 2022, “accretive growers” delivered, on average, 11.6 percent TSR (Exhibit 1). By contrast, “dilutive growers”—those that expanded their Growth is even more important in times of economic uncertainty, and the companies that grow during downturns often outperform their peers when the economy recovers.1 Børge Brende and Bob Sternfels, “Resilience for sustainable, inclusive growth,” McKinsey, June 7, 2022. 2 “A multi-lens approach to finding growth in consumer goods,” McKinsey, July 26, 2023. 3 ML is a particular field of AI that uses real, past data to create trained algorithms that can process new, unused data and imitate the way humans learn with increasing accuracy.2Where to play in CPG: A multi-lens approach to beat the marketmargins without growing their revenues—delivered only 6.7 percent. Overall, only 30 percent of consumer goods companies in Latin America were classified as “accretive growers.”These figures underline the poi...
