1、NOVEMBER 2021 PORTRAITS OF CHANGE: THE NEW ECONOMY INTRODUCTION03 AUTOMOTIVE06 CPG09 LUXURY13 TECHNOLOGY16 TELECOM20 WHATS AHEAD23 TABLE OF CONTENTS Habits formed during times of adversity have a way of becoming permanent. Children of the Great Depression never outgrew the compulsion to conserve res

2、ources, and the women who entered the workforce during World War II never really left. Today, as offices and cinemas reopen and airports prepare for holiday crowds, we are in the exciting position of seeing which consumer behaviors adopted during the pandemic may be with us for the long term and how

3、 they will affect our culture, our economy and our industry. To get the fullest possible understanding, it is helpful to look at the origins of these habits and how theyve impacted various economic sectors thus far. This means looking backward so we can see whats coming. While we aim to maintain a c

4、onsumer lens in our analysis, often the most detailed and accurate information about consumers can be assessed through extensive analysis of financial data from the companies they patronize. This report focuses on five of the largest marketing categories: packaged goods, luxury, telecommunications,

5、automotive and technology. By evaluating their performance over the past several years, as well as the headwinds and opportunities presented by these unusual times (supply chain changes, product distribution and sales, the capacity to operate digitally), we hope to emerge with the clearest possible

6、picture of how our recent past is shaping the foreseeable future. COLLECTIVE INTELLIGENCE AUTUMN 2021 3 PORTRAITS OF CHANGE: THE NEW ECONOMY 3 INTRODUCTION Forecast Growth of Advertising Spend by Sector 2021-2023 0% 5% 10% 15% 20% 25% 30% 35% AutomotiveCPGLuxuryTechnologyTelecoms Growth of Advertisi

7、ng Spend by Sector202120222023 COLLECTIVE INTELLIGENCE AUTUMN 2021 4 The pandemic challenged the long-term trend toward greater global connectedness, between consumers and business but also within and across industries. We saw Covid disruptions in Vietnam create a shortage of apparel and footwear in

8、 the U.S. Shipping companies were forced to divert cargo to avoid regions under lockdown. Meanwhile, China is increasingly separating its internet and policy from the rest of the world, despite rhetoric and Belt and Road initiatives espousing greater international cooperation. As a result, some comp

9、anies are becoming more tightly connected within markets while concurrently becoming more deeply tied to specific media owners and brand-related choices at a global level. Looking across our five sectors, we have noted three common threads of shifting company activities as a result of changes in con

10、sumer behavior. Business transformation accelerates While some consumers and businesses responded ad hoc to unanticipated shifts in the environment, others dusted off or accelerated existing plans that turned out to be well-designed for current circumstances, particularly in cases of digital transfo

11、rmation. Overall, the usually slow pace at which brands develop their portfolios has clearly accelerated. Automotive manufacturers are pushing technology services integration into cars. Telecommunications companies are more heavily prioritizing advanced network deployments. Packaged goods companies

12、are building out their e-commerce strategies. And everyone is looking to control more of their consumer experience in physical and virtual channels. Businesses are rethinking their dependence on distant markets and companies Over the past 40 years, China established itself as the factory to the worl

13、d. Companies of every kind outsourced much that was deemed “non-core” and transitioned their businesses to meet just-in-time requirements of customers. This helped minimize inventory and related costs. These supply chain optimization efforts coincided with the opening of global trade, facilitated by

14、 improving international cooperation, falling trade barriers and improving transportation links. COLLECTIVE INTELLIGENCE AUTUMN 2021 4 COMMON THREADS PORTRAITS OF CHANGE: THE NEW ECONOMY 4 COLLECTIVE INTELLIGENCE AUTUMN 2021 5 While there were some reversals of this trend before 2020, they were dwar

15、fed by the reversals during the pandemic. With supply chains interrupted, companies that had made themselves too dependent on external entities typically lost more control of their businesses, causing them to question whether the savings they received from outsourcing their global supply chains were

16、 worth the benefits. With these changes in mind, many companies are shifting aspects of their operations and becoming more tightly connected within markets. For example, packaged goods companies are establishing direct store- distribution models, apparel companies are onshoring manufacturing into th

17、e markets where goods are bought, and some technology companies are designing and bringing to market their own processorsall while becoming more deeply tied to specific media owners and brand-related choices at a global level. Distribution models are shifting, too, increasingly focused on integrated

18、 omnichannel or direct-to-consumer efforts where manufacturers control their sales and much more of the customer experience. Marketers have opportunities to shift their advertising budgets to reflect these changes To the extent that companies integrate their businesses more within markets, marketing

19、 strategies may become more integrated, too, as commercial results become much less dependent on uncontrollable actions by partners and more dependent on a marketers own choices. At the same time, as the dominant media partners are themselves increasingly global and account for growing shares of the

20、 global advertising market, many of the media choices marketers make will be strongly influenced by global preferences. More tactically, while the increased importance of e-commerce contributes toward marketers preferences around digital media, increasing focus on owned and operated (O throughout th

21、e pandemic, there was very little observed decline in research & development (R&D) investment within the sector. From the earliest pandemic-driven fears of an economy-wide liquidity crisis to the demand-driven semiconductor shortages Technology is also changing the vehicle purchase process, which ha

22、s long resisted e-commerce thanks to the long time horizons involved in purchases, the traditionally separate roles of dealers and manufacturers and the buyers need for financing. In July, the European Commission introduced a package of proposals that would require all cars registered in the bloc fr

23、om Source: European Commission 2035 to be zero- emission. PORTRAITS OF CHANGE: THE NEW ECONOMY 7 MARKETING IMPLICATIONS One of the key consequences of the current supply-chain issues is that manufacturers are likely to prioritize the production of higher-value vehicles. If semiconductor shortages ar

24、e going to limit the number of vehicles that can be produced, automakers are likely to make up revenue shortfalls by increasing the revenue per vehicle, which contributes to higher pricing, on average. One could then make the argument for continued investment in marketing and advertising to convert

25、consumers at higher prices now instead of waiting for a return to “normalcy.” On the other hand, lingering fears of the virus could prevent consumers from relying on public transit in the near term. Therefore, the need for cars as commuter vehicles paired with ongoing low interest rates could be eno

26、ugh persuasion for some to pay up. Still, the consumer car-buying journey is likely to evolve, especially as wait times expand. This may cause some manufacturers to re-emphasize brand building rather than specific performance. Looming in the background is Tesla, which, without spending much on adver

27、tising at all, has relied on its product and O&O dealer network to influence consumer preferences. That means that manufacturers need to find the right balance of resources that allows them to continue to invest in their own products while concurrently creating a desire for them. PORTRAITS OF CHANGE

28、: THE NEW ECONOMY 8 CPG PORTRAITS OF CHANGE: THE NEW ECONOMY Across the industry, over the last two years, the worlds largest packaged goods companies grew by an average of nearly 5%, substantially above the sub-3% annual growth rates observed in the years immediately preceding 2019. Because so many

29、 of the factors driving this growth are unique to the pandemic erastimulus checks, more time at home, etc.most companies in the sector appear to be aggressively modifying their portfolios to generate growth rates that exceed pre-2019 levels. Companies in the sector are always pruning or investing to

30、 modify their portfolios of products. The pandemic amplified changes in product preferences in relation to health & wellness, sustainability and comfort. This has informed many of the portfolio management choices companies have made over the past year and a half. In recent months, there were several

31、 significant transactions, including: The CPG sector saw unusually strong growth through the pandemic. PORTRAITS OF CHANGE: THE NEW ECONOMY 10 acquiring Chipita for $2 billionannouncing it would sell Tropicana and related juice brands for $3 billion purchasing Paulas Choice reportedly for $2 billion

32、 and commencing the sale of its tea businesses, reportedly for $5-6 billion completing its acquisition of The Bountiful Company for nearly $6 billion 14% The average share of revenue generated by e-commerce for CPG companies. Source: According to GroupM analysis of company reports. PORTRAITS OF CHAN

33、GE: THE NEW ECONOMY 11 More generally, the pandemic has caused meaningful input cost inflation, spurred by supply chain bottlenecks and massive swings in demand for everything from commodities to warehouse space to truck drivers. Many manufacturers are tryingor planningto pass costs along to custome

34、rs wherever they can. But concerns over inflation and an aversion to raising prices have spurred many CPG companies to focus on Revenue Growth Management (RGM). With this approach, companies prioritize products or categories that are most likely to drive profitable growth. For example, companies may

35、 prioritize sales of premium versions of products with a higher price point, or they might adjust the “price pack architecture” by shifting the mix of price points and product sizes or volumes. Insights and data provided by retailers can aid many RGM activities. This data can inform shifts of promot

36、ional activity in-store by geography or product line and SKU rationalization, in which a company analyzes which of its products are most profitable based on production, inventory and storage costs, and stability of demand. The good news for packaged goods companies is that these RGM activities are s

37、ometimes synergistic with other externally driven imperatives, like the call for greater sustainability and the shift to e-commerce (i.e., reductions in packaging are both cost-effective and good for the environment). Similarly, a more significant push into O&O e-commerce activities may reduce the c

38、ost of testing future product extensions or in testing initially smaller or experimental product opportunities while reducing large retailers leverage (and associated costs). PORTRAITS OF CHANGE: THE NEW ECONOMY 12 MARKETING IMPLICATIONS While some companies in the sector reduced their spending on a

39、dvertising as a percentage of revenue during the first half of 2021, most companies generally increased their spending in absolute numbers. At the moment, the sectors marketing priorities seem to be greater addressability and efficiency in their media buys and a desire to recoup the increased invest

40、ments of recent years. Given the ongoing march toward the deprecation of third-party cookies on Chrome and additional privacy measures from Apple and others, it is unsurprising that many of these marketerswho ultimately sell most of their goods through intermediariesare eager to develop their first-

41、party data to apply it to their buys in digital media and television. While marketers in this category are always prioritizing their brand health, a focus on first-party data will continue to take on increasing importance, whether that means developing e-mail lists and subscription services or other

42、wise finding new ways to maintain a direct relationship with consumers. LUXURY PORTRAITS OF CHANGE: THE NEW ECONOMY PORTRAITS OF CHANGE: THE NEW ECONOMY 14 Few sectors were hit as hard by the pandemic 4.5% Growth in the Luxury sector. Source: According to GroupM analysis of company reports. In the y

43、ears leading up to the pandemic, China represented opportunity and significant growth for the sector. But looking forward, Chinawhose government is somewhat emboldened by its relatively successful management of the pandemicis now emphasizing “common prosperity” policies that could curtail the conspi

44、cuous consumption of higher-end luxury products in the near term. And there are risks for apparel brands in particular. European and U.S.-based luxury brands may yet have to “pick sides” as they face scrutiny from consumers over the environmental and societal impact of their supply chains. Long-term

45、 growth for many brands may benefit from continually investing to support market share in Europe, the Americas and other parts of Asia outside of China. restrictions as the luxury apparel, jewelry and cosmetics sector. But following the sharp downturn of 2020, the sector has largely rebounded. Today

46、, in an absolute sense, the sector can be considered healthy. The industry is growing at a mid- to high-single digit rate on a two-year average basis, which suggests that a significant amount of catch-up spending occurred over the past year. However, the current rate of growth still lags the sectors

47、 pre-pandemic rate, which was reliably in the double digits. Faster growth may return when consumers fully resume travel and social activities. Or the market for such goods may be decelerating thanks to slower levels of expansion and changing habits and preferences, particularly in China. Regardless

48、 of the situation in China, the industrys long-term health could still improve, especially as companies increasingly focus on driving wholesale activities into O&O retail environments, including online and offline concessions where they control the retail experience and capture a larger share of con

49、sumer spending within the category. At a practical level, this contributes to the reluctance many companies express in selling goods on a wholesale basis to third-party e-commerce platforms. It is particularly true in the case of higher-value “hard” luxury (higher-end fashion and jewelry), where con

50、sumers are more likely to buy the preferred brand wherever they can find it. It will be less true where preferences among consumers are looser, as with lower cost “soft” luxury (cosmetics, for example). PORTRAITS OF CHANGE: THE NEW ECONOMY 15 MARKETING IMPLICATIONS While spending on advertising is u