In this session, PepsiCo Foods North America CEO Steven Williams joined Michael Jeschke from Deloitte Consulting’s Retail & Consumer Products, to present “Leading the charge for a brighter future: A sustainability discussion”.
The focus on sustainable business practices has become an imperative now more than ever, but what are the implications retail businesses must be aware of as they continue to venture into the sustainability space?
In this discussion, we focus on how new Deloitte research on consumer preferences while keeping a pulse on environmental, social and governance business elements. The focus was on what retail executives must be aware of to sustain their business into the future.
Over an 18-month period, working with Deloitte’s ‘Office for the Future’, insights were gathered from more than 800 professionals, industry experts, clients, and consumer industry insiders and Deloitte’s State of the Consumer Tracker.
This afternoon, was essentially aimed at exploring the profound and seemingly unanswerable question: What are the forces that will shape the next decade of the consumer industry?
Through extensive research, Deloitte identified six forces that will play a fundamental role in shaping the consumer industry over the next decade.
Force 1: The changing consumer
The consumer base is changing, moving from homogeneity to a diverse populace. Diversity, already a factor in the market, is poised for even greater proliferation. For example, the racial makeup of the baby boomer generation was roughly 75% white; in contrast, Generation Z is 52% white, with 25% identifying as Hispanic.
By 2044, most of the US population will be non-white, while those identifying as multiracial will nearly double. Meanwhile, in 2022, US adults identifying as LGBTQI+ have risen to 7.1%, doubling from 2012. This shift is especially pronounced in Gen Z, with 21% identifying as LGBTQI+.
Force 2: An evolving society and culture
Humans, by definition, are social creatures with behaviours that are driven, influenced, and reinforced by shifts in the surrounding culture and society. It is here that you find the pillars that define us—how we relate to each other, how we learn cultural norms, and how we establish acceptable social behaviour. Deloitte’s research finding that the societal force is the social fabric that once defined life—religion, school, community, work, civic organizations, is rapidly undergoing massive change, decoupling the consumer from many of the rites, rituals, life stages, and purchasing patterns that are attached to life passages.
People are seeking novel approaches to community building. The idea of “community” is no longer constrained by geography. Today, people are breaking free of geographic boundaries and using technology to find like-minded people, building communities, acceptance, and social bonds. Trust in governments and media has declined. Given the deterioration of trust and growing vacuum, consumers have turned to their agencies demanding transparency. And they’re looking for much more than just transparency by choosing to “vote with their dollars” and placing value on socially responsible.
Force 3: Exponential xTech
Several technologies will change how products and services are designed and delivered. 3D scanning and generative computer-aided design (CAD) will accelerate the design, prototyping, ongoing analysis, modification and refinement, and real-time optimization of new offerings. Sensors and connected devices and machines will detect, record, and respond to changes in the environment, sharing data and providing updates to connected digital twins. The use of AI and ML will drive both automated and predictive and prescriptive insights, which will be securely recorded and protected by zero-trust models and blockchain architecture.
Force 4: Radical industry upheaval
The consumer industry has undergone enormous transformation over the past decade, driven by two primary forces: globalisation and technology. Globalisation has had a deflationary effect on many consumer goods while simultaneously opening new markets. Similarly, technology has proved disruptive in driving efficiency and access, reducing costs, digitising physical processes, creating new business models, and tearing down barriers to market entry.
Deloitte estimates that 2.9% of the consumer wallet is now spent on digital goods and services, a category that is growing at significant rates. For example, the video game market is a $198 billion global market projected to grow at 8.5% CAGR through 2027; video streaming is a $59 billion market poised to grow at 21% CAGR through 2030.
Force 5: Extreme climate change
Humans have always been affected by the environment, but never to the extent we are today. Moreover, the role played by the consumer industry is clear: An estimated 60% of all greenhouse gases are produced by consumers and the consumer industry. Plastic bottle production alone has nearly doubled since 2004.
While many retail executives often sceptically ask, “Are consumers willing to pay for sustainability?” that’s the wrong question. Consumers are already paying. The cost of externalities is currently being borne by all of us. Companies that act as first-movers to make new markets, and who develop and build a circular economy-based future, moving from a linear and wasteful production to a new and transformative sustainable consumption model, will be better positioned for the future.
Force 6: Shifting economics, policy, and power
New legislative policies have created tax incentives for investments in solar, wind turbines, batteries, and other renewable technologies. These incentives are already beginning to fuel a move toward reshoring of manufacturing and investments in renewable energy infrastructure. Growing geopolitical tensions are also likely to reshape the coming decade. East–West relations have grown more tense, spurring a notable about-face on the previous 30 years of globalisation.
China is projected by some to become the world’s largest economy by 2030, a move that may further disrupt the world economic order, as countries and developing economies begin to hedge their bets over who to throw their lot with the West or the East.
The coming decade is potentially shaped by a move away from globalisation, the rise of a multipolar order, with continued tension between the Western countries and Russia, and a growing influence of Saudi Arabia, India, and Africa. Corporations operating on the global stage are faced with complex regulations, political uncertainty, and the threat of political retribution based on perceived, or real, economic alignment. Uncertainty makes markets more difficult to navigate, limiting expansion opportunities, while supply chain constraints force alternative approaches to sourcing. Meanwhile, risks and threats, such as cybercrime, are on the rise.
These six forces will drive those who will thrive versus those who may struggle. Retail executives will be forced to do more than just thrive. Executives of the next decade must expand from a shareholder value mindset to include new dimensions of people, planet, and prosperity.
Retail executives will need to recognise how these six forces will change their customers, industry, economy, society, and environment. Charting a successful course will take vision and courage – the vision to see what others do not, and the courage to journey forth when others turn back.
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