June 23, 2014

Talk with The Consumer Goods Forum

Peter Freedman, MD, The Consumer Goods Forum (photo: The Consumer Goods Forum)
Peter Freedman: "Consumer trust is in danger"
This year's Global Summit of The Consumer Goods Forum in Paris has again focussed attention on the world's largest retailer and consumer goods organisation. The parity-based industry network brings together the CEOs and senior management of some 400 retailers, manufacturers, service providers and other stakeholders across 70 countries.

Its new Managing Director, Peter Freedman, has a tough task ahead. Nearly everyone in the trade can see the benefits of joining a global network and community. But the fierce competition among retailers and their generally tough negotiating practices with suppliers make true co-operation within the industry about as easy as a climb up the north face of the Eiger.

Freedman's leadership of the organisation once known as CIES also comes at a time when digitally savvy consumers are calling retailers and suppliers into question more radically than ever before. So what does the new kid on the block propose to do about it?



Mr. Freedman, you became MD of the Consumer Goods Forum on January 1. What is driving the industry, and what is driving you?

There are three key industry issues that must shape our priorities, but number one is consumer trust. This has powered our industry for decades, but it is now in danger of being eroded. Consumer expectations for transparency and openness are growing all the time in an increasingly digital world. If we are not careful, the whole trade will be wrongly blamed, for instance, as the main driver of obesity. The same applies to climate change. We are making progress, but we are still in too many people's gun sights because it is all too easy to blame us for packaging and food waste.

Transparency sounds fine as a rallying call, but what does it mean in practice?

When they buy an item of food or clothing, many consumers want to know a lot more about the product than they would have done only a few years ago. Is it, for instance, safe to eat or wear? They also want to know when and where it was made and that it was produced under labour conditions which were both fair and secure. So the whole issue of traceability is an increasing consumer need. The consequences for retailers, who are particularly close to their customers, are obvious. If they want to attract more shoppers, they will need to be more transparent; and at some level that also means being more transparent about their own processes.

German retailers are known world-wide to be price-driven. Do you think their extreme emphasis on cost restricts the money they are prepared to invest in transparency?

Clearly a distinguishing feature of the German market is that it is very price-oriented, and many of us benefit in many ways from this, but it is not only price-driven. Germany is also one of the societies with the strongest green lobby and political movements. If customers are worried about green issues etc., then ultimately the only way to build or retain their trust is through transparency. So retailers don’t really have a choice.

You mentioned three key issues facing the industry?

The second one with huge ramifications is the growth of e-commerce and digital. This is completely upending the retail industry and challenging manufacturers. The third one is the shifting of the industry’s centre of gravity to Asia and other emerging markets with the creation of new players.

In 2010 the Consumer Goods Forum set itself some stiff goals, especially environmental ones. Were you overambitious?

We did indeed set a number of fairly demanding objectives four years ago, particularly as regards climate change, health & wellness. As regards climate change, the two key areas are zero-net deforestation and refrigeration. These objectives belong to a two-part mission: business efficiency and positive change for the industry, shoppers and the world.

Are you on track with your aim to achieve "zero-net deforestation" by 2020?

Zero net deforestation is going well, but it would be foolhardy of me to say that we are on track. The key part to this is palm oil and ensuring that palm oil purchases are not contributing to deforestation. So far, 26 companies have signed up and made their own commitments. This represents 80 per cent of the firms involved, who in turn account for four-fifths of the entire industry's palm oil purchases. That's a pretty good penetration, and using Pareto’s law we are focussing on those 80 per cent.

You also want retailers and suppliers to replace environmentally harmful refrigeration agents by next year…

That’s much trickier as the commitment is essentially to phase out HFCs, which requires significant capital investment, particularly for retailers. Here too, we want to have the right global approach. In some countries we are replacing HFCs with natural products and in others with refrigerants which cause far less environmental damage. But we are making progress, if not quite as rapidly as on deforestation. So we are still optimistic that we will be clear by 2015 as per the original resolution.

To what extent can you get non-member companies on board to help with these projects?

We are obviously starting with our own 300 to 350 members, who represent a large part of the industry, and trying to get these as involved as possible. That said, we’d clearly like to attract more members.

Especially German ones it would seem?

We have a fair number of very prestigious German names both on the supplier and the retailer side. These include Metro Group, Dohle, Beiersdorf, Henkel, and Dr. Oetker. However, we certainly want more. I am new to The Consumer Goods Forum, but that has been a long-standing gap.

So how do you plan to win more German members?

I think that if you asked manufacturers and retailers in Germany quite a few still wouldn’t have heard of us. So we are a bit of a hidden gem and need to communicate much better, which is part of my mission. We need to do a better job of explaining to them, why they should join us. We must point out the benefits of belonging to a global organisation when it comes to sharing best practice and the ability to influence global standards and processes.

Could it also be that parts of the German trade are still rather parochial?

No, I don’t think it's their fault. We are a very global organisation, and that is our huge strength and makes us unique. We are the only one that brings manufacturers and retailers together on a global basis. But the flip side to this is that we are not sufficiently localised. So, if you are a German retailer and can't speak English, we don’t exactly make it very easy for you. Therefore, we need to localise and to make ourselves more accessible in terms of language and where we hold some of our events.

So your annual conference next year will be in Berlin?
No, not literally because next year is planned for New York, but sometime after that, why not?

Sir, you have the last word…

You said, earlier on, that we had set some ambitious goals, but I think that we need to be setting ourselves yet more ambitious goals. We must put the consumer at the very heart of what we do, whether that has to do with food safety, obesity or healthy living, and constantly raise our game.

Related article in German: Interview by Mike Dawson in Lebensmittel Zeitung, no. 25, 20.06.2014

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