Insights

Your 2012 Plans: Preparing for the Uncertainty of the New Year

What is the outlook for next year’s economic growth? It’s the $64,000 question.

In the United States, some economists predict slow, single-digit GDP growth for 2012. Others, however, suggest the United States will face more severe headwinds as credit tightens due to the worsening European sovereign debt crisis. These economists believe the European banks’ credit squeeze on companies will spill across the continent and ultimately affect businesses all around the world. Recently, the Organization for Economic Cooperation and Development projected the U.S. economy would grow at a 2-percent rate next year, down from its earlier forecast of 3.1 percent due to the European malaise.

And yet, throughout the summer and into the fall of 2011, finance ministers from countries that use the Euro currency have scrambled to approve more loans, bolster bailout funds and manage to temporarily calm the financial markets. Meanwhile, in the United States, Black Friday, which traditionally kicks off the holiday shopping season, registered an increase in retail sales over recent years, and Cyber Monday’s 2011’s online sales increased 20 percent over Cyber Monday in 2010.

These observations point to a tremendous amount of conflicting, perplexing data that sheds little light on the answer to the question: What should we expect in 2012? More importantly, what should suppliers to the natural products industry expect in 2012? Will next year usher in a doom-and-gloom scenario, or simply be business as usual?

Fundamental social-economic trends that have fueled growth in the natural products industry—concerns over food safety, the increasingly high cost of health care and an aging population of Baby Boomers–remain prevalent.

Nevertheless, many still ask whether increased consumer interest in organically grown products will continue, or if the natural nutrition industry can continue to outperform the GDP growth and avoid the pitfalls of slower growth or a recession as it did in 2009 and 2010.

While the 2012 growth outlook remains difficult to forecast, we can confidently predict one trend—2012 will be a year of great uncertainty. And as all shrewd business executives understand, great uncertainty demands businesses manage this uncertainty and the potential risk with solid business plans.

To prepare for the uncertainty of next year, your 2012 plan should involve initiatives that address four important themes. While these themes are familiar to many and regularly find their way into annual plans, next year, in particular, it will be crucial to address their finer points.

  1. Address the middle market in emerging economies. While participation in emerging markets has probably been a part of your firm’s strategy in the past, next year, it will be necessary to intensify attention on these markets. Marketplace transition will continue throughout 2012 as the middle markets in these economies grow. Success in 2012 will require execs to determine how to shift from exclusively serving Western companies and elite customers toward building a presence with customers who are part of the much larger and more challenging emerging country middle market. Expanding into these areas will help bolster your firm’s presence in countries and economies that are growing far faster than Western economies. Furthermore, as the purchasing power and disposable income of the middle class increases in these countries, nutrition-based suppliers should target this evolving new consumer segment and begin to teach these consumers about the benefits of purchasing organic foods, dietary supplements and other natural products.
  2. Become a solutions provider. Plans should be in place to help your company evolve from “selling a product” to becoming a “solutions provider.” Competition from low-cost countries such as China will challenge product-centric businesses by offering attractively priced, almost-as-good products. In order to respond to this challenge, stop commoditization and prevent its adverse implications on prices and margins, your 2012 plan must include how to move toward offering an integrated package of products and services that addresses the key challenges facing your customers. Natural product suppliers should offer next-gen, innovative products, aimed at improving overall nutrition and enhancing quality of life. These products can be cleverly bundled together in aesthetically pleasing packaging that has thorough nutritional information and superior functionality.
  3. Address sustainability. Sustainability should also be elevated in 2012 plans. Sustainability is now viewed as an economic concept. Using fewer resources or shifting to less-expensive resources can improve your bottom line. For many years, specialty retailers who promoted healthy, organic natural products have long advocated for sustainable products with sustainable packaging. In recent years, some mainstream retailers have begun to embrace sustainability, opening the door to the natural product suppliers.
  4. Create headroom for growth. Responding to the strong balance sheet that your firm has developed since the 2008 to 2009 recession, you will hear about interesting opportunities for acquisitions and investments. Consider investments that will create headroom for growth and that can be justified by both top- and bottom-line arguments. In addition to looking for growth through acquisition, consider expansion into adjacent product and market spaces. Nutrition-based companies should create a plan in 2012 to identify and select adjacent opportunities using a systematic methodology to effectively facilitate the process and examine these opportunities from a strategic perspective. A formal plan next year to address acquisitions and adjacencies will ensure that your firm doesn’t fail from inaction, missed opportunities or bad investment decisions.

Successfully planning and executing these plans will reward your firm with growth. To ensure the good ideas underlying your 2012 plans don’t fail because of implementation issues and resistance to change, it will be important to include the appropriate funding for the implementation team into these 2012 plans.

Author: Atlee Valentine Pope

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