Adapting to Market Fluctuations: A CFO's Guide to Consumer Behaviour with Claire Caulliez

Hello and welcome to the CFO Playbook podcast. My name is David McClellan, I'm a journalist and broadcaster. I cover business, technology and leadership. And here on the CFO Playbook, I get under the skin of how world-class finance leaders from across various industries, leverage technology, set goals, manage teams, make plans and much, much more. And in today's show, we're talking about life as a CFO in the challenging world of fast-moving consumer goods. We look at cost management and cost-controlled measures because it's part of the rule of a CFO, which is driving and implementing some cost-controlling mechanism. But why do we do that? We do that because we absolutely need to optimize our operational efficiency, which is absolutely needed to enhance profitability. What do I mean by that? We always need to create fuel for growth, which means we have brands, we have loyalty brands, we need to invest into our brands. When I say invest in our brand, it means invest in doing some innovation and invest in our marketing strategy so that our consumer know why our products are good for them. A reminder that CFO Playbook is here every month with exclusive interviews and insights from world-class finance leaders. So do tap on that subscribe button and have a browse through our extensive back catalog. Don't be afraid to get in touch as many of you do your suggestions really do help to shape the conversation here. So drop us a line, let me know who or what you'd like us to speak to in our upcoming episodes. Right? On with today's show. This episode of the CFO Playbook is brought to you by Solday, trusted by over 25,000 organizations across 31 countries. Solday combines pre-programmed cards and intuitive app and a powerful management platform to replace manual processes with efficiency and control. To find out more or to book a demo, visit solday.com. Claire Cooley, a chief financial officer at a leading FMCG company. Thank you very much indeed for joining us on the CFO Playbook. Thank you David. Good afternoon to you. Whereabouts are you joining us from today, Claire? So I'm currently joining you from Milan in Italy, when work as a CFO in an FMCG leading company in the food and beverage sector. Super stuff. I'm detecting not an Italian accent, though. There's definitely more than a hint of French and you are indeed very, very well-traveled. I want to talk about that later on. But I think our plan for today, Claire, is we're going to talk about the FMCG industry itself, first of all, what working in that industry specifically demands of finance leaders and indeed of everyone else in the organization. And then I want to come to your approach as a finance leader in the FMCG space. First of all, though, you've worked in or been adjacent to FMCG and retail for much of your working life, even before your current employer, for the benefit of our audience outside of the food and beverage and fast-moving consumer goods industry. How do you characterize FMCG? What do you think Marx working as a CFO in that industry? What Marx in apart from say, I don't know, financial services or automotive? So, David, I would say that compared to financial services and automotive industries, big CFO in FMCG are some specific characteristics. The first one is the business model because in FMCG's, our revenues are very much driven by volume and brand loyalty to the product that we sell. And we sell with very high volume, with very high rotation and with low margin than in the automotive industries. It's also quite smart by the regulation that we have and here the regulation are primarily the consumer protection, the labeling and the environmental regulation. But as well, FMCG is quite focused on cost drivers and in our case and specifically in the past three years, we've been quite impacted by the commodities evolution, such as coffee, cocoa and cereals. And also with the need to have an efficient supply chain. So this is what maybe characterizes us. And then what it means, it means that in particular we need to be super agile in a financial planning and in analysis. It is crucial, like in many sectors, but even more here, because the dynamics of the market change very rapidly. So we need to be able to forecast, demand that correctly and to respond to the consumer trends. And this is paramount. You mentioned there about the business model, about the importance, not only of commodities, but consumers there as well. From a finance leader point of view, it's very easy to focus on the numbers and so on. But talk to me about how close you feel to the business, how close you feel to the consumers, ultimately those who are buying your products and keeping the business afloat. So we must stay very close to our consumer and we must listen very well to their demands and to the evolution of their taste. And this is extremely important also because in the past years, we had to ride the waves of the commodity pricing and also the availability of our product on the shelf. We have had to learn because the situation really changed in the past three years. It's quite different to be a CFO today from being a CFO few years back because we have had to adapt to make sure that if we want to have our product on the shelf and to satisfy our consumer, we have had to adapt with, for example, a smart sourcing and a smart hedging which means in practice, being able to diversify our suppliers and also being able to look our input costs so that we were then able to do some agile pricing. So the price at which, as a consumer, you sell our product. And then this is also where the, let's say, the playground of the brands we play with is very important because we have been then able to look at our product and to mix a bit the premium with the value brand. So then to be able to cover all segments, all customer and trying to maintain a brand loyalty. You're right. Having that right product mix. And I can understand that that would be the case in FMCG food and beverage and in other industries as well, making sure that you're appealing to a market that maybe has some more disposable income as those, as well as those who maybe are looking towards their the value and volume end. Like you say, you are somewhat at the mercy of the commodities market and there's been some real fluctuation there as you mentioned. But in terms of consumers as well, having the different products across your portfolios, important. But how do you set yourself up to best kind of ride the wave of consumer sentiment and indeed consumer demand? There's been recessions across the world right now and that means that consumers have been tightening their their purse drinks for certain types of products. How do you best manage the the ebbs and flows of consumer sentiment as well as the commodities? Why would you pay a premium price compared to a private label? What is the taste of it? What is the indegence it brings to you? So this is the way we've tried we've tried to do it. We've also tried to listen to their needs and to listen to their port for you to their wallet issues because the purchasing power of everybody has been quite decreasing in the past five years, I would say. And then everybody is a consumer. I'm a consumer myself. So you need to adapt your offer to the consumer to make sure that you keep traction, that you continue growing with the category in which you play and you propose something that is relevant to the consumer. So Claire, in this context then the FMCG industry and its specific demands, how do you define the role of a CFO? And what would you say your your response to that role has been your approach to it? So David, I would say that the recent and even the current FMCG context where we've been and we are still suffering from very high commodity price on cocoa and coffee has been an opportunity for me and for my finance colleagues. Why? Because finance is too often seen and misunderstood as a backward looking focus on the piano and the profit and us. And what what has taken place in the past months and years is indeed a chance for the CFO, is in a chance for us to be able to demonstrate to my stakeholders to the C suite that I can be a true commercial business partner. I can help them drive growth on top line on margin and on profit. So it's been a chance to show them that finance is not just about numbers. This is in fact, of course, regular transparency of performance, but above all it's combined with a tailor-made communication. And why do I say that is because numbers they don't speak for themselves. If you look numbers without understanding the context and if you don't have the right storytelling and the right visual and if you don't make the link between different elements, then it's very difficult. to drive the short term and the medium strategy. So my response to the context has been to paint a picture to my stakeholders in a way that it helped them see the true situation and not only looking at a piece of the story and I want to give an example here to explain. One of the examples is we sell products and I was mentioning in introduction on the role of an FMCGCFO. It's a lot about the business model. We sell a lot of volumes. We have very high rotation but we have seen margin. And one element of it is the cost of goods also. When you sell products, there is a cost to this product. The commodities has been increasing so much. It means that we have had the cost of goods all very high in absolute amounts. And like a lot of our competitors, including the private label, it has been necessary to increase the selling price which you have certainly seen as a consumer. Maroza as a CFO has been to show them what is the absolute value of that increase of the cost of goods sold. How did we react in terms of pricing? How much did we react? And how much did we not react? And what is then the link to our market share and to our category growth? What I call category growth is the values sectors in which we play with. So in the world of chocolate or in the world of cereals or in the world of food. How is the category growing? How are we growing considering the decision that we've been taking? And the current context has allowed me to give an holistic view of don't look only at that piece. Look at the total picture. Look at your margin and look at where we are and when we go and what do we need to do or not do? And also showing the importance of the scenario. When you're looking at the industry like you say how your market is responding to your product, that's one thing. With a part of your role, that is more inward looking into the organization. What's your approach then to decision making around operational efficiency around cost management, around resource management as well? Can you summarize how you look at that? Of course we look at cost management and cost-controlled measures because it's part of the rule of a CFO, which is driving and implementing some cost-controlling mechanism. We always need to create a fuel for growth, which means we have brands, we have loyalty brands, we need to invest into our brands. But for that we need money. And so to get money we need to create it. So budget are not limited. So we need to look at what matters, we need to do choices, and then we need to review our budgets and we have some constraints. So basically the way we've been looked at in the past months, and I would say 18 months, is really to look at what is the most health and what is the cherry on the cake. And then the cherry on the cake is a bit like in your own wallet at home, in your own personal wallet. You have to make choices and then basically we focus on the big bets on what do we need to do. And when I say cost management, it doesn't mean that to do some, we nearly qualify it as a stupid cut. We need to look at what can we get and what we cannot cut considering also the sustainable future. When I say sustainable future, I hear, speak about talent, I hear, speak about people. We need to make sure that we maintain the core competencies and we make sure that we groom them, we create them, we grow them. Nurture, nurture them. Yeah, I know, I go there. Yeah. You also spoke up there about your role as a CFO alongside the stakeholders. What would you describe as your key stakeholder relationships there? And what's the expectation from others at the C suite from you? My role within the C suite is to provide, of course, financial leadership. And insights to drive the organization's success. What does it mean, practice? It means that I need to balance short-term results with long-term business strategy. So what they expect from me, these people, they expect me to be their strategic partner to drive efficiency. But they also expect me to foster collaboration across the department. In an organization, there are a couple of important departments. And so I need to foster this collaboration across finance, sales, supply chain, HR, marketing, and the various businesses. Because I need to ensure that the values financial insights are communicated all across in an effective manner. So that we all go in the same direction. And when it's in the same direction, it means sales, supply chain, operation, marketing, being all aligned on where we go. So then what it means, it means collaborating with them, but communicating regularly, timely, transparently, accurately. Because that's the only way for them to make informed decisions. And so my role is not only to show what's working well, it's also to be courageous to show, look, this is where we are. This is the gap we have, but that's not a problem. We will work together to find solution. And they are the values way to do it. And then we decide together. The other element I need to manage with my C suite is also not to forget that we have some risk that we have to manage. But then nothing is never perfect at 100%. So my role is also to identify those risks and also to mitigate them. What we are managing is basically the market volatility, the risk of supply chain disruption, the risk also of a retaliation of our customer, if we would be to increase the price. This overall view altogether that my stakeholders expect. But the last one they also expect, and we need not to forget it. Because in a company, we nurture two elements in particular. We nurture our product, which are our brands to the external world. But we also nurture our internal brand, which are our people. And what my stakeholders also expect from me is to develop the finance talent. So they also look at me to lead and develop the finance team. And which means what? It means fostering a culture of accountability. And also continuous improvement because we need the finance function to be a support business function to help them deliver on their strategy. So well, in a nutshell, I would say my role with them is to collaborate, to communicate widely, in a line message. And certainly in food and beverage in FMCG, there's a lot of moving parts. And we've spoken about a lot of them over the last few minutes there. The variables, the things that you do have control over. And then those things in the outside world that you don't have so much control over as well. It strikes me as though there's quite a broad scope. A lot of complexity for anyone in a leadership position, especially in a financial leadership position at a company like yours. It needs an experienced hand, would you say? Or are there still opportunities for young finance leaders to flourish, even higher up with more responsibility where you are? So, you know, the success of someone is never just someone is the success of a team. So in fact, for me, there is room for everyone to blow some in a team to reach the role of a CFO. First of all, you need to be willing to take it because I think you need to, you need also to be able to understand that alone you can't do anything. So of course, you need some technical competencies, but I wouldn't say this is the, this you learn it across all your career. But above all, you need a collaborative culture. And here what I mean there, it's really an environment with teamwork. I really often say one plus one equals three, not two. That's super important to have all those different elements and to be surrounded by people who are better than you in the value sub function of finance. This is like all the ingredients you do in a kitchen recipe. I'm French as you know, so I take a lot of pride in the food, but I make a friend a comparison with a good recipe. So yes, there is space for young talents for them to blossom for them to try for them as long as they are courageous and they want to move the needle and they don't want to redo the same as in the past. So there is space as long as you are curious, courageous, you try, you learn, you fail, but it's not a problem to fail as long as you don't repeat. And you learn from that, you ask feedback and then you grow together. But the only way to grow together is to touch different things. So to touch different things means working on also a various project. It means to get out of your comfort zone and that's really something that I drive a lot with my team because I really believe in these things. and various experience in different functions. Finance is a bit everywhere. It's a bit like a noctopus, I would say. You learn finance in supply chain. You learn finance in sales. You learn finance in a copilot in a business. You learn finance in build the HR controller. You learn finance in working in financial services, in treasury, in tax. And so yes, there is space for everyone to blossom. To quote your LinkedIn bio-clair, you say you are passionate about people working together to support business growth, to blossom talents, and to drive change to improve performance. And I think that that passion working together, that helping others to blossom comes through in what you're saying. Sometimes the role of CFO has some difficult responsibilities that that comes with the role. And as we've said, that they're occasionally tough times, or quite a lot of tough times in various industries at the moment. How do you balance that passion for people with the difficult responsibilities that also come with a role like yours when budgets need to be trimmed, when workforce adjustments need to be made? How do you manage that in your head? That's a good question. Thank you David. So balancing the passion I have from people, because I also take energy from them, but also my role. It requires, for me, empathy and support. And it also requires empowerment of the people. As I was mentioning before, we can deliver as an organization, if we trust, for trust, we need transparency. But for that, you also need the right team. And so to need the right team, even though I need to take some top decision, we need to ensure that whatever budget reduction we do, we conduct them strategically, which means we really make sure that we preserve the core competencies. And we invest in the areas that we need to drive growth. So here, for example, we really need to continue driving the digitalization of people that in their mind, they grow and that is not for others, is for them. And all of that is needed because it's to safeguard the company future. But it's also to make sure that even though they are tough time, we work together and we need to make sure that the culture of the company is maintained. That's very important. And I was talking with empathy and support. So what do I mean there? Whenever we need to take some decision, for me, the first thing is to make sure that we recognize the human impact of some financial decision. So it means here that we have to not to hear people. We need to actively listen to employee concern. We need to listen to them and we need to provide support to them. Here again, it's about communication. But here, communication with two objectives should be an open and a honest communication. And he's in system honest. We need to explain clearly to the people what is the context, what is the financial situation, and what are the reasons behind budgetary constraints? Or even sometimes a workforce adjustment. I think there is nothing worse for people to be in a situation where they are rumors and they don't know where we are heading to. It creates a non-well-being of the people and even the short term, it doesn't help at all. In introduction, I was talking about ripple effect, about a positive ripple effect. If we don't communicate wisely and transparently in a respective manner to our people, then it creates some unsatisfaction, I would say. Hearing people listening to them and communicating the why as well, helping people to understand the broader context of why decisions are being made is certainly. I think the least that we should all be doing. We are running out of time, I'm afraid for now Claire. But towards the end of our conversations here on CFO Play, but we do like to ask a final question and we call it our show stopper question. And this season on the podcast, we're asking our guests to give us their reflection on the phrase progressive finance. So, Claire, if I was to say progressive finance, what does that mean to you? What would you say back to me? Progressive finance for me means integrating sustainability into the financial decision making. And here, what I mean is sustainability is not a cost, it's an investment. It's an investment towards our operation, the quality of our product, and the social governance, actually. So, it's sustainability, integration into our investment. If we don't do it, we're just missing something. And it's not even an investment, in fact, it's a. That's something that should come naturally on the agenda. The second part is about technological integration. That's the way I see progressive finance. I mean, it's about leveraging data analytics and all advanced finance technologies. And here are the ideas that we should get real-time financial performance. And we shouldn't spend time reinventing the wheel about forecasts. We have loads of data. We could use that to predict what could be a forecast, and then we could adjust it. The role of finance people is to add value. It's not to be a data-crencher person. We can use technology for that. So, yeah, in the end, for me, progressive finance is a. Integrating sustainability and technology. Great answer. Thank you so much, indeed, for that. We'll have to leave it there for now. Claire, it's been great to chat today. Thank you very much for joining us on the CFO Playbook. Thank you, David. I had a good time. And don't forget to join us every month here on the CFO Playbook for more insights from finance leaders. But for now, for me, David McLelland. Bye-bye.