Consumer products executives are confronting a bitter truth: conventional recipes traditionally used for profitable growth no longer are enough. As the marketplace undergoes a rapid transformation, it’s forcing leading brands to rethink everything—from where and how they compete to what capabilities they will need to thrive in this new world order.

The fast-changing world of consumer products is at the confluence of a number of significant trends. Declining populations in developed markets top the list. In Japan alone, the population is expected to shrink by 5% over the next 15 years. At the same time, economic turbulence has curtailed consumer spending, limiting the traditional pattern of continually trading up to more expensive products. Retail sector consolidation and the continued growth of private labels in developed markets are turning increasingly powerful customers into a new form of competition. Last but not least, executives must also figure out how to make the most of dramatic growth opportunities in the world’s rapidly growing emerging markets, as these regions start to become more profitable than fast-moving consumer goods (FMCG) companies’ historic core markets.

These trends create distinct challenges for companies trying to take full advantage of global opportunities.

For companies in developed markets, shifting market dynamics primarily raise the question of how to build sustainable, profitable growth models. In addition to reducing costs continuously, consumer goods executives in constrained markets have to identify new formulas to grow premium products and brands in a world where more and more consumers seem to have split personalities, splurging on premium items in certain categories while trading down in others. On top of innovating new ways to give consumers added value, executives need to rethink how to price and promote, and how to “compete” effectively against retailers that are more aggressively managing shelf space—all without wrecking the entire profit pool.

Companies competing in emerging markets must establish themselves as profitable market leaders as they go up against increasingly competitive local players—with higher brand recognition and lower costs. To ensure that their products are affordable, consumer products players have to adapt their product range, price point and innovation strategies while trying to grow their premium and super-premium market share as well. They must also overcome the high cost of reaching consumers in rural areas and a serious talent shortage.

Companies that are truly global players, pursuing opportunities in both developed and developing markets, face the tricky challenge of figuring out the most effective role for the company’s center: one that optimizes the allocation of resources across regions, but also supports regional and local market development. For example, the center must figure out how to shift people and capital to emerging markets without pulling the plug on developed markets, still a major profit generator.

Top ten capabilities

In this challenging marketplace, we have identified 10 critical capabilities that will separate winners from losers over the coming decade. Consumer products companies will need the ability to:

1. Design repeatable growth models to accelerate learning and execution, especially when expanding into developing markets
2. Artfully manage brand portfolios—defining optimal portfolio roles, winning strategies, investment levels and profit expectations
3. Develop 360-degree consumer and shopper engagement through multiple media and touch points
4. Accelerate brand growth, even in slow categories and developed markets
5. Become a true partner for retailers, adding value through sophisticated collaboration programs built on joint shopper insights, integrated supply chains, systems and data sharing
6. Align, measure and incentivize the frontline for perfect sales execution
7. Build a culture of continuous cost improvement, ensuring the organization measures and tracks true cost to serve in order to drive it down relentlessly over time
8. Master mergers and acquisitions to gain a competitive advantage at target selection, valuation and integration—building additional scale and the resulting economic efficiencies
9. Simplify, speed up and slim down operating models to maximize organizational effectiveness and efficiency
10. Create a talent pipeline to deliver growth expectations

Five winning behaviors

While mastering all 10 capabilities may look difficult, they are grounded in just five simple or-ganizational behaviors. Adopting these behaviors and embedding them in ways of working is paramount to emerge as a market leader in coming years.

Repeatability and consistency. Organizations should choose three or four things that they need to be great at to spur growth and gain a competitive advantage—for example, mastering point-of-sales execution, developing successful innovations or swiftly integrating acquired companies. They need to measure and create incentives around these capabilities and continuously improve them until feedback indicates that they are no longer giving them an edge.

Simplicity and alignment. The entire organization must wage war on complexity--from overly complex consumer segmentations that frontline employees don’t understand to decision-making models that impede decisions. We have a simple rule: If the frontline doesn’t get it, then fix it or stop doing it.

Speed. To outcompete and win, organizations simply have to get faster, whether it’s swifter decision making, getting new products to market quicker or creating a more responsive supply chain.

External focus. Winners gain an edge by heavily focusing on factors outside the company that influence performance such as consumer, shopper and customer insights, competitor intelligence or supply chain evolutions.

Selectivity. Finally, organizations often are too democratic in allocating resources, making decisions, managing talent and investing. Leading companies are much more selective: they know their “must win” battles, “must buy” acquisitions and “must develop” talent.

Kara Gruver is a Bain & Company partner in Boston. Based in Madrid, Matthew Meacham is a partner who heads the Consumer Products practice in Europe, the Middle East and Africa. Mike Booker, a partner in Singapore, heads Bain’s Consumer Products practice in Asia-Pacific.