A closer look at change management and TP in the consumer goods industry
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A closer look at change management and TP in the consumer goods industry

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Silke Lappe, Arundhati Pandeya-Koch and Isabella Rossi Pinheiro Mariottini of Deloitte Germany look at the impact of change management on businesses in the consumer goods industry from a transfer pricing perspective.

Since its onset, COVID-19 has rattled the world in more ways than one, consumer behaviour being no exception. Long periods of lockdown and economic instabilities forced consumers to adapt their behaviour almost overnight.

While certain consumer trends such as buying and using services online gained immense momentum, others such as using shared mobility and spaces have been disrupted or halted. These rapid changes in consumer behaviour forced business to change at break-neck speed leading to change in existing value drivers and creation of new ones, thus profoundly impacting the tax and transfer pricing (TP) policies of multinationals.

Key trends

Omnichannel capabilities

Even prior to the COVID-19 crisis, focus on omnichannel sales capabilities, especially building and integrating online sales channels was a growing trend in the consumer goods industry. The global pandemic has drastically accelerated this consumer trend of buying and using services online as consumers move towards consumption and activities in-home due to lockdowns and health concerns. Consumers expect a seamless and personalised shopping experience, whether they are shopping online or in a brick-and-mortar store.

As a result, companies that already have strong digital platforms and capabilities are the ones that are able to navigate more steadily through the pandemic while those that do not, are rapidly investing in digital transformation and omnichannel capabilities as a matter of survival.

Based on a COVID-19 study conducted by Monitor Deloitte on consumer behaviour, this trend of buying online is likely to be permanent (‘Monitor Deloitte. Monitor Deloitte COVID-19 study on consumer behaviour 2020 Europe’). Therefore, businesses must not only develop short-term solutions to tackle the crisis but build long-term sustainable omnichannel capabilities. Furthermore, businesses are also looking to use the rich reserves of data they gather through online channels to transform their business, develop future products, ensure better channel integration and offer a better overall shopping experience.

Last mile

Growth in last mile delivery has been another strong trend for the consumer industry for a number of years now (‘Deloitte Digital. Last mile delivery after COVID-19: A world of things to solve’). The pandemic and growth in e-commerce has not only accelerated this trend but has put additional demands for instance relating to safety, on delivery.

New and alternative delivery models such as ‘click and collect’ require companies to innovate and integrate their logistics model constantly to ensure end-to-end fulfilment.

Sustainable logistics is another key area of focus for businesses. Consumers expect zero-waste, eco-friendly packaging as well as fuel efficient, low carbon footprint deliveries. All these consumer behaviour trends require a significant change in a company’s logistics strategy and function (‘DHL. Research Report E-commerce is growing – Are you growing with it?’). Businesses need to design and implement effective delivery models that are not just fast, transparent and safe but also cost efficient to ensure profitability.

Disruption of supply chains

Changes in consumer behaviour and economic conditions due to the COVID-19 crisis have disrupted existing supply chains highlighting the need for supply chains to be more agile and flexible rather than just efficient to cope in an unpredictable environment.

Companies have experienced major disruptions in transportation and logistics services, restricted circulation, closure of ports, and slow customs clearances, etc. that ultimately led to empty shelves inside warehouses and distribution centers, while muted demand for certain consumer goods has led to piling inventory.

In order to tackle such challenges effectively, businesses require real time end-to-end monitoring of statuses of plants, transport availabilities, critical parts, suppliers and customers. Many businesses are responding to these challenges by setting up ‘supply chain control towers’ that utilise predictive monitoring and analytics to increase transparency, speed up reactions to disruptions and facilitate scaling during crisis.

Furthermore, businesses have realised that the strategy of production in low cost regions and shipping across the world is fallible. As countries entered lockdown at different stages, the delivery of goods and critical input factors was interrupted or even entirely halted. Such disruptions are driving many companies towards nearshoring. The nearshoring trend is further reinforced by an environmental, social and corporate governance (ESG) driven move towards ethical sourcing and the ‘buy local’ trend to support local suppliers and businesses.

Both millennials and Gen Z consumers tend to make special efforts to support smaller local sellers and avoid companies whose values do not match their own (‘Deloitte Global. The Deloitte Global 2021 Millennial and Gen Z Survey’). In order to adapt to these trends, businesses are revisiting and redesigning their procurement and manufacturing functions rapidly.

Increased M&A activity

Capability-driven M&A in the consumer industry is on the rise as businesses need to acquire critical capabilities in a short timeframe to manage rapidly changing consumer preferences as well as economic challenges due to the pandemic.

Since supply chain resilience has become a key strategic focus area for companies, mergers and acquisitions (M&A) targets with robust, resilient supply chains are expected to create value for investors seeking a scalable platform with minimal risk (‘Deloitte Corporate Finance LLC. Consumer products and retail quarterly update – Q1 2021’).

Moreover, businesses struggling due to the pandemic make for typical acquisition targets for bigger and stronger players in the industry. Another trigger for increased M&A activity is the rapidly changing global tax regulatory environment wherein companies are looking to restructure their businesses in order to be compliant as well as effectively manage their tax liabilities. Such increased M&A activity accompanied by post-merger integration efforts is likely to change existing business models.

New and evolving trends in the consumer goods industry such as those described above, will lead to changes in existing value drivers and creation of new value drivers accompanied by changes in functional, risk and asset profile of companies within a multinational group thereby warranting a reevaluation of existing tax and TP policies. These trends, however, do not only pose challenges for businesses and tax leaders; they also create new opportunities for tax departments to align with the business to ensure successful and holistic change management.

TP implications and considerations

Effective change management requires proactive collaboration between business and tax departments

The need for resilient and agile business models and supply chains within the consumer industry require tax departments to rethink their businesses’ main value drivers, and whether the multinational corporation’s TP system in place continues to appropriately capture the profit generated from such value drivers.

The more specific functions or (newly identified) value drivers gain importance within a multinational corporation’s overall business and TP model, the more tax leaders will be forced to re-evaluate the existing profit allocation within their multinational corporation.

Resilient and agile business models require resilient and agile TP systems, which adapt to business change. Business change creates momentum and opportunity for tax departments to team up with their counterparts in business to promote and establish their advisory role within a multinational corporation. As tax compliance in light of a constantly changing regulatory environment remains crucial for a multinational corporation’s overall success and reputation, collaboration between the business and tax departments within a multinational corporation is indispensable.

Tax departments need to proactively monitor whether business decisions such as changes to procurement set-ups and product portfolios, the restructuring of supply chains to nearshoring concepts (eventually in connection with the use of advanced technologies) or changes to sales channels result in taxable relocations of functions and (intangible) assets.

M&A activities require thoughtful acquisition structuring and post-merger integration planning, not only to ensure smooth and undisrupted integration of newly acquired businesses into the legacy operating model but to also appropriately structure and manage relevant tax consequences arising thereof.

For some multinational corporations in the consumer industry, centralisation of intellectual property (IP) becomes crucial as they are adapting their business models to changing consumer needs. To manage tax consequences arising from such operational changes, tax departments have to take bi- or even multilaterally aligned approaches depending on the number of jurisdictions affected by the changes.

Digitalisation requires innovative tax solutions and pushes the digitalisation of the tax function

Accelerated digitalisation of businesses and the increasing acceptance of remote working because of COVID-19 has given multinational corporations the opportunity to hire top talents globally, wherever the best-suited person may physically reside.

As boundaries of traditional ways of working break and virtual operational networks within multinational corporations are established, questions such as who is the legal/economic employer of such talents, whether permanent establishment might result from the respective set-up and whether appropriate profit is attributed to such permanent establishments (if any) etc. arise.

Further, questions may arise whether and how such virtual networks and respectively the virtual transfer of assigned roles and responsibilities around the globe affect value drivers, substance requirements (e.g. with regard to ATAD or the OECD’s development, enhancement, maintenance, protection, exploitation (DEMPE)) concept for intangibles) and respective profit allocations. Tax leaders not only need to have answers to such questions but also ensure that they are effectively managing this new normal from a tax perspective.

On the sales side, the optimisation of supply chains and the digitalisation of delivery models may result in the creation of new intangible assets, and specific circumstances might arise under which such new intangible assets might decrease the relative value of existing functions.

Likewise, such new intangible assets may create new value drivers, which have to be incorporated into the existing business and TP model, potentially triggering taxable relocation of functions. (Consumer) data and the use and processing of such data within a multinational corporation’s value chain requires tax departments to define innovative TP systems.

Tax leaders have to navigate through a bundle of new national taxation approaches dealing with digitising businesses, e.g. withholding taxes, digital services taxes, specific VAT obligations applicable to e-commerce businesses etc. Over and above such national developments, global developments such as the pillar one (digital business model) and pillar two (global minimum tax) concepts proposed by the OECD/G20 Inclusive Framework on BEPS need to be constantly monitored to timely identify and manage potential impacts on a multinational corporation.

Additionally, as tax departments evolve and strengthen their roles and responsibilities as in-house advisors, the need for technology to facilitate and enhance tax processes as well as effective and efficient tax control frameworks rises.

The challenge tax departments face is to constantly reduce costs and create efficiency gains while ensuring compliance as business as well as the tax regulatory environment undergo rapid change. This is forcing tax leaders to manage proactively the digitalisation of the tax function.

Sustainable change management requires proactive tax controversy management

Governments worldwide are revising their tax regulatory frameworks in order to capture the new business realities, especially that of the digitalisation of businesses. The above-mentioned pillar one and pillar two concepts are prime examples of the global tax reset.

In addition, mandatory tax related disclosure requirements such as DAC6 and (public) country-by-country reporting as well as optional reporting such as the sustainability reporting issued by the Global Reporting Initiative resulting from an increasing ESG awareness have increased transparency requirements for businessessignificantly.

With this increasing level of transparency, tax leaders can expect to deal with an increase in number and size of tax audits and related disputes. To manage tax controversy in the future due to increased scrutiny , tax departments need to proactively manage their tax and TP policies and re-think their approaches towards TP documentation. Preventative measures such as advance pricing agreements (APAs) will remain crucial instruments to avoid lengthy and costly dispute resolution procedures.

Challenges and opportunities

COVID-19 has significantly affected the consumer industry and its supply chains and accelerated the trend towards digitalisation. Effective and sustainable change management requires proactive collaboration of business and tax departments of multinational corporations.

While such changes pose challenges on multinational corporations, they also create opportunities for the tax departments, e.g. to strengthen their role as in-house advisors, proceed with the digitalisation of the tax function and to ultimately thrive and grow their operational excellence.

Click here to read Deloitte's TP Change Management in Industries guide

Silke Lappe



Deloitte Germany

T: +49 89 29036 8016

E: slappe@deloitte.de

Silke Lappe is a Munich based TP partner.

Silke has vast experience in TP consulting, in particular in the structuring and implementation of TP models including the set-up and management of permanent establishment structures, and in defending TP structures during tax audits and dispute resolutions including mutual agreement procedures and APAs.

Silke is responsible for the development of new design options for business models in the digital economy. She advises clients from various industries, with a focus on consumer goods, technology and digital economy. She is the EMEA TP leader for consumer products, retail, wholesale and distribution under the Deloitte Global Transfer Pricing Industry Programme.

Arundhati Pandeya-Koch



Deloitte Germany

T: +49 89 29036 7963

E: apandeya-koch@deloitte.de

Arundhati Pandeya-Koch is a director in Deloitte Germany’s TP practice.

Aru has over 10 years of TP experience. She has assisted companies across all industries in the development and/or defense of their TP models and policies, with an increasing focus on the consumer industry in recent years.

A key focus of Aru’s has been large TP planning and implementation projects involving business reorganisations. She has been the main TP resource on several major supply chain restructuring projects. She also specialises in assisting clients from a TP perspective with digital business models as well as digitisation of traditional business models.

Isabella Rossi Pinheiro Mariottini



Deloitte Germany

T: +49 7111 6554 8018

E: imariottini@deloitte.de

Isabella Rossi Pinheiro Mariottini is manager in the TP service line at Deloitte Germany.

Isabella is actively involved in several TP projects and assists multinational companies across various industries to establish, document, and defend their TP policies. She has extensive experience in the LATAM region and has worked on large TP projects with other Deloitte member firms, for both planning and global documentation purposes, covering inbound and outbound transactions. She also participates in projects related to the digitalisation of multinational companies’ business models.

Isabella holds a master’s degree in international tax law, as well as a bachelor’s degree in law.

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