To Find Margin Points, CPG Executives Must Prioritize New Opportunity and Measurable Improvement

Topics: C-level, Management, Leadership

pexels-photo-390426.jpg“Big food companies are experiencing anemic growth thanks to changing consumer tastes, toward more-healthful and less-refined foods, along with rising retailer fees and trucking costs eating into profits this year,” according to Wall Street Journal reporters Heather Haddon and Annie Gasparro in their article “At Food Expo, Companies Jockey for the Next Big Thing.”

These margin-threatening influences on revenue are driving CPG executives to chase after investments that thwart potential loses and reinvigorate “anemic growth”. For some organizations, as alluded to in the article, this means acquiring smaller organizations or launching new products to diversify offerings and branch into new categories. For others, this manifests as cost reduction and the adoption of zero-based budgeting. For executives, these decisions are strategic tactics to impact the top and bottom-line revenue.

However, it is critical for sustainable growth that companies position themselves not only to accelerate through new initiatives, but also by optimizing current investments to both limit expense and maximize outcomes.

"Companies are searching for the next best thing to change the future, while risking repeating the same problems on a greater scale."

Nowhere is this opportunity more present than in the large investment in trade promotions accounting for upwards of 20%+ of annual revenue for most CPG companies. Despite this large investment and a surplus of usable data to inform decision making, companies are slow to prioritize investment improvements.

According to The Partnering Group whitepaper, Trade Management Excellence: A Framework for Practitioners, “Seldom seen are documents that outline the strategic choices and direction for the second greatest line on the company P&L.”

This is problematic both in the risk of poor investment and in the real possibility of repeating the same broken practices with new acquisitions or innovative products. As a result, it is counterintuitive to invest in new opportunity without a plan to solidify current strategic investments.

“The 3-Year trade investment roadmap should focus the organization on the critical few choices that will help them win in the marketplace for the next three years and beyond,” continues The Partnering Group whitepaper.

'"Seldom seen are documents that outline the strategic choices and direction for the second greatest line on the company P&L.'"

Making this roadmap a sustainable reality that will impact current practices and future investments will require real-time, quantified analysis of promotional performance at a variety of hierarchies and predictive planning and optimization capabilities to test, assess, and revise decision making. The truth is that most companies already have the data necessary to perform the detailed analysis and modeling sought after to make more strategic promotional investments. However, instead of investing in solutions, such as a Trade Promotion Optimization solution, that can make this a usable resource in revenue, volume and profit generation, companies are searching for the next best thing to change the future, while risking repeating the same problems on a greater scale.

There is no question that the shifting landscape, new consumer preferences, and external disruption will force CPG executives to make bold decisions to maximize opportunity. Realistically, it will be the combination of wise innovations, purposeful cost management, and informed investment that create the foundation for sustained growth for these organizations. Quantifiable improvement to trade investment returns is an opportunity that is currently available to organizations as a permanent enhancement to existing practices. It is with this that it becomes imperative for companies to no longer neglect the opportunity in front of them in favor of the opportunity that may be.

What to read next: CPG CAGNY Announcements Balance Risk and Reward in the Hopes of Spurring Growth

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