FMCG Consumer Goods

Emerging trends in the supermarket and consumer goods sector are compressing manufacturers' gross margins.  Factors, such as the rise of the private label, the concentration of supermarket power and increasing commodity costs are all placing significant pressure on FMCG companies to deliver earnings growth in mature markets


RETAILER POWER

Retailer power is growing as suppliers desperately bid up category margins to ensure their share of the shelf and survival at range reviews. Suppliers are increasingly reliant on price promotions to deliver topline sales with the hope and expectation that this will deliver bottom line earnings. The reality is that baseline sales are in decline, margins are being eroded and the ability for suppliers to negotiate their way out of price discounting commitments diminishes

Retailers are also driving their buyers to achieve 'dashboard' hurdle rates of earnings growth through margin enhancement and trade spend. This situation means that suppliers spend valuable company EBIT buying pages in catalogues, floor media and other supermarket real estate rentals. In reality, this equates the retailer's pocket five-fold to what the supplier achieves in incremental profit

Much of this ineffective spend is designed to provide support for the retailer's 'dashboard'.  In the short term, this may be advantageous for a strategic thrust into new categories or a 'bridge' into developing working relationships with buyers.  However, in the long term it leaves the supplier at a disadvantage.  They are exposed to the next highest bidding competitor in the battle for limited shelf space and access to the consumer

EMERGING IN THE RETAIL LANDSCAPE

Trends emerging in the retail landscape include:
-  A move away from deep discounts that drive demand spikes and cause supply chain havoc
-  The introduction of rollback pricing to branded goods that is half way between Every Day Low Pricing and long term discounting 
-  Active retail shelf price management that sees market leaders and followers signalling intent and driving more value into the category through responsible and steady prise rises

WORKING WITH PRICING INSIGHT

Pricing Insight concentrates on optimising the folllowing:
-  Price elasticity modelling
-  Trade spend management planning
-  Market segmentation
-  Competitive analysis and end game planning
-  Pricing and value-to-customer
-  Distribution channels, especially in connection with pricing and sales incentives
We base our recommendations on concrete quantitative analyses, using tools such as conjoint measurement, multidimensional scaling or causal analysis 

By using our 8 Step Strategic Pricing Management Process, we engage with your company through the following structured approach:
1)  Initial stakeholder interview
2)  Diagnostic evaluation (see Online Diagnostic)
3)  Identification of key pricing issues
4)  Initial report and workshop proposal
5)  Pricing workshop and/or consulting assignment with key recommendations and actions
6)  Publication of an implementation plan
7)  Set-up of a project team
8)  Complete project plan

Our consulting approach is specifically tailored to your company's needs to optimise price and discount systems. We support the preparation, development and execution of:
-  pricing strategy initiatives;
-  pricing policies & tactics;
-  processes to monitor, report and control price realisation

Your company's pricing can improve within 90 days by focusing on the following key areas:

1) Implementation of price control systems
The development of price systems that determine regional, national and international prices. The price systems determine the price architecture of the products and account for differences between core, side and complementary products

2) Development of discount management systems
Price structures are developed using a number of pricing mechanics including:
-  List Price less % discount;
-  Long Term Incentive rebates;
-  Special project/contract pricing and;
-  Exclusive customer pricing and specials management

3) Pricing market management
The concept of price leadership differentiates the market players according to size, strength, behaviour and strategy. Considerations toward 'natural' market areas and 'natural' customers help to define the scope of operations. We coach the price leader in the internal set-up and support the external price communication. This allows the market to understand 'how to price' in a rational and fair market place

4) Optimisation of price lists
We optimise the price list of our clients by developing price architectures that strategically position SKU relativities, product groups and customers.  This will make it easy for your company to do business and support 'value for volume programs' with key customers

5) Executing price rises in the market
We support our clients in the preparation, implementation and monitoring of price increases in the market. The process of price increases involves internal participants (sales, marketing, operations and finance functions) as well as the external business partners


Contact us on +61 2 9091 0226 to evaluate your Margin Expansion potential