By adjusting our analysis for mergers and acquisitions (M&A), foreign-exchange effects, and inflation, the model enables like-for-like evaluation of real organic growth over the period. This surge effectively catapulted the CPG sector three years into the future — and jump-started the previously nascent efforts at direct-to-consumer (DTC) growth strategies. Many companies, however, were caught off-guard by the pace of change, resulting in inadequate DTC commerce models, less-than-optimal customer experience and anemic returns on DTC investment. Be sure to adequately staff your accounts receivable and deductions teams, so they can provide timely and relevant data that enables management to effectively evaluate trade spend. Bob has 25 years of finance and accounting leadership experience serving companies from the Fortune 500 to the middle market. Prior to 8020 Consulting, Bob led finance and accounting as the Vice President of Finance for Ardmore Home Design, a high growth wholesale luxury furniture company.
CPGs need to build developer teams that produce the necessary assets (pictures, videos, and key words) and drive technical execution, day in and day out. These teams need to be fully integrated with the business and prioritized as a critical capability required to maximize growth. Leading CPG players unlock the next growth curve by linking the core levers of RGM—pricing, assortment, promotion, and trade investment—to the company’s occasion expansion and activation strategy. Precision RGM is powered by advanced analytics tools that automate key analyses at a very granular level and enable simulation and foresight. In today’s fast-paced global marketplace, consumers are driven by brand loyalty, demand, and effective marketing strategies.
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GEP SMART is an AI-powered, cloud-native source-to-pay platform for direct and indirect procurement. Consumer packaged goods are bought, consumed, and replenished quickly and regularly. Examples are food, beverages, tobacco products, cosmetics, toilet paper, shampoo, cleaning supplies, and other household items.
Consumer Packaged Goods are products that consumers need to replenish often. Food, beverages, makeup, household products, toiletries, and over-the-counter drugs are all examples of consumer packaged goods. Essential to the success of its campaign is leadership support and encouragement for all employees to immerse themselves in digital experiences for clarity on what motivates their customers. Commerce in the DTC space can range from subscription services and next-generation vending to own-brand stores, pop-up stores and social commerce. To strengthen consumer relationships, CPG leaders can turn to exclusive events, either virtual or real; games and contests; loyalty programs and rewards; community building; and entertainment. If you have questions about your trade spend approach or need some support with your financial operations, we’re happy to chat.
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A family may opt to squeeze a few more years from an outmoded washing machine rather than upgrade to a newer model. By contrast, sales of consumer packaged goods staples like bread, milk, and toothpaste are less affected by market fluctuations. Consumers consume or run out of these goods faster and must replace them or do without entirely. For example, cosmetics typically have limited shelf lives, as these products quickly deteriorate if exposed to extreme temperature fluctuations. They are sold in individual packages at varying price points, depending on the brand’s position in the market.
As mentioned, profit margins are always a key part of income statement analysis, but profit margins in CPGs can be unique. This is because many CPG companies have developed streamlined production facilities with the advantage of economies cpg accounting of scale to lower the overall cost of goods sold and create a higher gross profit margin. CPG companies must assess the likelihood of inventory becoming obsolete and create inventory reserves to account for potential losses.
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The new model continues to leverage scale advantages in marketing spend, distribution, supply chain, and back office but uses digital to move away from mass marketing and sales and toward targeted commercial execution. The new five-part model, which requires building or strengthening 16 individual capabilities, looks like this (Exhibit 5). Not all growth is coming from emerging markets; companies must identify and invest in pockets of growth in developed markets as well, particularly as growth in emerging markets slows. In the United States, for example, the spending power of certain demographic groups, such as baby boomers and Hispanics, is significant and growing. The “value” segment, which flourished during the recession, continues to appeal to a broad swath of consumers.
- A customer orders a given quantity of product using master case as the unit of measure (UOM), but you ship the product on a mixed pallet.
- By adjusting our analysis for mergers and acquisitions (M&A), foreign-exchange effects, and inflation, the model enables like-for-like evaluation of real organic growth over the period.
- Companies with high fixed cost structures (SaaS, Manufacturing) can grow revenues without growing expenses as much, meaning the net income expands faster.
- Large CPGs acquired small brands successfully in the last few years, often accelerating their growth and helping them over the $100 million scale barrier.
- Coupled with senior sponsorship and a “fast-track removal of barriers” spirit, all the teams completed their tasks, which otherwise might have taken years.
- They also want to know that the brand is virtuous on local community contributions, equitable commerce, and environmental performance.
Categories like pet care and non-OTC consumer health offer abundant opportunities. For other categories, D2C propositions may still be worthwhile to acquire proprietary consumer data and create a test-and-learn opportunity. To execute these category and brand growth strategies, CPGs need to adopt a new model—a new “how to win”—that looks quite different from the old model.
