Transforming revenue growth management for CPG profitability

Consumer products companies are challenged on all fronts. Inflation continues to drive up costs, supply chains remain unpredictable, and consumer behavior changes constantly.

In this volatile economy and rapidly changing industry, how can CPG companies thrive, let alone survive? How can they optimize their operations to drive sustainable, profitable revenue growth?

Simply put, old ways of doing business won’t cut it. Today, effective CPG trade and revenue growth management requires a new approach to keep up with the pace of change.

Managing revenue growth amid relentless change

While the supply chain problems of the pandemic era seem to have eased, CPG brands still deal with plenty of out-of-stock situations. And instead of low interest rates and consumers with extra savings in their pocket, companies are now faced with sky-high inflation and budget-conscious consumers.

Soaring inflation has a cascading impact, increasing costs for companies then raising prices for consumers, which in turn impacts demand.

In a recent webcast, industry experts discussed how CPG companies can tackle these challenges and improve revenue growth management.

The need for accurate forecasting, understanding retailer pricing dynamics, and addressing out-of-stock situations has become more critical than ever, said Pete Charette, senior manager of strategic revenue growth management at The Hershey Company.

“The current economic environment has created challenges, but we found that by leaning into our use of systems and processes and in some ways creating new processes, we’ve been able to better adapt and respond to the pace of change,” Charette said.

Moving away from spreadsheets

With so much rapid, continual change, CPG companies need systems that give them agility and flexibility to revaluate promotions, plan capacity, and adjust forecasts. Old, manual systems just can’t keep up.

Paul Smith, a global solutions manager for trade and revenue growth at SAP, noted that a lot of companies still use Excel to manage trade promotions.

“Doing this as a paperwork exercise or an exercise with partial systems or things slightly bolted together or where you’ve got batch jobs running – that’s when it becomes really painful,” Smith said.

A more effective approach for managing revenue growth involves integrating trade promotion and revenue growth management capabilities into a holistic enterprise planning ecosystem.

Comprehensive ERP solutions like SAP handle pricing conditions, master data, and trade management, providing a complete system of record.

This streamlines and automates processes by providing teams a single source of truth – including promotion plans, costs, list prices, and discounts rates. Teams get the agility they need to respond quickly to market dynamics.

A holistic approach to revenue growth management

A data-driven, integrated approach gives companies the real-time visibility and flexibility that’s so critical in today’s business environment.

For example, they can conduct frequent scenario planning in order to gauge promotion effectiveness. With a central source of truth, they can align with retailers’ perspectives and foster better outcomes for all parties, Smith said.

Charette stressed the importance of collaboration between departments, including sales and demand planning. A holistic system connects teams across the enterprise, giving them the same data to improve forecasting accuracy and optimize revenue growth.

Ready for what’s next

The pace of change will only continue to increase for CPG companies. But brands that take steps to modernize their processes and systems will be able to navigate today’s market complexities and whatever new challenges come.

By implementing the necessary technology and business changes, they can ensure sustainable and profitable revenue growth for years to come.