Many up-and-coming brands experience local success, but competing on the national scale is not for the faint of heart. You have a great product, you locked down a few retailers and now have quite a following. You feel the tipping point approaching but are unsure of what’s next.
Whether you are a seasoned industry executive or an upstart entrepreneur ready to introduce your product to the world, the following six business best practices are vital to successfully scale your brand.
1. Always consider your bottom line
With success comes a necessary investment in the company. Whether you are considering growing the team, partnering with third-party supply chain companies, or investing in technology solutions, it is impossible to build your brand alone. Thankfully, there are considerable resources to manage your company’s growth, but all come with a cost. Before making any investment in your brand, a cost-benefit analysis is critical. Will this new hire increase revenues? Will this supply chain partner lead to further distribution? Will this software streamline my outdated processes? If you cannot easily quantify how your bottom line will improve after any investment, it may be worthwhile to explore other options. The CPG industry is much too cutthroat to be wasting resources.
2. Account for unforeseen hidden costs
The food and beverage industry can be brutal up and down the value chain. Costs climb rapidly as a brand scales and margin pressures grow with competition. Between cost of goods sold (COGS), distribution expenses, promotion spending and SG&A, it seems like expenses always swell before revenues. These constitute a variety of the common expenditures, but there are considerable unexpected costs a brand must hedge against as they scale.
Within CPG, retailers hold all of the channel power. It is common for retailers to charge brands based on a variety of disputes or errors that end up impacting the brand’s bottom line. Such disputes include shipping errors, shortages, damaged products, excess promotional expenses and charges for penalties. To protect yourself, it is critical to validate retailer deductions as they occur. Margins are too tight to be paying for undue costs.
3. Utilize strategic promotion campaigns as you expand
First impressions last forever. Do your best to take advantage of introductions into new regions or retailers. A typical approach to penetrate new markets is to run a promotional campaign. This could include temporary price reductions, paying for an in-store display, or couponing activity, which combine to generate excitement amongst your consumer base. However, different promotional strategies resonate with consumers in different ways. For example, a consumer may be trained to consider the best deals of the week rather than an everyday low price (EDLP) option. Other consumers may feel strong loyalty to their current choices and might need a free sample to convert to your product. Do not be afraid to massage and manipulate your promotional strategies by retailer or region to optimize your on-shelf performance.
After enacting your promotional campaigns, be sure to keep a close eye on their effectiveness. Worthwhile metrics to pay attention to include overall trade spend by promotion type, increased revenue or lift from promotional activity and sustained velocity numbers after the promotional period ends. Every new region provides an opportunity to refine your promotional launch campaign. Make sure you are strategic with every launch.
4. Adopt an ERP and invest in good data
Your Enterprise Resource Planning (ERP) system is the framework of your company’s operations and should be the first technology solution that your brand adopts. ERPs automate all your company’s back office functions including customer relationships, accounting, human resources, supply chain and sales activity. It is the system for which all other systems should connect and allows you and your team to make data-driven decisions. If you want to take your brand from mom-and-pop to national powerhouse, you need to implement an ERP solution.
However, an ERP system is only as strong as the underlying data. To track sales, retailer portals or syndicated data providers such as SPINS and Nielsen are vital to understanding consumption at each of your retailers. If that is unavailable, leverage data feeds from large distributors such as customer orders or inventory data at customer distribution centers. The best practice is to use data “close to the register,” but there are a variety of workarounds to help position your brand for success.
In the food and beverage industry, the retailers hold most of the channel power. Between slotting fees for new products, control over where the product is placed in the store (plan-o-grams), and then charge-backs for spoilage and damages, new brands face an uphill battle when selling in national retail chains. Leveling the playing field by enlisting an experienced food broker is a critical step in managing relationships with retailers. Food brokers are equipped to represent your brand on shelf and to keep tabs on the retailers. It is impossible to track every point of distribution when your brand sells nationwide but a food broker can make sure that you are well represented.
6. Master go-to-market execution
Once the back-office foundation is sound, ensure your go-to-market infrastructure is best in class. Modus Planning (Modus) by OnePage Software enables brands to master the disciplines of demand planning, trade promotion management and customer order validation.
No traditional statistical demand plan will anticipate the rapid distribution build and baseline growth during a brand’s growth phase. Brand-built sales planning assumptions in spreadsheets do not scale appropriately and typically include version control nightmares and errors.
As for trade, the promotion budget is usually the second largest P&L item behind cost of goods sold. Though this is a massive spend bucket, growing brands often neglect the persistent tracking and planning of their promotional and pricing spend. This can lead to devastatingly unprecedented trade spends, ineffective promotions and blown budgets.
One last headwind a growing brand faces is ensuring distributor orders are accurate and satisfy all demand while limiting spoilage. You cannot assume a supply chain partner will understand your expected consumption as well as you can.
Modus Planning is the go-to-market operating system for growing brands. Modus ties the demand plan with the trade promotion plan to ensure that your forecast considers all variables. With a highly accurate and collaborative demand plan, you can monitor your customers’ orders and stock positions and hedge against costly spoils or stockouts. Modus ensures that even the newest brands can have a world-class S&OP infrastructure that can scale while they grow. Being able to advocate for your brand using Modus Planning will maximize in-stock rates, working capital and trade spend to drive the business forward.
You have a great product, now build a great business. Take control of your growth by leveraging the experts around you while investing in the technology and processes to scale effectively. If you’re a supplier looking to grow your business, explore our list of service providers and certification partners in RangeMe Services here.