Getting Ready to Grow

The Neglected Cost Center for a New CPG Manufacturer… 

As you may know, we at Adesso, focus within the emerging area of the natural channel. Many emerging CPG companies enter this complex arena with an understanding on how to address payroll (rather straightforward) and the entire Cost of Goods area, ranging from raw materials, to production costs & planned logistical areas. Seems pretty simple as they enter into what seems to be a rather straightforward sales channel with QuickBooks as a financial system & Excel as their basic analysis platform. 

Then they secure a distributor, gain some distribution in retail stores (many call it ‘doors’), get excited & send an invoice. They have an agreement with the distributor, but it is quite complex – most do not read it nor do they align their GL accordingly. While not looking to be crude, in about 20 or so days, when payment arrives, they hit a bit of a ‘holy shit’ moment. 

They receive 20%, 30% or sometimes even a negative amount in return on the invoice and the challenges & confusion begins – why did they not pay the total amount? Not just that, but they paid next to nothing. Then another order arrives, and another – all with this level of short-payment – and the cycle continues. 

We get calls weekly on this. 

The Reality is as Follows & is Not that Complex

There are 3, not 2 major cost centers for a new CPG manufacturer – COGS, payroll (probably #3) and Trade Spending. 

Trade spending has been a part of the CPG industry for over 40 years. We have a term for this here at Adesso; it’s not terribly clever, but it is accurate. We call it ‘consistent complexity’. It is the same for everyone entering the space & everyone has dealt with it for decades. 

It can be relatively simple to solve, but you need to be open to some change & rely on a solution partner with deep industry experience. Our group has dealt with this for over 10 years as a team here, and we all have countless years (well into the hundreds) in the industry from large sales agencies/brokers, CPG manufactures, experts in trade management technology & infrastructure – and, yes, we have exemplary client service references. That is because our clients drive what we do every day.

What we can tell you is that working with us will reduce your internal admin time, you will know what you are spending & where you are spending it very quickly. Then, if someone owes you $ (yep they do) you will have the information to get it repaid, and as you move forward with us as partners, you will clearly understand what works and what is not working in your trade promotions – we do this better than anyone!

If this sounds like what you may need, please contact us.

Addressing Your Trade Spending Is Much Like Starting Your Wellness Program

Have you ever felt overwhelmed before getting started with that wellness program?

So, we know we need it.  Yet, we put it off till next Monday, till after the holidays, or till after we have tackled some house project that we’ve been meaning to do.  

No doubt, ‘eating the elephant whole’ seems overwhelming.  But once we’ve made the decision to do it, the key is to decide on key objectives, make a detailed plan for what we know we need to change to achieve those objectives, commit to following that plan – sticking to it every day, and be consistent to realize the desired outcome.

We often start out debating between spending money to join a club or program, or whether we can just do it at home on our own and save a few bucks.  We could even hire a personal trainer if or health coach we really want to get maximum results with feedback from an expert.

How Does This Compare To Addressing Trade Spending?

This same process holds true when a CPG manufacturer realizes managing trade spending and deductions is something they need to address for their business to grow and become increasingly healthy, financially speaking.

First, you need to set your objectives:

  1.  To have a complete view of all trade spending to know at any given point in time what you are spending at every customer, by time period, by promote group.
  2.  To gain accountability within both the internal and external sales teams, so everyone knows what promotions have been agreed to and can verify they run as planned.
  3.  To reduce the administrative burden and time-drain of managing deductions, especially those ’80 pages of backup nonsense’ from some of the key distributors.
  4.  To be able to dispute unauthorized deductions or double-dipped promotions quickly & effectively?
  5.  To strategically improve the effectiveness of your trade spending, such as reducing trade spending while maintaining volume, or evaluating and eliminating ineffective promotions so you are only spending trade where it is helping to grow your business.

Next, you evaluate the most effective solution that enables you to achieve your objectives.  Do you stick with the enormous Excel workbook that takes days to fill out for your promotional plans (at which point you have multiple versions, someone needs to remember to update any changes that happen, etc.), or do you ‘build your own’ because you feel you really know what you want this to look like?  Or is there sufficient ROI in investing in partnering with an expert who has a solution that is specifically suited to achieve your objectives?

Some Simple Recommendations

  1.  Partner with a provider who has deep industry experience.
    • Tenure in the Industry – A partner who has lived it and understands what you need.
    • Tenure in the Organization – An experienced team that has added years of knowledge and improvements into the solution.
    • Client Tenure – Both new clients and clients who have been there for years.
    • Client Referenceability – Ask for case studies, references and recommendations!
  2.  Insist on a complete solution.
    • A standard system, so your solution continues to evolve easily and ongoing.
    • A solution that has evolved for decades with client input (so you will have input into the ongoing evolution as well!)
    • Everything in one system, so you can address all objectives within one solution:
      Including 1 System for All Users, Trade Plans, Deductions & Check Requests, Analysis & Reporting, Contracts & Documentation.
  3.  How do they ensure project success?
    • You will need a focused & rapid setup.
    • Training & change management is essential for your team. In fact, this is a key factor for ‘sticking to the plan’ and doing what is required consistently and systematically to continuously improve your trade effectiveness!
    • Outsourced System Administration services means you can focus on growing your business, not administration of software.
    • Client-focused, ongoing releases that you can take part in prioritizing.
    • A community of clients who share best practices.
  4.  How do they address areas of complexity that you couldn’t address ‘at home’?
    • Security & Workflows
    • Ease of Use
    • Financial Accountability
    • Analysis & Reporting BI Tool

So, How Does Partnering with an Expert Make It Less Overwhelming?

Like a wellness program, this does require some work.  However, with a partner like Adesso, we do not make you ‘eat the elephant whole’ or ‘drink from a firehose’.  We’re like your health coach – we have a simple, phased approach that guides you through a structured process.  And if you dedicate the time & effort, you’ll see incredible results. 

Just like how you feel better after starting your wellness program, implementing a trade management solution delivers early results like gaining full visibility into your trade spending & immediately saving money in repays.  Longer term, however, is where you will really begin to realize the benefits – and like with your long-term health – you can begin to relax, knowing trade is in good shape!

When Is A Good Time To Get Started?

Just as people adopt a wellness program as part of a New Year’s resolution, there is actually a perfect time to get started with a trade solution.  The time is NOW so you can be set up and ready for the next fiscal year planning!

Let Us Help You Take the First Steps

Toward Getting Your Trade in Shape!

Let's Talk!

6 Reasons Flamingo Drives an Immediate ROI, Saves Sales Time & Helps You Relax

AdessoSolutions

1. Complete Line of Sight & Accountability

You should know what you are spending on trade at every direct and indirect customer, like you do any other item on your P&L.

“The benefit of Flamingo is complete line of sight. Historically, we used a piece of paper or an Excel file and now it’s all in one place with line of sight and visibility that can hold people accountable to what their budgets are, and use a better business management style.”

Lou Fata, VP of Sales  Palmers

AdessoSolutions

2. Makes Your Trade $ Work Harder for You

You need significant information over an extended period of time, in order to make more strategic decisions for trade planning – based on what works and what doesn’t work. (Download this eGuide by New Hope Network, “Every CPG’s Secret Weapon: Trade Promotion Strategy” for more information.)

3. It's Painless

Your setup is quick and easy; and training for your internal and broker team, as well as administration of Flamingo is taken care of.

Leverage Adesso’s trade expertise for your trade effectiveness!

“The setup and kickoff training got us up to speed quickly, with the Adesso team being deeply involved throughout the process. Next, their ongoing AdessoU training program is a valuable resource for our internal sales organization, financial group and broker team. Additionally, we are finding the System Administration service very effective; having their experts to help our team minimize administration duties, which allows us to focus on running our business. Adesso’s team is always prompt with their responses, they are proactive, on target, and willing to help. They do what is required to make us successful, and it is having an impact on our business.”

Steven Boyle, FP&A Analyst  Blue Marble Brands

AdessoSolutions
(click to request case study)

4. Pays for Itself Immediately

You can save the equivalent of 6 years of subscription your first year by reducing deduction aging and securing repays of unauthorized deductions. (See this case study of how one client achieved this!)

5. Brokers Love It

Flamingo enables greater broker involvement, which saves admin time for your internal sales and finance team to spend building and analyzing your business.

“Our brokers enter deals, clear our deductions, do our repays, the check requests – – they do it all and we have no deductions over 90 days. My brokers tell me that Adesso is the most user friendly system they have in their office. We have brokers recommend Adesso to other clients that they have.” Karen Prophet, Promotions & Trade Spend Manager IdahoanFoods
AdessoSolutions
(click to learn why it's crazy simple)

6. Convert Sales Time From Admin to Analysis of Trade

Ditch the spreadsheets and leverage a flexible Annual Planner so your sales team can reduce admin time and improve trade effectiveness. You may never need to enter a deal again!

Let's Discuss How We Can Help You Relax

Adesso Has NO Clients on the ‘Forbes Top 25 Food & Beverage’ List

Adesso Has NO Clients on the Forbes Top 25 Food & Beverage List

However, We Make a Major Difference Supporting Small-Midsize North American CPG Manufacturers.

by Fred Schroeder

Other TPM providers in our industry have recently touted their penetration for various types of systems across the Forbes Global ‘Top 25 Food & Beverage’ list. Over half of this list is comprised of tobacco, alcohol and durables. However, we do not have, nor do we aspire to have, any clients on this list.

At Adesso, we hire team members that clearly have demonstrated a background and knowledge on the North American CPG market. Additionally, we focus our solutions around the uniqueness, challenges and opportunities. This includes our clients and ‘not yet’ clients who face trade spending every day – in the conventional retail segment and in the natural, specialty and organic segment.

Adesso Earns CGT AwardsThis focus has been recognized consistently by the Consumer Goods Technology (CGT) Readers’ Choice Award. 

This Award annually recognizes the consumer goods industry’s top technology and service providers, as selected by their end users. With Adesso’s “SMB Market Leader for TPM” recognition, the CGT recently cited some of Adesso’s SMB clients. They called the company and its CPG-focused solutions:

  • “Responsive to our needs and always willing to help.”
  • “User-friendly and intuitive.”
  • “A great system to manage trade.”
    “Very accommodating and easy to use.”
  • “Very simple to use — and it works.” 
  • “The Adesso team is great to work with.”

In short, unlike others in our industry, we do not aim to serve the ‘Forbes Top 25 Food & Beverage Companies’, nor global conglomerates. Our client-partners are small to midsize CPG manufacturers in the North American market with similar challenges and opportunities. They look to effectively track and manage their trade spending and become more effective through a community-based approach.

So, If you are looking for the best TPM system, supporting services to improve usage from your team, and eliminate unnecessary administration – all at a fair price with immediate ROI, contact Adesso Solutions. 

And feel free to ask our clients! 

Ease of Use

The Flamingo TPM system is quick to learn, and easy to use. Additionally, we continually update the system based on client input, to further enhance ease of use.

"Adesso ensures a rapid return on investment. It's easy to learn and use, it helps to control trade spend early on in a company's lifecycle, and continue to grow. Overall , Adesso works for all sized companies, and provides one system of truth for the management of trade."
OFarm
Denise Adamich
Controller
"One of our major objectives was to improve accountability. We previously used spreadsheets to allocate GL accounts to the right customers, and were limited to unofficial deal approvals through email. Flamingo TPM is easy to use, and has the functionality we need."
Blue Marble Brands
Steven Boyle
FP&A Analyst

Would you like to learn more about how to better manage your trade spending and deductions? We invite you to explore our Events and Industry Learning resources.

Adding a Resource Doesn’t Fix Your DEDUCTION CHALLENGE

Adding a Resource Doesn't Fix Your Deduction Challenge
Adesso - Adding a Resources Doesn't Fix Your Deduction Challenge
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Often, we get a call from an emerging Natural-Specialty-Organic (NSO) manufacturer telling us that they have added a new accounting resource to assist in reducing their deduction balance, and sorting out all of these trade spending issues. When we ask how it’s going with the new person, the reaction is typically underwhelming.

THE REASON IS SIMPLE: trade spending deductions are not the problem – they are a symptom of the problem.

An added resource will not address this.
The problem lies in not having a clear and accurate understanding of:
  • what you were planning to spend,
  • what was committed to by your sales team and the distributor or retailer,
  • and then not knowing what actually happened in the marketplace.
The deduction is simply a form of payment for the distributor or retailer.
When these areas are aligned within small or emerging NSO manufacturers, ‘matching’ the deductions to the spending is a rather simple process – typically addressed by your broker partners. And, yes, there may be a small percentage of these deductions that are not authorized, or someone made an error. But for manufacturers that have accurate plans and agreements documented, these issues typically begin to melt away.

We’d love to discuss this with you in more detail, and share client results.

[button link=”mailto:natural@adesso-tpe.com” newwindow=”yes”] Let’s Talk![/button]

Face It, DEDUCTIONS Are a Form of Payment

Adesso-FaceIt_Deductions
Adesso-Deductions Are a Form of Payment
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Deductions come across as evil to many in the industry. They go by a lot of different names: chargebacks, MCBs, short pays and a host of others, but the common name for decades is simply Deductions. 

And believe it or not, these were originally driven by CPG manufacturers! 

You see, when trade spending was in its infancy 30+ years ago, manufacturers moved from ‘off invoice’ payments to ‘bill back’ payments. Hence, the retailers had to ‘bill back’ the manufacturer to get reimbursed for the dollars they used to discount the manufacturers’ products. Yes, that’s what the dollars were used for back then.

The manufacturers (who had a lot more clout in those days…) would debate whether the dollars were worth it or drove enough cases, which delayed reimbursing the retailer. In this day and age, the retailer was out the money!

As manufacturers became increasingly dependent on this extra volume and revenue, retailers became rather impatient and realized they had more leverage, and soon the balance shifted. It was a lot quicker to take the dollars spent last week or the week before off of the next invoice.

That addressed 2 issues:  

1. The retailer got their money faster.

2. The retailer also shifted the proof and incremental volume responsibility to the manufacturer.

And as soon as one retailer did this, everyone followed!

This is how, somewhere in the 1980’s, deductions became a form of payment for trade spending.

Therefore, if you are a food manufacturer entering this arena, be prepared to address this in a logical, effective manner. Because, in addition to all of the legitimate deductions, retailers and distributors will assume they are always accurate, and place the burden of proof on the manufacturer. Though some are more effective than others in assuring accuracy.

The reality is this is a clear form of payment in this industry. Profitability and effectiveness are therefore dependent on your ability to address this quickly, accurately, and thoroughly.

DID YOU KNOW that many manufacturers – large, small & emerging – now address deductions in 30 days or less? And they account for everything at the same level of granularity as any other item in their P&L!

The ‘Pink Elephant’ is a Major Expense on Your P&L

The Pink Elephant in your P&L chart.
Adesso-Pink-Elephant-In-Your-P&L
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Trade Spending is the ‘Pink Elephant’ on Your P&L – 

Time to talk about trade spending – a major expense in your P&L. You are a team of professionals, who manage a small business with tenacity and care. You can account for your Cost of Goods, your HR expenses, G&A and others down through the line item level. In some cases, you can even account to fractions of a penny – yes every dollar matters!

Knowing these is critical to managing your business. Furthermore, you also analyze these, make decisions where to invest more, cut back some, or spend the same to get a better bang for the dollar.

In fact, not only does your internal management teams drill into these numbers regularly, but your investors have a keen interest what the returns are as well. We all know the drill at a small or emerging company.

THE BIG QUESTION IS: Can you account the same for your trade promotion spending in your P&L?

Undoubtedly, this area confuses and challenges many Natural-Specialty-Organic manufacturers. They don’t analyze it, and many simply ‘sweep’ all of the distributor deductions into broad categories to clear the short-pays too! Every trade promotion expense has (or should have) a contractual agreement with a distributor or retailer.

Similarly to every other line item on your P&L, your finance team should be able to account for every dollar deducted by a distributor or retailer.  You should have the same level of scrutiny & granularity as any other GL area.

In sum, maybe it’s time to address the ‘pink elephant’ on your P&L, a.k.a. trade spending – and have your team make better and more effective decisions with these significant dollars. Our other client partners do!

We can be assisting within weeks with practices, processes and systems. It will save you time and it’s extremely affordable.

Let’s Talk!

 

What’s Up With Pricing?

by Fred Schroeder

I seem to have missed an email, or a blog, or maybe some ‘best practice’ introduced over the last year in regards to pricing. It seems that when someone asks you for a price for what you are selling, it now apparently means nothing. Later on, there seems to be this new practice where a prospective new client, who seems to be supporting us, is suddenly given the ‘new low price’ from a competitor. 

Continue reading

What to Look for in a TPM Solution—Now & Long-Term

by Fred Schroeder

How often have you thought about replacing your Excel spreadsheets with a TPM Solution to address your lack of visibility into trade spending? I’m sure it’s crossed your mind! And if you’re like most, you can’t spend countless hours developing an RFP (not that this is the best course), nor do you want to worry about the cost, time to value or other areas of uncertainty that process would bring to your life. So, the spreadsheets will be fine for another year or two.

If you do start to explore the market, you might do an internet search, find a few ‘vendors’ that do this, and check out the websites of 2, 3 or 4. You then make your request, “Can we get a demo of your product?”

Having been in the CPG industry my entire career, and on this side for about 15 years, I know that the odds are, you will stay with Excel. Why is that? After multiple vendor demos, they all look the same.

In reality, we – Adesso and others in our industry – have done a rather solid job of creating software to address planning promotions, clearing deductions, creating some reporting, and all the basics of trade management.

However, there is a long-term reality here. This is not a recent problem, it’s far from simple, and you don’t have a 7 figure budget to address it.

You need a long-term partner, and a short-term plan to get started.

It takes significant CPG & trade spending experience to understand that it takes a system, PLUS clearly defined, successful and cost-effective services for the short term, such as administrative help, training and insights. If needed, you move into retailer analyses and even some assistance in trade strategy.

An experienced partner will contribute specific client results to help you make sense of it all – our clients even share success stories and challenges with each another as a community.
Finally, you need a chance to relax.

Imagine not having to worry about this constantly every period closing – knowing all the numbers and accruals throughout each month. The ‘monthly close’ becomes a snapshot in time, as it’s supposed to be.

You watch your kids play soccer, spend time with your spouse, play with your grand kids, whatever you want to do – without worrying incessantly about trade. At the end of the year, you’ve met your objectives and take a vacation or two. You earned it.

Fred Schroeder is CEO of Adesso Solutions, makers of the Flamingo TPM System. He understands the complexity of trade promotions, the mental barriers to getting started, and the importance of getting it under control so you can finally relax. You can write to Fred at fschroeder@adesso-solutions.com.