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.

When It Comes To Trade Spending, All Retailers Are Not Created Equal

We have been big proponents of the concept of “Consistent Complexity” when it comes to CPG manufacturers dealing with the trade.

The premise is while trade spending is complex, that complexity is the same regardless of the size or type of CPG manufacturer. So while you can’t use the same trade promotion approach with every retailer, most CPG manufacturers have to deal with the same retailer the same way.

For example, Publix uses BOGO’s. Therefore, different CPG manufacturers can be helped by trade experts familiar with the different accounts and how they handle trade spending.

However, there is also the fact that while all retailers are looking to take as much of your trade dollars as possible, there is a big difference between how retailers extract those dollars. Therefore, the time and effort spent maximizing the effectiveness with your trade dollars doesn’t always match up with your top sales accounts. For example, Walmart is EDLP. Not much trade promotion management issues there. However, go to the major retailers in the northeast and deal with Wakefern (Shoprite), Stop N Shop, Keyfood, A&P, Pathmark, CNS among others and you deal with a myriad of overlapping trade promotion programs, diverting, double billing for the same promotion etc., that makes the effort, money, and approach extremely complicated to manage, to control and to plan for the future.

Therefore, you need both a TPM solution that can handle all these variants and trade experts with experience to help navigate you to TPE – trade promotion effectiveness.