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.