A Food Company’s Bold Play to Restore Margin and Growth
An outside-in investor approach was key to reversing a decline.
After its US gross margin dropped 5 percentage points in three years, a leading global food manufacturer knew it needed to change course—and fast. No single factor had caused the dip. Accordingly, CPCo* decided to look across its six key revenue growth levers—pricing, price pack architecture (PPA), mix, promotion, trade terms, and in-store execution—to find solutions.
When it enlisted our help, the company already had several growth initiatives underway. Given the urgency of the situation, and the company’s ongoing efforts, we jointly opted for a bold private-equity-style diligence approach to revenue growth management (RGM). This meant applying an outside-in investor mindset: an unvarnished view of opportunities that would ultimately challenge CPCo’s status quo.
Through a series of provocative challenge sessions with cross-functional teams, we worked together to define potential areas for gross margin improvement. As with a due diligence engagement, all options were on the table, and our hypothesis-driven approach probed possible remedies: Could we reorganize the assortment by channel and shopping occasion? Or be more assertive in eliminating unproductive SKUs?
An analysis of priority actions helped validate the case for change and determine the multimillion-dollar size of the prize. We conducted an RGM maturity assessment to identify CPCo’s strengths and gaps, then worked together to pinpoint value creation opportunities around the six key levers. This exercise supported critical cross-team discussions about priorities and efforts to develop an action plan.
With meaningful insights in hand, CPCo created and piloted bold customer plans with a test-and-learn methodology that encouraged fine-tuning along the way. Priority actions included optimizing promotion spend allocation toward the consumer spending periods with the highest ROI and incremental household penetration; redefining winning SKU distribution targets by channel; and selectively increasing prices to reflect brand power and shoppers’ brand perception.
The investor mindset we applied helped CPCo conduct a fresh analysis of its issues and make critical, value-boosting adjustments. The unconventional method delivered immediate results: a gross margin increase of 300 basis points within four months.
There were also longer-term gains. Through this concerted, all-hands-on-deck effort, more than 50 client managers were mobilized to health-check ongoing initiatives and identify gross margin opportunities. Similarly, sales team members learned how to squeeze value from customer plans. In the end, CPCo not only reversed its downward trend but also built new RGM capabilities to ensure future success.
Kontaktieren Sie Bain