NAPLES, FL— Net sales for category-leading consumer product manufacturers grew nearly 3 percent more than the average growth for their category while those companies invested 8 percent less in sales operations than the category average, according to a report released today by the Grocery Manufacturers Association (GMA), McKinsey & Company and The Nielsen Company. The report summarizes the findings of the 2010 Customer and Channel Management Survey, which has been conducted since 1978.
“This report provides valuable insights that will help CPG companies develop and manage high performance sales organizations, thereby enabling them to serve retail customers and ultimately consumers more effectively,” said Brian Lynch, director of sales and sales promotion for GMA. “The strategies uncovered through this study also highlight an important theme that is reflected throughout the industry: winning companies remain committed to the continuous improvement of their innovation and collaboration capabilities.”
The 2010 survey focused on four key dimensions of customer and channel management: sales strategy, pricing and trade investment, customer collaboration and complexity management. Winning practices are identified in each of these areas independently using a unique approach linking CPG companies’ self-reported customer and channel management practices with in-market results and financial performance.
“In terms of sales strategy, top-performing companies realized growth faster than their category peers by investing in their go-to-market models, aligning resources with high growth channels, and upgrading sales leadership teams and strategic collaboration,” noted Kris Licht, a partner in McKinsey's consumer/packaged goods practice. “Looking ahead, more than half of winning companies said they will look to solidify gains by boosting field sales and merchandising resources.”
The analysis also revealed that when it comes to strategic collaboration, high performing manufacturers are casting a wide net in their search for collaborative retail relationships, but are ultimately selective, choosing to work with those that offer the greatest potential to deliver returns. When they do engage in joint initiatives with retailers, the majority of leading CPG companies focus on boosting growth for the entire category, recognizing that increased sales in the category overall will translate to sales growth for category leaders.
Complexity management is another aspect of customer and channel collaboration addressed in the study. Manufacturers’ efforts to meet retailers’ varying price-point, size and packaging requirements have resulted in large, complex product portfolios that require careful management.
“It is no surprise that 96 percent of survey respondents acknowledge the challenges posed by vast SKU assortments and overall complexity in the marketplace,” said Stuart Taylor, vice president of custom analytics for Nielsen. “There is known concentration at the top, with 25 percent of SKUs generating 80 percent of CPG sales, but the remaining 20 percent is not insignificant. The top performers are addressing these challenges by being disciplined about conducting their own SKU optimization exercises on a regular basis. And, while there are no firm rules, we find the top performers also limit the number of retailer-specific SKUs they produce to less than 10 percent of total SKUs.”
The 2010 Customer and Channel Management Survey was conducted in the spring of 2010. Nearly 220 consumer packaged goods (CPG) executives representing a record number of more than 50 companies with close to $160 billion in U.S. sales participated in the survey. The full report is available online at www.gmaonline.org/publications, www.nielsen.com, and www.mckinsey.com/cpg.