Time for FMCGs to master the art of Trade Spend Management

1. Time for FMCGs to master the art of Trade Spend Management For fast moving consumer goods (FMCG) companies, it is a tough battle on all fronts. Retailers are holding market power like never before, which leaves little room for negotiations on prices. Demanding suppliers are squeezing out productivity on the operational front, causing cost escalations. Being pushed to the wall on both prices and costs, producers are struggling to survive, forget making profits. The solution for the producers is to master the art of trade spend management. It is both simple and complex. Simple, because it is not a new technique. Complex, because it involves application of tools such as rebates, discounts, and listing fees in varying degrees across multiple retail outlets and other channels. This makes it vulnerable to faults and confusion, so it is a difficult exercise for financial controllers and marketers. Several companies end up spending more on trade promotions than the profit they earn. Suppliers too, if they are looking for a sustainable business, must develop the discipline of regular trade spend analysis. Just buying sales volumes recklessly will never help in bringing long-term profitability. Trade spend is a lever for growth, but when it comes to monitoring it and measuring the return on investments, it is extremely difficult. There will be hardly any sales people or marketers who can say for sure that a particular promotion they planned has been most successful. It is also hard to say in which outlets their promotions worked. Many a time, it is impossible for a producer to list out the last 200 promotions he has done without putting in a lot of effort. Despite these facts FMCG producers can draw sustainable profits, while also developing their brands, if they master the art of trade spend management and administer it in a disciplined manner on a day to day basis. Drawing and understanding the data is the first step. FMCG companies across Asia Pacific do not struggle so much with the access to sales data. What they get stuck with is what to do with that data. They lack time and machinery to get a proper trade spend analysisdone by an expert. Such FMCGs are far from producing reports which can assist them in growing their businesses. Suppliers most of the times are lost in spreadsheets. They are trapped in the enormous quantities of sales promotions data their IT systems generate. There a so many SKUs and outlets to be looked at. Despite all this trouble, there are

2. many companies which do not really think that they need an enterprise-level IT solution. Their marketers carry the weight of spreadsheets daily trying to decode the data that those spreadsheets bring them. FMCGs must opt for high quality services which can do correct analysis by interpreting the gathered data while also helping in building up capabilities to analyse data internally. FMCGs which have chosen to focus on systematising trade spend management along with trade promotion can see the difference it can make in bringing insights into the precise customers and brands they have spent, and also get a clarity on the ROI. They have seen that this has allowed their managements quicker and more consistent business decisions, leading to an increment in overall profitability. Evidence is more powerful and foolproof than gut feelings when business is concerned. In today’s economic environment, the difference of even a few percentage points can lead to success and failure. Therefore, to see some growth in this hyper-competitive market, taking trade spend analysis seriously is the only alternative left for manufacturers.