Today’s typical discount on list price which has doubled from 20% four years ago
40% UK snack market (Nielsen, July 2013)
A pricing function, or at the very least a manager, is needed to close the gaps between the marketing team looking to hang onto brand equity, the sales team wanting to shift the goods, and the production team anxious to see their factories fully utilised and achieve clarity around how promotion spend is defi ned on the P&L.
This is true of the multinationals, including Diageo, Unilever, and Procter & Gamble, all of which have dominant brands. However, it is much harder for a lower margin business to afford both innovation and deals simultaneously. Inevitably, the risk for these categories is that they are starved of investment and become commoditised, as is already the case with consumables like milk, bread and chilled foods.
The other thing that needs to happen in the sector is for procurement to cooperate more effectively with salespeople, especially given infl ation in energy, and raw materials including wheat and cocoa. Manufacturers attempt to recover these costs through pricing but they usually receive push back from sales. They need to recover these costs by buying better and more effi ciently.
WHAT THESE
FIRMS REQUIRE IS AN INTELLIGENT AND ANALYTICAL APPROACH TO PRODUCT MIX, MARGIN AND CUSTOMER CHANNELS. UK CHIEF EXECUTIVES NEED ACCESS TO THIS SCIENCE WHEN DEFENDING THE BUSINESS.
2011 2012 2013 2014
Meanwhile, sales teams must understand both the category dynamic and cost structures of their competitors. A competitor may be able to afford to cut the price of a bottle of pasta sauce because their supply chain is more effi cient.
These changes in the way companies operate are the key to balancing the short-term promotional need to compete with the longer-term health of the brand and category. In the world of consumer goods, standing still is actually very hard work.
FOCUS 29
Robert Browne KPMG Strategy Group T: +44 20 7311 8962 E:
robert.browne@
kpmg.co.uk
Tim Kelly, Senior Advisor, Consumer Markets, KPMG T: +44 (0)7810 862 328 E:
tim.kelly@
kpmg.co.uk
© 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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PRICING
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