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FOCUS 20
A worthwhile investment
Currently, targets and incentives at FMCG companies often encourage working in silos. The typical structure is to have an account manager for each large retailer and decisions taken to manage this relationship do not always take into account the overall impact on other brands, channels, revenues and profi ts.
An integrated approach to decision-making where decisions are taken in the context of the wider portfolio would deliver a more profi table pricing strategy.
Yet, I have seen fi rsthand that large FMCG companies don’t compile and analyse price and volume data for their own and competitor products over time despite the scale of advertising and trade spend.
Admittedly, collecting that data is a challenge and the analytical techniques required means new capabilities, but the potential for revenues and margins is so signifi cant that I believe this is an investment worth making.
Further cannibalisation ahead
There is a lot of catching up to do. Large retailers are well ahead of the game in data and analytics and continue to make huge strides in enhancing their capabilities. They typically have large dedicated teams focused on aggregating and analysing pricing and volume information.
For FMCG fi rms, developing the data and pricing analytics’ capabilities required to understand and model the interdependencies across brand, products, channels and retailers has the potential to increase competitive advantage and generate immediate fi nancial benefi ts.
Over the next few years, I believe this will become the competitive standard. Those that fail to act will be increasingly at the mercy of retailer demands, see further cannibalisation of product and brand sales, which will ultimately lead to margin erosion and sub-optimal performance.
Mukarram Bhaiji Associate Director, KPMG Strategy Group
E: +44 20 76942543 T:
mukarram.bhaiji@
KPMG.co.uk
Mukarram specialises in strategic pricing and working with organisations to unlock value through changing pricing tactics as well as broader strategic pricing issues encompassing customer segmentation and value drivers. Mukarram has been with KPMG for over ten years and has worked across a wide range of industries including FMCG, Business Services. Industrials and Telecoms. Mukarram has worked in the UK and in India and qualifi ed as a Chartered Accountant with KPMG in 2006.
© 2014 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.
DRIVING VALUE
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