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HRCP Case Study: Trade turn-around

Situation

A billion-dollar food company with three brands in the same category was experiencing significant decline in volume, despite investing 20% of revenues in trade spending. With base volume contribution sinking to just 55%, the client recognized the need for a more coherent, fact-based approach to its trade promotion spending and tracking.

Challenge

Henry Rak Consulting Partners was engaged to help improve the effectiveness of trade spending by developing an innovative and comprehensive trade promotion strategy.

HRCP Advantage

Based on a Strategic Role of Trade Spending analysis, Henry Rak Consulting Partners:

Identified key factors impacting performance. HRCP found that the role of trade promotion was not defined and varied by brand. Volume targets were not linked to brand and consumer strategies. Sales planning processes were not well defined and information and tools did not support fact-based decision making or tracking.
Recommended a 10% price reduction to bring the client’s leading brand in line with its competitors’ pricing.
Defined trade planning best practices, based on clear metrics. We recommended reductions in off-season dealing and new efficiencies in trade advertising, and defined variable contribution/gross margin after trade targets to drive decision-making.
Recommended re-allocating trade dollars to advertising at defined optimum advertising levels, with renewed emphasis on base brand.
Simulated the new plan to support all recommendations to management.
Worked collaboratively with top accounts to develop trade promotion management strategy and implementation plans.

Results

Reduced trade spending to 17% of revenue—realizing $11 million dollars in savings that was re-allocated to advertising.
Turned brand volume around—achieving 9% growth after just nine months.
Dramatically improved client capabilities and behaviors as a new information-based approach to trade promotion and pricing management was adopted.

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