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By Chris Miller, Sunny Delight Beverage Co., and Rob Bois MEI
Consumer packaged goods (CPG) manufacturers rely heavily on trade funds to proactively shape demand, influence retailers and collaborate on marketing programs that help drive consumer behavior. While the average shopper may not be aware of it, virtually every product placement, price reduction and end cap have been funded by manufacturers. For the average CPG manufacturer, trade spending ranks second only to the cost of goods on the balance sheet, and regardless of the recent recession, trade spending hasn’t decreased in most companies.
As a result, most CPG companies have implemented trade promotion management (TPM) solutions with the idea of improving trade spend, automating antiquated spreadsheets or creating a better planning and forecasting process. For Cincinnati-based Sunny Delight Beverages Co. (Sunny D), a leading producer of juice-based drinks in North America and Western Europe, it was all about customer profitability. Sunny D first implemented a TPM application back in 2005, and then gradually expanded the use of the technology, a move that culminated in its Customer Profitability Initiative, which rolled out in early 2009.
A Sunny New Direction
After spinning off in 2004 from CPG giant Proctor & Gamble, which is also based in Cincinnati, Sunny D suddenly found itself a small fish in a big pond, as a new small-to-medium-sized business (SMB). It was imperative that Sunny D not only implement new technologies, but also use them in a way that could exploit its position as a smaller CPG manufacturer and help it compete better with much larger competitors.
The first step in the process was for Sunny D to integrate its TPM system with its broker’s network. To make this happen as quickly and seamlessly as possible, Sunny D knew it needed to adopt the right TPM solution [m] one that would tie into the broker network while improving synergies between TradeLync (a trade promotion and deduction software the company’s broker, Acosta, helped develop) and Sunny D’s financial system. Sunny D also realized, like many other CPG companies, that Excel spreadsheets weren’t the best way to communicate trade promotion and/or sales and reporting activities between the company and Jacksonville, Fla.-based Acosta. Consequently, and on the recommendation of Acosta, which was already using Montreal-based MEI for its TPM needs, Sunny D began an intensive look at this solution.
Customer Profitability Will Quench Your Thirst
After a fast implementation, Sunny D’s order management and enterprise resource planning (ERP) systems were feeding data to the new TPM application. The company soon began to realize, however, that there was a lot more to TPM than improving and tracking overall trade spend, so it quickly shifted its overarching goal to improving customer profitability. If it could map revenue, trade promotions, cost of goods sold, logistics and any other variable customer-related costs to finance, it could also improve the overall efficiency and revenue of the company. To do so, this model would require Sunny D to extend the use of the TPM solution throughout all of its finance, product supply and logistics operations.
“By gaining small wins with the MEI trade system and then multiplying those wins on an enterprisewide level, we could really drive change across the company,” noted Chris Miller, Sunny D’s sales finance manager. “We knew that combining various data and customer touch points would allow us to identify spend by customer and see how effective we are at driving specific financial contributions at the customer level.”
Managing cash is always a priority for SMBs, and Sunny D is no exception. The company needed to be specific when it came to incremental trade, and be able to analyze which programs could be more profitable to the business. According to Miller: “When allocating incremental trade funding, we can analyze the data to determine the appropriate investment. We recently analyzed two very similar customers with slightly different profitability to determine why there was a delta. Using the MEI TPM suite across internal groups, we identified the difference in profitability was due to logistics, not necessarily in shipping costs, but in ‘lumper’ fees and late fees. After some discussions, the customer now picks up [its] orders, saving both Sunny D and the customer a significant amount of budget. Being able to see trade spend and revenue per customer enabled the groups to perform an accurate analysis of the situation. This resulted in a win for Sunny D and the customer.”
The TPM solution helped in other ways, too. For example, Sunny D sells to the military though government-approved distributors; consequently, the company wouldn’t normally be able to track the end customer’s profitability. By leveraging the functionality of the MEI TPM solution, Sunny D is able to drill down and see how the distributors are loading their data, which in turn enables Miller to gain valuable insight into how the end user is buying the company’s products.
Sunny D also uses the TPM solution to help analyze a company after an acquisition. During its recent acquisition of Veryfine, some of the product lines were considered unprofitable. Using the MEI system, however, Sunny D was able to analyze the “spend per pack size” data and determine that trade spend was a lot more efficient than it initially realized. “The ability to see the details enables us to act faster to market conditions and make the best choices for the company,” observed Miller.
Sunny D’s sales force is also using the TPM application. In fact, Miller noted that it uses contribution to maximize the efficient use of customers’ trade funding, by analyzing top-line revenue down to cost of goods sold. “Our goal is to make our funds work as hard as possible to grow revenue for Sunny D and our retail partners,” he said. “Becoming more efficient in our trade promotions at our retailers has yielded better profits for both the manufacturer and retailer in the long term.”
Since the implementation, Sunny D has seen a higher level of efficiencies across the board, and has enlisted the help of various departments to help strengthen profits. In fact, the TPM application has already helped the company exceed initial goals for the implementation. Although Sunny D concentrates on customer profitability, it also reaps the more standard rewards from TPM technology, including simplified budgeting, planning, accruals, and volume and spend forecasting. But it’s the smaller-business mentality that Miller claims is behind the company’s successful use of its TPM technology. By fully employing all of the functionality of its TPM suite, Sunny D has successfully managed its business through a detailed view of customer profitability and by continuing to create wholesome beverages that meet the needs of target audiences.