For consumer goods companies looking to improve bottom-line growth, the top line is the critical place to focus.
In the past three years, more than two-thirds of revenue growth—and an even bigger share of profit growth—among the top 50 global fast-moving consumer goods (FMCG) companies has come from pricing and mix rather than from volume increases. FMCG companies are operating in an increasingly challenging retail environment: they face slowing top-line growth in many developed and developing markets, and smaller brands are gaining share against more established rivals. Retail consolidation, e-commerce, and continuing incursions by discounters result in ever-fiercer price competition. In many developing markets, the organized trade is replacing the traditional trade, shifting sales to a channel with lower prices and profits. Companies must deal with rising promotion intensity, and, typically, the growth of trade discounts is outpacing sales growth. As a result, FMCG companies are finding it difficult to increase revenues and ex-pand margins at the speed investors expect.
In recent years, smart FMCG companies have been looking to net revenue management (NRM) techniques as part of the solution to their growth challenges. But in our experience, many struggle to get full value from these efforts. Revenue management requires a structural approach that builds and embeds a cross-functional capability into the organization and is supported by the right analytical tools and methodologies. Most FMCG companies approach revenue management as more than 70% art and less than 30% science. Companies that want to reignite sales and profit growth need to flip this ratio in their favor. Here’s how they can go about it.