Category Management Discussion: Managing Commodity Challenges

By 3rd December 2019 March 10th, 2020 Category Management Tips
Managing commodities, image of grains in sacks

Managing Commodities Provides a Challenge for Category Managers

At a time when commodity prices continue to come under pressure, category management can help. It can help you shape your strategy, allowing you to better manage commodities and deliver the margin needed to maintain a healthy P&L.

Over the years I have been amazed by the lack of flexibility and creativity from brand teams when it comes to sales strategies. Even in the light of ever-increasing costs. It is still commonplace for an account team to come in to see a buyer with the news that the cost of ingredients has gone up significantly and there are global shortages. Yet, in the same breath ask for 52 weeks of deep cut promotional activity!

The Promotional Balancing Act

Now, I understand the value of promoting products. But if you were to look at the category management data this may help you understand how customers interact with your product. A high promotional activity can also mean low loyalty with customers who only ever buy when on promotion. This strategy can cost the company, even in a low market share retailer, many millions of pounds.

Yes, value for the customer is key. But at what cost? Especially when costs are on the rise. There are a number of brands within the retail world where they have over 66% promotional participation! This includes new lines that have had millions spent on developing them. Yet, the only message to the customer is, that this great new product is only worth buying when on offer! Crazy.

Use Data to Improve Margins

With the ever-growing impact of Aldi and Lidl, how value and range are viewed by the customer is changing. If you carry on doing what you have always done then others will steal your share.

Man checking a graph on his tablet

Shape plans that are category/ product/ retailer-specific

Use the mass of category data that is available. Shape plans that are category/ product/ retailer-specific. Invest in the right way, rather than taking a one size fits all approach. You never know, those margins may start showing signs of recovery.

For further tips and information, you can take a look at our Ultimate Guide to Category Management and our Category Management YouTube Channel. Also, check out our award-winning blog to see more Category Management tips and articles.

Michael Simpson-Jones

About Michael Simpson-Jones

Following a career of over twenty years in food retail with experience in Fresh, Ambient, BWS and Frozen Foods. Michael is now delighted to be building his experience in the Food Service sector where he hopes to continue his passion for treating customers, suppliers and the planet fairly.

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