Managing Commodity Challenges for Category Managers

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.

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Category management can allow you to better manage commodities

Use the mass of category data that is available. Shape plans that are category/ product/ retailer-specific, and this will allow you to better manage commodities. 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.

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