
2/20

GROCERY MANUFACTURERS ASSOCIATION (GMA) Based in Washington, D.C., the Grocery

Manuacturers Association is the voice o more than 300 leading ood, beverage and consumer

product companies that sustain and enhance the quality o lie or hundreds o millions o people

in the United States and around the globe. Founded in 1908, GMA is an active, vocal advocate

or its member companies and a trusted source o inormation about the industry and the

products consumers rely on and enjoy every day. The association and its member companies are

committed to meeting the needs o consumers through product innovation, responsible business

practices and eective public policy solutions developed through a genuine partnership with

policymakers and other stakeholders.

In keeping with its ounding principles, GMA helps its members produce sae products through

a strong and ongoing commitment to scientic research, testing and evaluation and to providing

consumers with the products, tools and inormation they need to achieve a healthy diet and an

active liestyle. The ood, beverage and consumer packaged goods industry in the United States

generates sales o $2.1 trillion annually, employs 14 million workers and contributes $1 trillion in

added value to the economy every year. For more inormation, visit the GMA Web site at www.

gmaonline.org.

McKINSEY & COMpANYMcKinsey is a management consulting rm that helps many o

the worlds leading corporations and organizations address their strategic challenges, rom

reorganizing or long-term growth to improving business perormance and maximizing revenue.

With consultants deployed in 50 countries across the globe, McKinsey advises companies on

strategic, operational, organizational, and technological issues. For eight decades, the rms

primary objective has been to serve as an organizations most trusted external adviser on critical

issues acing senior management. The Consumer Packaged Goods (CPG) practice serves

the majority o the top global CPG companies on a range o cross-unctional topics. As CPG

companies ace an increasingly challenging market, our consultants deliver distinctive, substantial,

and lasting perormance improvements, rigorous analyses, and innovative insights.

NIELSEN The Nielsen Company is a global inormation and measurement company with

leading market positions in marketing and consumer inormation, television and other media

measurement, online intelligence, mobile measurement, trade shows, and related assets. The

privately held company has a presence in approximately 100 countries, with headquarters in New

York. For more inormation on Nielsen measurement products, visit www.nielsen.com.

Copyright 2010 by the Grocery Manuacturers Association (GMA), McKinsey & Company, and The

Nielsen Company. All rights reserved. No part o this publication may be reprinted or reproduced in

any way without written consent rom GMA, McKinsey & Company or The Nielsen Company.


3/20

2010 Customer and Channel Management Survey

CONTENTS

1 Emerging from the Storm: How Leading Customer Organizations Reignite Growth

Executive summary 3

Survey vervie ad metdy 4

Te vaue ii 5

Detaied fdis y errmace area 6

Sales strategy 6

Pricing and trade investments 8

Pricing 8

Trade investments

Strategic customer collaboration 11

Complexity management 13

Ackedemets

Ctacts 16


4/20




5/20



EXECUTIVE SUMMARY

The past ew years have presented an unprecedented set o challenges or con-sumer-packaged-goods (CPG) manuacturers and their customer organizations.

Margins have come under pressure rom a signicant rise in commodity prices.Cash-strapped, value-conscious consumers continue to look or ways to savemoney, waiting or sales and trading down to lower-priced brands and private-

label products. Retailers are placing ever-increasing demands on manuacturers

to oer greater value and quality to consumers.

As the recession ends and a slow recovery begins to take shape, it is clear that

the past ew years were challenging or even the most well-equipped and pre-pared players in the industry. At the same time, the 2010 Customer and Channel

Management Survey shows that those leading customer organizations that madethe right bets or growth, built better capabilities, and collaborated more eective-ly with their top retail customers emerged rom the storm better and stronger than

their peers, with share gains, growth, and margin expansion to show or it.

EXECUTIVE SUMMARY


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SURVEY OVERVIEW AND METHODOLOGY

This report summarizes the ndings o the 2010 edition o the Customer andChannel Management (CCM) Survey, which provides an up-to-date perspective

on the practices o top-perorming CPG companies. Unlike other market surveys,this eort links companies nancial perormance and in-market results with sel-reported practices to identiy winning practices.

This years survey is produced in collaboration between the Grocery Manuactur-

ers Association (GMA), McKinsey & Company, and The Nielsen Company. The2010 survey ocuses on our dimensions o customer and channel management:

sales strategy, pricing and trade investment, strategic customer collaboration, andcomplexity management. By reviewing the survey ndings in these areas, CPG

companies can identiy gaps and opportunities in their customer and channelmanagement practices, as well as gain insights into new and important industrytrends.

The CCM Survey has a long history. In 1978, McKinsey & Company began gather-

ing data and perormance benchmarks on the sales organizations o the leadingCPG companies in the United States. The GMA/McKinsey partnership on the

survey started in 2002. Over time, the survey evolved to include a deeper ocuson perormance across a broader range o topics; or example, in 2010, we added

new modules on strategic customer collaboration and complexity managementand increased the details o our nancial and sales organization benchmarks.

This year's survey was conducted in the Spring o 2010. More than 50 compa-

nies with close to $160 billion in US manuacturer salesin the ood, beverage,personal care, and home care categoriesparticipated. These players representa broad cross-section o the CPG industry, including large-cap and mid-cap com-

panies, leading brands (No. 1 or 2) and trailing brands (No. 3 or 4), manuacturerswith direct-store-delivery and warehouse distribution models, and companies

using sales agents and direct selling models.

To ensure the accuracy and relevance o the data, the person accountable oreach perormance area completed the relevant part o the questionnaire. Approxi-

mately 220 CPG executives participated in the survey.

SURVEY oVERVIEw

AnD METhoDologY


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SURVEY OVERVIEW AND METHODOLOGY

ThE VAlUE o

wInnIng

The survey revealed that CPG manuacturers that outperormed their categorypeers implemented winning practices in several critical dimensions. We de-

termined the value that these winners realized using a unique approach thatcombines market perormance and nancial results with sel-reported businesspractices.

Sales strategy

Average percent, April 2009-10

2.2

-0.3

4.5

OthersWinners

-3.5

Sales growth

above

category

Averagechange in

selling cost

2.0

-0.91.8

-0.4

OthersWinners

Average unit

price change

Change in

sales

Pricing winners

Median percent, April 2009-10

Trade winners

Median percent, April 2009-10

10.8

-1.4

4.3

Winners Others

18.5

Lift per point

of price

reduction

Lift from

merchan-

dising

Collaboration

5.0

16.0

62.0

OthersWinners

100.0

Sales growth

Median

percent

April 2009-10

Positive ROI

Percent of

respondents

Complexity

April 2008-10

-0.2

-8.1

1.6

-2.9

2.45.0

OthersWinners

SKU growth

over category

Average of PP

Revenue

increase over

category

Average of PP

Category

growth

Average

Sales strategy winners were able to achieve astersales growth than their category peers while

decreasing selling costs (as a percentage o netsales). Net sales or these winners grew by almost

3 percentage points more than the average growthor their category, and they invested 8 percent less

than the category average to achieve this growth.

Pricing winners were able to increase their unitprices by 3 percentage points more than the aver-

age unit-price increase or their category and growtheir category share by 2 percent.

Trade investment winners achieved higher marketshare and gross margin growth than others, with

greater impact rom their trade investment eortsby capturing 11 percentage points higher sales lit

rom each promotional price point reduction and a14 percentage point higher sales lit rom mer-chandising than their category peers.

While most manuacturers believe that their stra-

tegic collaboration eorts are eective, only 20percent o these eorts achieve signicant impact.This group achieved, on average, a sales lit that

was 11 percentage points higher than other col-laboration eorts.

Complexity-management winners were able todecrease their number o stock-keeping units(SKUs) while increasing market share. On aver-

age, these winners realized an 8 percent greaterreduction in SKUs and 5 percent higher sales

than others in their category, and they increasedoverall category size.


8/20



DETAILED FINDINGS BY pERFORMANCE AREA

DETAIlED InDIngS

bY pERoRMAnCE

AREA

Saes stratey

Despite the challenging economic environment in 2008 and 2009, winning CPG

companies increased sales aster than their category peers while decreasingselling costs. Winners achieved these results by ocusing their resources onhigh-growth channels such as dollar and discount stores as well as Walmart.

These players also strengthened their go-to-market models, developed winningand highly capable sales leadership teams, and tailored their account teams to

address the needs o priority retailers. Last, top-perorming companies capturedeciencies in warehousing and transportation that lowered their overall sell-

ing costs. The companies that won in sales strategy used multiple strategies toachieve these outcomes and to realize this growth.

Make i, rard-ki ets t uck rt. The survey revealedthat winners are seeking to solidiy gains made during the crisis and preparing

or even stronger perormance coming out o this period; 70 percent o thesetop perormers (versus 17 percent o others) are reshaping their go-to-market

models (Exhibit 1). Accordingly, in the next 12 to 24 months, more than halo the winners plan to boost their eld sales organizations and merchandising

resources, and one-third o winning companies also plan to increase their use obrokers and to combine broker and retailer resources to reach more outlets.

To ensure that their bets are aligned with changing high-growth opportunities,

winners continually evaluate resource investments by channel and customer. Forexample, in the past survey, winners invested heavily in a rejuvenated grocery

channel. However, our 2010 survey reveals that winners have stopped expandinggrocery resources and instead increased resources in the highest-growth chan-

nels o discount, club, and Walmart. For example, in dollar and discount stores 63percent o current winners increased customer-acing resources in this channel

while over hal o others in their categories did not. Similarly, 89 percent o win-ners increased customer-acing resources at Walmart Stores, versus 64 percent oothers.

Exiit 1

Winners proactivelyreshape theirgo-to-market models

% of responding heads of sales

17

70

OthersWinners

Winners make strengthening their

go-to-market models a priority

Half of the winners are boosting

field sales and merchandising

resources

One-third of the winners areincreasing the use of brokers

One-fourth of the winners are

covering more outlets with

combined company/broker

resources

and plan to take several

actions in the next 1224 months


9/20




Winners also report that they perceive higher-growth retailers such as DollarGeneral, Costco, and Kroger are more willing to collaborate with them. More-

over, top-perorming CPG manuacturers pull multiple levers to build strongerrelationships with key retailers. Not only do they make a greater resource invest-ment in priority retailers, they also take a collaborative approach to growing a

category or solving business issues, sharing mutually benecial insights and

data with their retail collaborators.

buid a str saes eadersi team, ext-eerati caaiities, ad

crss-uctia carati. Winners ensure that they sta the right salesleadership resources to ensure uture growth, emphasizing deep category exper-

tise, customer knowledge, and a strong strategic perspective. Our survey alsorevealed that winning companies are constantly improving their team's capabili-ties by investing in customer prot and loss (P&L) management, pricing analytics,

and strategic collaboration. In contrast, their category peers are still working onimproving basic capabilities such as nancial analysis and marketing knowledge.

In addition, winning CPG organizations report a high level o internal collaborationand more eective relationships between sales and other key unctions including

marketing, nance, and supply chain. In particular, collaboration between sales

and marketing appears to be critical to winners.

Create custmer-cused accut teams as art a ii saes

raizati. While all survey respondents deploy sales teams o similar sizes,

winners' teams have a high percentage o customer-aligned unctional experts inareas such as pricing, category management, and trade marketing versus their

category peers (Exhibit 2). As we have seen in the past, winners also tailor theircustomer teams to the unique needs o each priority retailer. In addition, winning

CPG organizations report a high level o collaboration and more eective relation-ships between sales and other key internal unctions including marketing, nance,and supply chain. In contrast, in the grocery channel, winners deploy more o

these unctional experts to support their retailers.

Exiit 2

Winners make a greaterinvestment in customer-aligned unctionalexpert roles

3025

2930

Support

Key accountmanagers/headquarterselling generalists

Customer-alignedfunctional experts

Others2

93

46

Winners2

95

42

On average, winnershave: 15 FTEs per $1 billion

in net sales incategory

management 8 FTEs per $1 billion

in net sales in tradeand customer

marketing 3 FTEs per $1 billion

in net sales in

shopper marketing 2 FTEs per $1 billion

in net sales in pricing

1 FTEs per $1 billion in net sales; only considers companies with more than $0.75 billion in annual net sales; customer-alignedfunctional experts include those in pricing, category management, shopper marketing, and trade/customer marketing; supportincludes sales finance, sales IT, sales HR, sales planning, sales training, shopper insights, administrative, seniormanagement, and broker management.

2 Numbers do not sum to 100% because of rounding.

While all consumer-packaged-goods (CPG) players

deploy similarly sized sales teams, winners invest

more in customer-aligned functional experts

% of full-time equivalents (FTEs)1

100% =


10/20



prici ad trade ivestmets

From 2008 to 2010, CPG manuacturers aced signicant challenges in manag-ing pricing and trade investments. At the start o this period, late 2007 and early

2008, many CPG companies experienced signicant increases in commodity in-put costs, a situation that caused many players to implement price increases that

were signicantly larger and more requent than the industry has seen in the past.Then, as the United States economy ell into a deep recession and core commod-ity prices declined, CPG players encountered considerable downward pressure

as volumes declined and consumers, ocused on value, began trading down andswitching to more value-oriented ormats. In order to maintain their competitive-ness, retailers responded by pushing or lower prices and greater investments

rom CPG companies to deliver lower prices and more value to consumers.

However, despite these challenges, the 2010 survey revealed that pricing andtrade winners were still able to deliver strong results and outperorm their cat-

egories. While these winners relied on many traditional industry leading practicesthey achieved winning perormance in this volatile time period by adapting to the

rapidly changing and complex market environment o the past ew years more

quickly and strategically than their peers.

PricingPricing winners were able to increase prices above those o their categorieswhile increasing category share by developing a deep understanding o the

consumer, careully weighing the eects o market orces, and making organiza-tional investments to deliver strong results.

Iterate a cmreesive vie market dyamics i rici strateies.

Pricing winners are more likely to ocus on external infuences when setting prices.

For example, they examine shits in competitor pricing and the ability o retailers tomeet their target margins or price points. In addition, recognizing the growth in pri-

vate labels, winning companies report that private-label prices have become a more

important consideration in the development o pricing strategy. Yet, with only 57percent o winners and 35 percent o other CPG companies tracking and managingtheir price gap relative to private-label products, there is room or improvement inthis area or many companies.

Take a rad yet dee vie rice easticity t esure rici

errmace. Winners have a clearer view o overall consumer price sensitivitythan do others, and they more oten set prices by considering consumer price

elasticity at national and regional levels, as well as at the detailed category orbrand level (Exhibit 3). Top-perorming CPG players are also more likely to use

a menu approach to pricing, varying prices depending on the service levelrequested by a retailer or warehousing, logistics, and back-oce services.

Esure reuar ad requet rici discussis it retaiers. Winners

continue to engage retailers in pricing discussions at regular intervals (at leastonce a year), raming these discussions in ways that are relevant to retailers andtaking into consideration the market environment and pace o infation. Winners

are also more likely to take a multidimensional approach in pricing discussions,emphasizing retailer prots and product or category investmentnot just com-

modity costs.

Ivest i dedicated rici resurces ad iterate rici ad rm-

ti teams. Winning CPG companies invest nearly 50 percent more, normalized

based on sales, in pricing resources across unctions. In addition, winners are two



11/20




times more likely to have a dedicated revenue-management group to ensure thatpricing receives the appropriate level o attention and analytics support.

Winners are also twice as likely to integrate everyday pricing and promotion rolesin a team that resides either in an existing centralized unction (or example, mar-

keting or nance) or in a revenue-management group at the center (Exhibit 4). Thisapproach provides multiple benets to the CPG manuacturer, including alignment

o pricing and promotion strategies and the establishment o a single source oaccountability or all pricing activities.

Trade investmentsIn response to the challenges noted above, trade spend as a percentage oadjusted gross sales increased signicantly rom 2008 to 2009 or all companies

67

82

OthersWinners

9

64

55

36

9

55

82

13

53

57

40

10

20

63

Market area

Regional

National

Dont measure

elasticity

SKU

Brand

Category

Winners aremore likely to

track prices

by

geography

and at

the level of

detailed

SKUs

Winners more often consider

consumer price elasticity in setting

prices

% of respondents

Respondents who measure price

elasticity at the following levels

% of respondents

OthersWinners

Exiit 4

Pricing winners investin FTEs and organize toachieve winning results

Functionally centralized1

13

18

Dedicated revenue-

management/pricing

group27

45

Organization of pricing roles%

18

27

55

57

17

27

Completely

integrated

Not integrated

Strategy integrated;

separate analytics

Organization of everyday pricing

and trade promotions roles%

1Centralized group can reside in any function (eg, sales, marketing, finance).

OthersWinners

Exiit 3

Winners have aclearer view o overallconsumer pricesensitivity


12/20




(Exhibit 5). Trade-investment winners, however, were able to dierentiate theirperormance and capture more incremental sales rom promotions than others.

The majority o these winners chose to use increases in trade investment tooset price increases and captured more market share and gross-margin gainsrom these increased investments.

Cduct rirus ad requet errmace revies trade ivestmets.Winning companies make it a priority to evaluate the perormance o their trade

investments at requent intervals. Approximately two-thirds o winners conductsuch promotional perormance reviews at least quarterly. Winners use more metrics

on averagespecically, volume and trade investment trends, overall accountreturn on investment (ROI) versus plan, as well as account protability and growth.

By contrast, less than 50 percent o other players assess their trade investments atleast quarterly. A third o other CPG manuacturers have no ormal post-promotionalreview process. Because winning organizations consider these assessments a pri-

ority, they more oten allocate resources within corporate headquarters to completethese post-promotional analytics, instead o assigning this task to a eld analyst or

account representative.

A majority o all survey respondents use three sources o data to understand tradepromotional perormance: syndicated scan data, loyalty- or shopper-card data,

and retailer POS data. Winners are using the insights rom this analysis to improvechain-level perormance and to deepen their understanding o consumer and cat-egory dynamics. In the uture, winning companies are looking to continue improving

these analytics in order to better better understand issues such as the incremental

value o promotions and the promotions that best drive their brands and expand thecategory.

Dieretiate ivestmets ased ast ad tetia

uture errmace. Top-perorming CPG players use both activity- and

outcome-based criteria to set trade investments across channels and accounts,and they are more likely to consider projected nancial outcomes such as ROIand sales growth at a given retailer in their rate-setting exercise. In addition, these

players evaluate the type o activity that their investments will und.

wrk eectivey it wamart. While most CPG companies are increasing

Exiit 5

Trade rates havesignicantly increased,with winners using tradeinvestments to osetpricing

The majority of winners used trade

investments to offset pricing

32%

53%

Increased trade

to partially offset

price increases

(2008 to 2010)

Others

Winners

Trade rates have

increased

16.614.6

2008 2009

%


13/20




their trade investments at Walmart, winning companies are allocating more otheir trade spend to nonpromotional activities requested by Walmart (or example,

sustainable packaging) than others. In return or these investments, winners areable to secure greater cooperation rom Walmart in the orm o increased distribu-tion, more promotional support, additional secondary placement in stores, and

better shel placement.

Strateic custmer carati

A new, more collaborative way o working is replacing the oten adversarialrelationship between manuacturers and retailers. A majority o CPG companies

report having recently undertaken multiple strategic collaboration eorts withretailers. The survey dened strategic customer collaboration as joint initiativesbetween manuacturers and retailers that go well beyond the normal course o

business. These initiatives are designed to deliver impact in multiple dimensions:sales lit, cost savings, ROI, and the impact captured by the retailer.

While most manuacturers believe that their collaboration eorts are eective,

ew deliver winning results; 50 percent have only modest impact, with category

perormance at participating retailers slightly better than the baseline, and 30 per-cent yield no measurable impact. However, a small group o manuacturers20percentis realizing the ull potential rom these collaboration initiatives (Exhibit

6). Our review o these winning companies suggests that the ollowing leadingpractices increase the return on collaboration.

Seect te rit retaiers. Winning companies cast a wide net, exploringpotential collaboration initiatives with more retailers than other companies do: 50

percent o these companies have approached ten or more retailers as potentialcollaborators versus 22 percent o others who have done so. Ater the net has

been cast, winning companies closely evaluate prospective collaborators, choos-ing to work only with those with the greatest potential to deliver impact based onsales, protability, and growth outlook (Exhibit 7).

Exiit 6

Most CPGs believe theircollaboration eortsare eective; however,a very small portion o

these eorts are trulydelivering winningperormance

95% of CPG1

players believe

their efforts are

either extremely

or somewhat

effective

95% of CPG1

players believe

their efforts are

either extremely

or somewhat

effective

Somewhat

effective

Extremelyeffective

100

5

65

30

Somewhat

ineffective

1Consumer packaged goods.

2 Increase in sales above manufacturer category growth and retailer category growth, as well as self-reported metrics.

Overall, how effective do you believe your

collaboration efforts have been?

% of respondents

Despite these beliefs,

only ~20% of the

collaboration efforts

achieve significant

impact2

This suggests that

understanding best

practices is critical for

improving performance


14/20



12


Defe a d amiti. Eighty-eight percent o winning companies, versus 62

percent o others, include 90 percent o total category sales in collaboration eorts.Top perormers also have a proactive rationale to develop strategic collaboration e-orts. For example, winners view collaboration as an opportunity to increase access

and infuence on merchandising and marketing initiatives or to build a "preerred"relationship with retailers, as opposed to reacting to perormance issues (Exhibit 8).

Deve a true strateic aiace. Winners align with retailers on common per-

ormance goals at the start o a given initiative. These manuacturers ensure thatjoint eorts with retailers are mutually benecial and establish at the outset how

benets will be shared. While retailers commonly share inormation on store sales,loyalty-card data, and shopper research, winners go a step beyond basic data

sharing and provide retail collaborators with inormation on brand perormance,competitor perormance, and price elasticity.

Exiit 7

Winners make hardchoices to prioritizecollaboration eorts witha subset o potential

partners

Strong growthoutlook

83

High importancewith regard tosales/profit

100

94

100

Winners focus on sales, profits,

and growth when determining

potential partners

Winning efforts are more often with retailers that are:

80

42

Large in size (sales)

$ billion, 20101

2.2

1.1

Strong in growth

%, April 2008 to April 20102

5

3

Strong in growth for

focus categories1

%, April 2008 to April2010

3

14

8

Represent significant

% of CPG2 sales in

focus categories

% of CPG category

4

1 Note that winners were selected based on their ability to beat this number; winners still outpace others on this dimension.

2 Consumer packaged goods.

OthersWinners

%

Exiit 8

Winners are bold in theirambitionand proac-tively seek to collaborateon win/win opportunitiesor growth and prot

1 Consumer packaged goods.

2 Refers to focus category sales as % of total.

90%

Others

38

62

Winners

12

88

CPG1 categories represented in effort2

% of manufacturers salesOthersWinners

Interest in gaining retailer input and

collaboration in growth initiatives 68

75

Desire to build preferred relationship

with retailer 91

100

Belief that best opportunities and

solutions can only be uncovered together 77

100

Desire for more frequent, higher-quality

senior-management interactions 59

88

Interest in increased access and influence

on merchandising and marketing initiatives 62

100

What triggered this strategic collaboration effort?

% of respondents

Proactive rationale


15/20



13


Set u te jit team r success ad cus executi. To support agiven collaboration eort and develop comprehensive solutions, winning manuac-

turers and their retail collaborators dedicate more resources across a broad rangeo cross-unctional experts (or example, those in brand marketing and categorymanagement) to work on the joint team. Furthermore, manuacturers and retailers

invest more, going beyond the basics (or instance, consumer and shopper re-

search) to address such areas as IT, supply chain, and new product development.

Furthermore, manuacturers and retailers jointly tracked perormance metrics and

shared incentives, perormance routines, and a ocus on the bottom line to enablesuccessul execution, which is critical to collaboration eorts.

Cmexity maaemet

Many orces are combining to make manuacturers product portolios and value

chains more complex. Channels have varying price-point, size, and packaging re-quirements (or example, discount stores require small packages with lower price

points). Individual retailers are seeking competitive advantage through dierenti-ated product oerings and requesting customized SKUs, while also ocusing on

assortment optimization or their stores (more than 40 percent o retailers reducedSKUs in 2009). And as 25 percent o SKUs generate 80 percent o CPG sales,according to survey responses, manuacturers recognize the value o reducing

SKUs and eectively managing complexity (Exhibit 9).

Our survey revealed that a majority o respondents are using two approachesto address this complexity challenge. Despite broad eorts, only 30 percent orespondents are able to manage this complexity in an eective manner. Winners

are reducing their SKUs below the category average while increasing revenue andachieving category growth by adhering to the ollowing imperatives.

Imemet rust SKU timizati. Seventy-eight percent o winners conduct

SKU-optimization analyses once a year, while 42 percent o other players do. Inwinning companies, marketing and sales lead this analysis; in other organizations,

nance and supply more oten assume this role. Ideally, SKU optimization shouldbe considered not only rom the perspective o the manuacturer but also rom thato the retailer and consumer. Winners also take a more strategic approach to this

analysis, according greater importance to criteria such as strategic t, growthpotential, and consumer decision trees, as opposed to retailer requests (Exhibit 10).

Exiit 9

CPG companiesalmost unanimouslyrecognize thecomplexity challenge

Much less relevant 4

Less relevant 0

More relevant 60

Much more relevant 36

Relevance of complexity management in

comparison with the past

%

96


16/20




Eectivey ad ractivey eae retaiers i te SKU-timizati

rcess. Top-perorming CPG companies proactively engage retailers in the

SKU-optimization process. Survey results show winners are more likely thanothers to initiate this process with a retailer; others may simply react to a retailer

request. Winners are also more likely to apply a targeted approach to SKU opti-mization, ocusing on one category at a time. Finally, winners create a relativelysmaller number o customized SKUs or retailers77 percent o winning compa-

nies tailor less than 10 percent o their SKUs or individual retailers; 36 percent o

other companies do so.

Take a crss-uctia arac t stadardizati. Our survey reveals

that most CPG companies pursue standardization. While standardization initia-tives have been implemented in many areas, more than 70 percent o respondents

ocus their eorts on supply chain, manuacturing, and marketing and packaging.These players involve a broad range o cross-unctional groups in the process oidentiying standardization opportunitiesincluding supply, research and develop-

ment, nance, and marketing. Companies pursuing standardization initiatives usu-ally realize the greatest savings in inventory, raw-material, and packaging costs.

The winning companies in the 2010 Customer and Channel Management Surveyhave proven that strong perormance is possible even in the most challengingo economic environments. To deliver high-impact results in the uture, winningCPG manuacturers will need to continue to rely on many o the leading practices

outlined in the survey, while strategically positioning themselves to reignite growthand capture the next wave o business opportunities.

Exiit 10

Winners prioritizestrategic or SKUoptimization

33

22

33

56

78

100

100

100

32

63

0

42

58

84

95

100

Volume

Profit

Other

Retailer request

Age of SKU

Consumer

decision trees

Future growth

prospects

Strategic fit

Winners higher

consideration for strategic

fit and growth prospects

indicates a more strategic

SKU-optimization process

Winners less frequent

use of retailer input

indicates that these

players may be more

proactive in SKU

optimization

Criteria used in SKU-optimization process% Others

Winners


17/20



ACKNOWLEDGEMENTS

ACKnowlEDgEMEnTS Grocery Manuacturers Association (GMA), McKinsey & Company, and Nielsen would l ike toacknowledge the cooperation and input rom the companies that participated in the 2010

Customer and Channel Management Survey. Additionally, we would like to thank the GMA

Sales Committee or its sponsorship and support.


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CONTACTS

For more inormation about the survey or this report, please contact:

grcery Mauacturers Assciati

Brian Lynch, Director, Sales & Sales Promotion/Industry Aairs

([email protected])

McKisey & Cmay

Kari Alldredge, Senior Expert, Consumer/Packaged Goods Practice, Minneapolis([email protected])

Danielle Bozarth, Principal, Consumer/Packaged Goods Practice, New Jersey

([email protected])

Kris Licht, Principal, Consumer/Packaged Goods Practice, Dallas([email protected])

Te niese Cmay

Konrad Gerszke, Executive Vice President, Global Consumer Practices & Products

([email protected])

Steve Matthesen, Executive Vice President, Proessional Services([email protected])

ConTACTS


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Tl 646 654 5000

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www.il.com

55 eat 52 strt

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Tl 212 446 7000

Fax 212 446 8575

www.mcki.com

Documents

Customer and Channel Management Survey