Beer, wine and spirits: Driving value even with a lack of visibility

How can this sector meet the challenges of rapidly changing demand, with an unprecedented growth in off-trade volumes, at the expense of the on-trade?
05 June 2020
Brown drink bottles
Adam Holmes
Adam
Holmes

Global Presales Director, UK

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Since my previous articles on how to manage baselines and get the most out of Joint Business Planning, CPG manufacturers and suppliers globally have had to face multiple and unprecedented challenges. For the Beers, Wines and Spirits (BWS) sector, lockdowns and the resulting changes in consumer behaviour have impacted route to market (RTM) supply, data visibility and of course the split between on- and off-trade demand.

When considering Trade Planning, we view this sector in three ways:

  • 2-Tier Modern Trade where there is normally a large focus on promotional activity;
  • Traditional Trade where the focus is on contractual and long-term complex deals;
  • The US, which operates what we like to call “The 3 Tier Conundrum”. For those of you who know the specifics of the American BWS market, there are several specifics that make managing trade very challenging.

First, let’s define each segment:

2-Tier Modern Trade

Predominantly across European markets, with the 2-tier RTM model, suppliers have a direct relationship with the retailer.  This has enabled manufacturers to adopt a standardized approach to managing trade spend, that mixes total volume planning for smaller customers which saves time for account managers, and a more detailed baseline and uplift approach for larger customers that enables a view of promotional ROI.

There often still exists a struggle around sell-out data availability which may prevent suppliers from understanding what has happened in-store, but where data is available, the focus should be on quick wins using AI-driven analytics and insights to drive future strategy. Within this segment the priority has normally been on managing the promotional spend, but recently has switched to meeting consumer demand and minimizing out-of-stocks. 

Traditional Trade

In markets where there is a strong off- or traditional trade RTM, for suppliers the first challenge normally relates to complex trade terms where growth incentives are assigned at lower levels of the customer and product hierarchies. The second challenge is data availability, though it is still possible to drive insights using distributor sell through (IMS) and depletion data. Then finally is the question of baseline and lift versus total volume planning. In this case, where there is a lack of promotional activity the focus should be on total volume and understanding gross to net profit, especially as the on- trade restarts and consumer demand is expected to surge.

The 3 Tier Conundrum

Arguably the most complex segment is the US market, which for manufacturers poses numerous challenges ranging from specific State laws and regulations, to the distributors owning the relationship with the retailer, which leads to a lack of visibility of what is happening in-store except through depletions.Managing trade spend is another layer of complexity with overlapping deals and related conditions, and complex deal calculations like free goods, Discount Participations (DP’s) and Case Quantity Discounts (CQD’s). The list goes on. The question is which challenge should we tackle first and how to capture value.

In our experience, it is important to give priority to simplification, visibility and data driven insights. For example, aligning across States by using the same planning tool so managing all deals one place. Then it is important to match all depletions as accurately as possible against each deal – a challenging task when there are often multiple types of deals running at the same time. But, by bringing these together, BWS companies can really understand their full value chain through the distributors, then into the retailers or on- trade, within this hybrid structure.

The most common question we receive is how we can create a global solution and framework that provides visibility and insights across each of these market types with their own specific local constraints and complexities. The short answer is clear - one solution and one configuration for all three segments is not advisable. Instead our recommendation is to adapt to these individual segments and drive value through each one, focusing first on simplifying the complexity up-front by aligning business processes, building and scaling capability, and harmonizing data to deliver actionable insights.

As the world emerges from the COVID lockdown, by adopting this approach BWS manufacturers and suppliers can meet the challenges of the ‘new normal’.  Data driven insights will help ensure stock availability across the different segment types and RTM, deliver the visibility to drive value from promotions, deals, and contractual planning, and enable fact-based decision making.

If you want to expand on this topic and learn how we have been helping our customers thrive in this market, please contact us at salesperformance@kantar.com.

If you want to see these concepts in action and learn how CPG leaders are tackling these challenges, fill the form below and access the Campari Digital Transformation Webinar.

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