How to protect profit and develop a clear action plan for challenging times.
By Janine Chamley, Pitchfork 
With the constant news around price inflation, cost increases and challenging retail environments, it’s tempting to close your eyes and hope that it’s all a bit of a beat-up and goes away quickly. Unfortunately, hope is not a strategy for navigating times like this and now is when you’ll see businesses that have been sailing too close to the wind fall over. The focus is now on profitability instead of top-line growth, and while taking a price increase is the first and most obvious way to help maintain profit margins, it’s a short-term solution to a longer-term situation.
If you want to develop a clear action plan, there are a few key areas to dig into right now.
Get all over your numbers - inside and out
Work with your finance team to dig into the numbers and get clear on where you make the most money by channel and Retailer. Each retailer and channel have a different role to play in your business, and you should be clear on whether they are a grow, maintain or harvest channel. Making sure you have a balanced mix of retailers helps protect you against unexpected deletions and changes in buying behaviour. Although volumes can be lower outside the supermarket, you may find margins are good and it offers a way to do higher margin bulk lines to improve operational efficiencies and manage COGS.
Rank your products across four key metrics – dollar sales, dollar profit, percent margin and unit/ store/ week. There can be hidden heroes with poor sales but high USW hiding in your range, and a distribution push can deliver good sales, quickly. If a product is not moving, then it's tying up capital, hindering cash flow and may either need to be deleted or sold through another channel.
Go deep on your promotional program and make sure they’re delivering the volume and profit uplift to cover the cost. Consumers are changing how they shop, so look at the type of promo as well as your pack price architecture to ensure you’re encouraging them to purchase products that deliver good sales and profitability, for both you and the Retailer.
Read the rest of this article in the August issue of Supermarket News here
