Your company on Ozempic
2-min read
This will be a year in retail where brands will have to trim down to deal down.
Pushing through price increases and pulling back on promos was last year’s playbook. Consumers aren’t going to pay whatever anymore, and shrinkflation is out.
To protect demand, you’re going to have to deal down, and in order to price in deals you have to find money in the system. With labor and input costs still sky high, the remaining places to look are employee bloat and supply chain: two middlemen whose cravings will have to be suppressed.
Big Food
Unilever looks to be getting out of food completely, and you bet spinning off ice cream saves a ton on salary expense immediately. Mondelez winding down Snack Futures incubator and CoLab accelerator is nothing but a fat shredding measure. They will halt throwing money at start-ups and focus only on corporate ventures. Getting these line items off the main P&L helps concentrate spend on the core.
Middle Market
I held a discussion recently with mid-market brand executives in major commodities: rice, butter, coffee, specialty oils – and they all told me they raised prices last year. This year, rice co SunFoods, SF Bay Coffee, Challenge Dairy and La Tourangelle are all engaging in cost efficiencies or process innovations that improve margins.
For example, SunFoods and SF Bay are leaning into private label, which turns manufacturing capacity into a profit center, in order to generate cash to fund their brands – and they can do that because they own their supply chains. La Tourangelle is investing in a process innovation that will improve through-put and quality.
Growth Brands (up to 100M revenues)
If this is where you sit, there are ways you too can trim the fat:
1) Supply — cut out the middleman by dealing with raw material suppliers directly. You should be able to negotiate better pricing.
2) Regional Density – focus on establishing a strong presence in specific regions. This allows for shorter transportation distances, reduced logistics costs, and potentially faster turning products.
3) Process innovation – be willing to pick apart every step in your production line and ask if there are ways to be more efficient, either through a new ingredient application or equipment integration.
Cost-cutting doesn't have to be a zero-sum game. You can remain competitive in the marketplace and continue to grow your brand, deliver value to your investors, retailers, and consumers alike.
All my best,
Jennifer